Is Riccardi a bad GM? No...

JP Riccardi has had a job the last seven years because he had a plan. His plan - which was not for a five-year timeframe - made sense. Still makes sense. People don't seem to recognize it but that's the nature of innovation.

Billy Beane was considered a baseball pioneer when he used different forms of player evaluation such as OBP and the like. This allowed him to get bargains on good players that the market did not recognize: exploiting inefficiencies in the market. The result? A competitive team on the cheap. This isn't just good baseball, it's good microeconomic sense. That was Beane's innovation. Riccardi's innovation? He postulated that defence was an underrated component of run prevention. So if he stocked up on excellent fielders (particularly infielders) he could field a good team because the market was not valuing fielders properly.

He's right. If there's one inefficiency in the market right now it's the evaluation of fielders. Everyone uses OBP now, but 'Moneyball' was never about OBP. The Moneyball philosophy is about innovation - Michael Lewis is primarily an economics writer. So you see Toronto stocked up with players such as Aaron Hill, Scott Rolen, Marco Scutaro, John McDonald, Lyle Overbay, Alex Rios; all premium defenders at their positions. That's why in spite of five rookies starters making their debuts, six rookies making starts, a glut of pitching injuries, constant turnover in the bullpen... in spite of all this, the Blue Jays are second* in the American League with a 4.18 ERA.

The Blue Jays are paying ONE guy in their rotation more than a million and change. They've had twelve players make starts for them. Halladay, Marcum, McGowan, Litsch, Romero, Ray, and Downs have all lost time due to injury this year. I just named possibly the best pitcher in baseball and four other guys key to their pitching success these past few years. The replacement who were pitching well lost time in Romero and Ray. With all the bad pitching luck the Jays have had this year, they are still one of the best teams at run prevention in the majors. Hmmmmm... maybe JP was on to something.

(* - I wrote this a couple days ago when this was true. There's about three teams all within three on hundredth of a run of second right now.)

So have the Jays not have success? Luck. Division. Pythagorean wins in the last few years, compared to a regular playoff team in Anaheim:
2006: Jays - 86. Angels - 84
2007: Jays - 86. Angels - 90
2008: Jays - 92. Angels - 88 (Rays 93)
2009: Jays - 60. Angels - 63

They've had fundamentally the same Pythagorean record in the last four years yet the Angels have been to the playoffs twice.

Roy Halladay, Again

This seems like a little bit of deja vu.

I suppose when you're the best pitcher in baseball, as soon your GM declines to say you're untouchable the media blows up in speculation. This is not unusual or surprising in any way, but will he get traded? My gut feeling is no, but let's do some analysis from the point of view of the Blue Jays.

I believe the key to any deal like this is a comparison between long-term and short-term effects. When a player of Roy Halladay's calibre is traded the return will almost always be prospects or young players of high potential, thus setting up a potential long-term advantage against the short-term disadvantage of dealing your ace.

Case 1: Halladay is Dealt

Okay, suppose Halladay is traded. The return on that deal likely includes at least three of the following players: a major-league-ready number-one-type arm, a major-league-ready shortstop, a high-potential third baseman, or a major-league-ready catcher. All have to be top prospects. The reasoning is fairly trivial as the Jays are not going to make a deal centred around players at different positions: they have Lind, Snider, Rios, and Wells long term in the outfield, Aaron Hill long term at second, probably Lind or Cooper long term at first, and oodles of number two/three type young pitchers. With luck the Jays won't need a catcher either with prospect J.P. Arencibia but he has stumbled recently to the point that the Jays may be forced to look outside the organization long-term.

The short-term disadvantages are rather obvious: the Jays are not going to contend in either 2009 or 2010. Losing Roy Halladay makes that much of a difference and even with the aforementioned ridiculous depth of pitching the Jays have they are unlikely to contribute to the point of replacing Halladay's output. So, given that this is the case, it seems likely that the Jays would attempt to deal Scott Rolen, Lyle Overbay, and Brian Tallet who all fill the profile of short-term contributers.

Long-term we'll go with advantages first. We are assuming in this case that Halladay would not re-sign with Toronto beyond 2010 because I think otherwise the Jays would try to hold on to him. Long-term - with luck - the players sent back in the Halladay deal make up the core of a very young team. The theoretical lineup includes Wells, Rios, Snider, Lind, Hill, plus shortstop, plus catcher, plus third baseman, and a 1B/DH type guy. That lineup is relatively cheap, with Wells/Rios/Hill taking up 40$ million with the other six having their salaries controllable. The rotation likely ends up as: number-one type arm, Marcum, Cecil, Romero, McGowan/Richmond/Litsch/Purcey/Rzepcynski/Mills/Ray/Castro/one of the early round pitchers drafted in 2009. That looks like a pretty solid team going forward.

