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Baseball ROI

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David Leonhardt re-opened the debate about whether high-spending baseball teams (like the Yankees) are winners or losers.  According to his application of an idea from Doug Pappas, George surely fools his investors!  Accompanying his article was a table of numbers, of which I clipped the top third:
 
Nytbballtable_1As tables go, this one is fundamentally sound, teams sorted by "cost per victory" which was the point David wanted to make.

If some readers find this table hard to swallow, they probably have wandered off, trying to make sense of the payroll and winning percentage columns; or perhaps they got dizzy trying to get their heads around 1,133,807 versus 1,225,575.  Precision is a great scientific virtue but rarely makes a good graphic guideline.

This set of data, essentially a bi-variate series, gives me yet another opportunity to discuss the versatile scatter plot.  Here is the basic design, with winning % on the y-axis and payroll on the x-axis.  Contrary to the article’s conclusion, there appears to be a general association between payroll and winningness.  The dotted lines are median payroll (US$ 63 million) and median winning % (0.500) respectively so that half the teams fall on either side of each line.  I have removed the Yankees since its spending far outstripped every other team (will return to them later).

Redobball0

We can take this design a step further by standardizing both variables: in the new graph, the scales are in units of standard deviations (s.d.) so that 0 is the mean payroll and +1 is payroll that is one s.d. above the mean and so on.  Observe that the Yankees payroll of US$ 206 million is four s.d. above the mean payroll.

Redobball2a_3

Notice the rectangle above.  These are what I call "middle market teams", their payroll within 1 s.d. of the mean, ranging from US$ 39 to 107 million.  Plotting them separately from the Big/Small Spenders gives us a much richer picture of what is occurrring in baseball today.

 
Redobball2b

On the left, the 25 middle market teams are almost equally distributed among the four quadrants (about 6-7 teams in each), showing possibly payroll having nothing to do with winning.  However, extravagant teams (Yankees, Red Sox) always are winners and miserly teams (Pittsburgh, Kansas City, Tampa Bay) always are losers, the inevitability starkly revealed on the right.  (Admittedly, these sample sizes are small.)
 

Scatter plots reveal many more insights than tables of numbers.  Any table must be sorted in one given dimension, and such ordering causes difficulty in understanding other variables listed in the same table.  In a scatter plot, both variables are accorded equal status and the reader decides where to place her attention.

For more analysis of this data, visit Junk Charts


Reference: "Passing on Blue-Chip Players can Pay Off", New York Times, Aug 28, 2005.

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  • http://sussfr.blogspot.com Matthew T. Sussman

    The data would probably be better correlated if taken over a larger period of time.

    Sure, the Indians are getting the best deal per win now, but in 2 years if they keep all those players, how much will their salary be?

    (BTW, Moneyball is in my suitcase. It’s the next book for me to read when I’m on the road.)

  • http://www.djradiohead.com DJRadiohead

    I need to read “Moneyball.” Of course, I am waiting for the A’s to get out of the first round before I knight Billy Beane as keeper of the sacred flame of baseball.

    Walking your way to wins works against the Royals and the Tigers. It’s a different story when you have to face real major league pitchers in October. Or is it? Interesting discussion going on in baseball these days.

  • http://www.dorksandlosers.com Tan The Man

    The problem with using “money” as an indicator of talent/skill is that many players are overrated and overpaid.

  • http://none.com Bob A. Booey

    This is smart and geeky, but rather obvious.

    OF COURSE payroll is associated with winning. That’s the point of “Moneyball,” that Billy Beane is so smart that he wins despite the odds stacked against him. The first chapter of that book details various meetings involving MLB execs and owners where they’ve presented the case for an absolute rich-poor competitive imbalance.

    But that doesn’t mean there aren’t teams who spend lots and don’t win. The Mets have been in that category the last couple of years and the Yankees may also miss the playoffs this year.
    The Dodgers are a good example this year.

    That is all.

  • Anthony Grande

    Its coming to me, I can see the future, METS 2005 WORLD CHAMPIONS

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