How Much Success Can You Buy in Baseball?

With the MLB offseason in full swing and over $2 billion already committed to free agents, the question of how much to spend in a sport with no salary cap is still relatively unanswered. We saw the juxtaposition between the stagnant 2018–2019 MLB offseason and the rapidly moving 2019–2020 offseason where teams are ready to show that they want to win games and be aggressive. Is it a matter of teams getting to a point where they can feel competitive if they sign a few players, or are more team friendly deals being made compared to last offseason? Perhaps both are true, but it seems like now more than ever, teams are realizing that to be a playoff team, a real proven winner, you need to open up the checkbook. By taking a look at the dominance and performance of top spending teams in the 2010’s, we’ll see why it pays to break the bank.

In baseball there are big market teams and there are small market teams. Both can win a World Series, but continued success — a string of dominance, is very rarely done by the latter. In the 2010’s we saw the Kansas City Royals win consecutive AL pennants, the Cleveland Indians almost win a World Series, and even the Cincinnati Reds win a few division titles. However, there is a reason that the New York Yankees haven’t had a losing season since 1995. There is a reason the Los Angeles Dodgers have won their division 7 years in a row. It’s because they are willing to spend. This offseason alone, the Yankees committed $324 million over 9 years to RHP Gerrit Cole, $62 million more than Cole’s former team (the Pittsburgh Pirates) has paid their entire 25-man roster in the last 3 seasons combined.

Winning the division is square one for a team to compete. It’s the only way to guarantee yourself a playoff spot since the MLB adopted the one game wild card playoff after the 2011 season. We’ll start off by taking a look at the division winners in the past decade and where they ranked in payroll among their competitors.

The one thing that stands out immediately is that most of the red dots are in the upper-half of the league for their respective season. The median payroll of division winners in the 2010’s was $135.5 million compared to $101.3 million for non division winners.

In the 2010’s, 36 of the 60 division winners were top-10 in payroll. Another way to think of this is that if a team was top-10 in payroll every year since 2010, there is almost a 1 in 10,000 chance they wouldn’t win a single division title. There were 6 teams in the MLB that did not win a division title in the 2010’s. When you consider the randomness of baseball and the fact that no team has won consecutive World Series since 2000, this seems pretty significant.

To get a more statistical perspective of how money translates to playoffs, specifically division titles, I conducted a simple linear regression model to predict division wins by payroll. This was calculated using a dummy variable of 1 as division win and 0 as not a division win.

There are several takeaways from even a simple model like this. First, this regression provided a p-value of 2.68*10^-6. This essentially means the probability of obtaining results more extreme than the 2010’s is 0.00000268 if you assume every team in the MLB is equally likely to win a division independent of their payroll.

Next, looking at the equation for this model, you see that the slope is 0.0023094, meaning that for every million spent, a team is 0.23% more likely to win their division. So, a team with a payroll of $200 million has an implied 39.6% chance to win their division, while a team with a $100 million payroll has an implied 16.5% chance to win their division. Of course this is just to provide context on the importance of spending, this model is not how it actually works. If this were the case, a team spending $461 million would have an implied 100% chance to win their division.

We’ve seen that a large payroll is vital to making it into the playoffs, but another trend points out that shelling out the big bucks can also give you an edge in the most meaningful games. No team in the bottom half of payroll has won the World Series since the 2003 Florida Marlins. Among the other 16 winners, 7 teams have come from the top 5 in payroll.

Top paying teams had the upper-hand in the 2010’s as 8 of the last 10 World Series winners had a higher payroll than their opponents.

Next, I took a look at each year as its own plot of standardized payroll against wins to see if payroll has been consistently associated with wins and not just making the playoffs. When analyzing wins in a season compared to payroll (standardized for inflation), the correlation of every year in the 2010’s was positive, ranging from 0.19 to 0.64 with an average correlation of 0.37.

You will notice that in most of the plots, there is a discernible positive correlation between the standardized payroll and wins in a season. It is especially visible in years like 2010, 2013, 2016, and 2019 where the top spenders are consistently among the top in wins and the teams that do not have as high of a payroll are fairly low down on wins. One of the biggest trends that is supported in these charts is that once you spend enough, the wins will come. Superstars like Bryce Harper (13 yrs $330 MM), Mike Trout (12 yrs $426 MM), Stephen Strasburg (7 yrs $245 MM) and others have shown that not only can teams certainly afford them, but that they are worth every penny.

Although the highlight here is to point out the importance of spending, it is equally important to recognize that there are teams who consistently are below payroll average and can still perform. The following table displays the best seasons by division winners in terms of millions spent (standardized for inflation) per regular season win since 2010.

The 2011 Arizona Diamondbacks finished the regular season at 94–68 and had a standardized payroll was $52.3 million, earning them the top spot with only $0.556 million per win. Of these teams, two went on to win their respective league, and none of them won the World Series. It just goes to show that although you can have a surprise season and win 90-plus regular season games, World Series talent is frequently bought, not developed.

The secret is out: spend, spend spend. Although some owners can try to penny pinch and pick and choose which seasons they would like to be competitive, it is in their best interest to go out and pay the players what they are worth. So why do we care about all these trends if it just comes down to spending money? Because players, fans, and coaches will all agree, they want to win championships, no matter how you get there. As the saying goes “If you lose the last game of the season, nobody gives a ****.”

Data obtained from Lahman Database & Spotrac

Related posts:

Most children who have grown since the era of the N64 have had video games play a major role in their life. From Zelda and Goldeneye to tablet games where any two-year-old can drag and drop zoo…

One of the biggest weaknesses in any organization’s cybersecurity strategy is human error. Social engineering attacks take advantage of this vulnerability by conning unsuspecting people into…

Often we get caught in the belief that enormously successful people have a special gift and that’s why they are successful. If you look closer you will find that the only difference between you and…