Long-term disadvantages time. I don't think you can ignore the effects of Roy Halladay's mentorship on the young pitchers. He has a superior work ethic and Toronto fans have seen it rub off on those young impressional minds time and time again. Without Halladay it will likely fall to guys like Shaun Marcum to provide the veteren leadership which obviously does not seem as valuable. Leadership is impossible to quantify, however. Something easier to quantify is the effects on the fanbase. Attendence would drop like a stone and would be nearly impossible to get back even long-term. Jays fans have been told this past year that 2010 was the year, yet if Halladay is traded the fans would feel betrayed and would find it hard to trust the organization again in the future.

Case 2: Halladay is kept

In large part I have covered the advantages/disadvantages in the previous section. Let's do this anyways.

Short-term advantages: 2010 baby. Putting together another theoretical lineup and pitching rotation, we're looking at for pitching: Doc, Marcum, Romero, Cecil, ; and for hitting: Hill, Rios, Wells, Lind, Snider, Rolen, Overbay, shortstop, catcher. I could make a case that Rolen and Overbay will likely outcontribute our theoretical corner infielders of the Jays future playoff run seeing as both are premier defensive players with above average bats playing in front of a ground-ball heavy rotation (two things that Riccardi has always sought: good defense and ground ball pitchers). If the Jays can re-sign Scutaro for another couple years then this lineup should be able to outproduce the theoretical one I made up before. Put that with that pitching staff and they really really should be contenders. On the other hand, I've been saying that about the Jays for the past three years, so take it as you will.

Long-term disadvanges: The 2010 lineup above is transient. Guys like Overbay, Rolen, and Scutaro are nearing the end of their contracts with no obvious replacements in sight, aside from Overbay with Lind, Cooper, and Dopirak. Even if the Jays have a strong 2010 season, with little depth on the left side of the infield it may not be sustainable. And if Halladay does not re-sign, there really isn't an ace in the system right now (though admittedly I don't know much about the guys the Jays just drafted), leaving them with a gaping hole at the head of the pitching staff.

Other Factors

I really don't want to see Roy Halladay pitching for any other team than the Blue Jays, but I have to admit the possibilities are certainly there. I think there are a few factors which will tip the scales either way, though.

• The J.P. Riccardi factor: Say what you will about the guy, his draft record has been his saving grace. Free agent contracts are not. Many Blue Jays fans have been calling for his head for a while now but it may just happen now. If Halladay gets traded then the Jays are in a rebuilding mode and, with his contract expiring after 2010, Riccardi will be gone at the end of the year. I don't think this is debateable. His entire plan was aimed at 2008-2010 being "the years," and absent of a playoff berth in 2009 and absent his ace, he will have failed at that plan. Now, does Riccardi want to come out, admit failure, trade Halladay, and get fired? I'm inclined to say no, probably not. Even with him saying that he wouldn't be doing his job if he wasn't listening to Halladay offers, you can bet J.P.'s fighting to keep Doc.
• The Ownership Factor: i.e. does Rogers believe they can keep Halladay and have a high enough payroll to give Doc the supporting cast for a playoff run? If not then a trade will be forced on Riccardi, whether the GM likes it or not.
• The Risk factor: No, not the board game. I don't think enough people are factoring this in here. You always always have to consider risk in every decision and there's enough of it going around for these big prospect deals. There is a large inherent risk in prospects - they may not reach their potential, they may get injured, etc. This is extremely difficult to measure, while with a pitcher like Roy Halladay with a long track record it's relatively easy. The Blue Jay may prefer the risk they know than the risk they don't.

Conclusion

It makes enough sense in as far as holding a continuous stream of talent at the bigs that even with the potent fan reprecussions that will come Toronto may be forced to pull the trigger. This is all dependant on the right mixture of prospects coming back to pry Halladay out of Toronto's grasp, but the demand should definitely be high enough to accomplish that.

I really, really, really, really hate to say this, but it looks likely that the Blue Jays trade Roy Halladay. There, I said it, now I'm going to cry in the corner.

Closers are Stupid

No, not the actual closer himself, but the way he is used. This is not news, this is a rant.

Today, in the game ongoing between the Jays and the Yanks, there was a tie ball game going into the bottom of the ninth. Cito Gaston's best reliever - his closer - this year has been Jason Frasor with Scott Downs injured. Cito elects to bring in Jeremy Accardo, ex-closer extrodinaire. Accardo is a good pitcher, but this strategy boggles my mind. Traditional wisdom has the home team using their closer for the top of the ninth with the away team conserving their closer for a save situation. The home team uses their closer because there exists no plausible save situation for him.

This bothers me. Why does the away team not use their closer for the bottom of the ninth? So that he can stay around to pick up a potential save? That's what traditional wisdom tells us, and if you have half a brain you should know why that's a huge fallacy. If the Jays score a run on the top of one of the extra innings, Jason Frasor comes out trying to conserve the win. If he gives up a run, there's a tie ball game. If he gives up none, there's a win. Okay, different situation. Suppose Frasor comes in the bottom of the ninth. If he gives up a run, the Jays lose. If he does not, there's a tie game. What's higher leverage, a situation where he can give up one run, or a situation where he can give up none?

Okay, you disagree and say that it's better to have a situation where he locks down a win as opposed to preventing a loss. But the former situation assumes that all the other (worse) relievers throw scoreless innings ahead of him.

Am I wrong in this? Can someone give me a reasonable argument for conserving your best reliever in an away game in extras?

All Star Breakdown: AL Third Base

All-Star voting is apparently already underway... which is confusing since it's only a month into the season. Nonetheless, here are some thoughts on who will be the AL starters.

The Usual Suspects

Alex Rodriquez: You know who this is, you know why he deserves it.
PRO: He's A-Rod, considered one of the greatest hitters of all time.
PRO: He's a Yankee.
CON: He's a Yankee.
PRO: Always an all-star, always an MVP candidate.
CON: He's injured currently.
CON: Steroids allegations.

Mike Lowell:
PRO: A consistent contributer.
PRO: He's a Red Sox player.
CON: He's a Red Sox player.
PRO: Having a good start to the year offensively for the second-place Sox.

Scott Rolen:
PRO: Superior defensively.
CON: Has been good at bat, but not great.
CON: He plays for the Jays, never a good thing to get voted in.
PRO: Multi-time all-star

Michael Young:
PRO: Having a great start to the season.
PRO: Multi-time all-star
PRO: Looks good defensively this year
CON: New to the third base position

The Upstarts

Evan Longoria:
PRO: Fantastic hitter.
PRO: Great fielder.
PRO: Plays for the Rays, who went to the world series.
PRO: Known by Red Sox and Yankee fans, so will gain some anti-A-Rod votes etc.
PRO: Complete exposure in the baseball world (see: World Series, RoY)

Brandon Inge:
PRO: Having a great start of the year.
PRO: Plays in vote-heavy Detroit
CON: Has a reputation for being a utility player.

Verdict

In every AL All-Star race, the New York and Boston candidates always have a leg up. One consequence of early voting this year is that Rodriguez is starting out with a big disadvantage, plus this whole steroid thing. Evan Longoria's start, plus name recognition, means he probably should start and hopefully will.

Predicted starter: Evan Longoria
Should be starter: Evan Longoria
Bench: Michael Young, Alex Rodriguez

Player Contract Inflation vs Real Inflation

	Average MLB Salary*	Salary Inflation	Average Inflation**
2008	2.93 M	3.6%	2.85%
2007	2.82 M	4.6%	3.24%
2006	2.70 M	9.0%	3.39%
2005	2.48 M	7.0%	2.68%
2004	2.31 M	-2.5%	2.27%

* Based on data released by the MLBPA
** From previous year. Contracts are signed usually at the end of the preceding year.



References
Inflation Data
MLBPA Salary Data, 2004-2008

Solving The Yankees Problem

Alright, so I have outlined the general strategy of the Yankees Dynasty yesterday and mentioned that I would do this follow-up post covering the drawbacks of their method and the solution. Let's go over the drawbacks first.

The most obvious disadvantage to the way the Yankees spend money is that they have a huge amount of capital dedicated to payroll, which is not something you want typically. On a typical team it is to your advantage to pay your athletes as little as you can get away with but with the Yankees their advantage comes when they can pay their athletes as much as they can. It's tough making a profit with the payroll numbers they have on there but luckily the Steinbrenners care more about having a winning team than the dollars. Baseball is a business, however, and by raising cost they are bleeding money all over the place.

Another drawback is the fact that players who hit free agency are usually in the early thirties or late twenties and in the decline phase of their careers. Whereas young teams get better as time goes on, veteran heavy teams just get worse (excluding the effects of steroids and players who simply buck the trends). In the late nineties and early two thousands this effect wasn't as pronounced, due to the aforementioned steroid abuse and the simple fact that contract lengths were a lot shorter. Before, they had guys running out their contracts when they were 33 or 34, now it's 36 - 37. Their team becomes older and, thanks to the decline of steroids, less effective.

There's also the curious result that the Yankees cannot seem to win in the playoffs since 2001. Many commentators would be quick to blame individual players (ie. A-Rod and Giambi) but such pathological failure has to run deeper than that. Another team with a very engrained methodology, Billy Beane's A's, suffers from a similar problem. There's no obvious root for this problem but I figured I would mention it anyways.

The Yankees' Dilemma - or - How They're Gonna Fall

The continued lifespan of the Evil Empire is very tenuous. Like every empire in history and monopoly in business it had a time when it rose, it had its golden age, it had its decline, and soon we will see its fall. I will give an economic interpretation of this eventually.

The problem with their strategy of escalating player contract inflation is that it has a cap. More than a salary cap could kill the Yankees, the Yankees will fall when they simply can't pay their players more than they already do. Players are already making money in the hundreds of millions and it's reaching the point where salary inflation simply cannot rise at this ridiculous rate. Player contract inflation will soon fall down to match monetary inflation and the Yankees will lose every bit of competitive advantage they've been enjoying up until this point. They'll still get some of the best players in free agency but they won't be able to grab salary dumps like they used to.

It just needs one domino for the entire set to fall, and this economic crisis the world is going through can be that catalyst. Many teams are either keeping their payroll the same or reducing it in advance of the bad times to come and this will have a huge effect on payroll inflation. Sure the top players are still getting paid more, but the mid and low level free agents won't get a proportional payday letting more teams afford players. Next offseason will see a huge dip in player contract inflation with teams in the midst of a global recession and the Yankees unlikely to buy the entire market again. This can spark a trend towards more modest salary growth in the future.

With their strategy obsolete the Yankees will no longer be the powerhouse they once were.

Aside: The Economic Interpretation

This shouldn't really be an aside per se as it's what I'm basing this blog around, but anyways. In economics there is this idea of "creative destruction," popularized by Joseph Schumpeter. The gist of it is that innovations (of product, marketing, or whatever) give one party a great competitive advantage that turns into monopolies. What destroys monopolies is another party coming up with an even better innovation (which in turn creates a new monopoly). I won't bother to give real world examples, but the important thing to take away from it is that innovations create and destory monopolies.

In the economic interpretation of baseball, where instead of dollars we have wins and world series rings, each team and head office is their own company competing with every other team. So the Yankees use of salary inflation was their innovation that allowed them to form a monopoly over the AL East for a decade. Billy Beane is the ultimate example of an innovator in baseball, where his innovation was better evaluating tools for players in order to get a better team with less payroll.

What destroys these monopolies is a superceding monopoly, and we really already saw that with the Red Sox overtaking the Yankees to be the "beast of the east." So really the Yankee Dynasty is already finished and they can no longer hope to remain competitive without changing their strategy - developing a new innovation. Problem is and the problem with many who come up with a great idea is that they lucked into their innovation and are soon pushed aside when they can't do something new.

Now with the emergence of the Rays (draft and scouting based innovation), I think we've seen the final nail in the Yankee Dyansty's coffin.

How Do You Solve A Problem Like The Yankees?

Ah, the Yankees, so maligned, so hateable. As a Toronto fan, it is beyond easy to blame the success and failure of the Jays on the free-spending ways of the "Evil Empires:" the New York Yankees and the Boston Red Sox. It's not unreasonable to suggest that the success of those two franchises has had a large effect on the fate of those aforementioned Blue Jays. Recently with the Tampa Bay Rays' run at success for the first time in their dozen year existence commentators are suggesting that it is not unfair to be in the same division as the heavyweights; afterall, if the Rays can do it, so can the Jays, right? Shockingly, the Jays management doesn't seem too keen about the prospects of a decade of last place finishes to restock their farm system and get lucky in one year. According to many metrics, the Jays were better than the Rays last year.

But whether or not the Jays can improve their chances, there's still the problem of the Yankees. They are fresh off the signing of AJ Burnett, CC Sabathia, and Mark Teixeira now and a lot of people seem to believe they have bought their way into contention yet again. Remarkably, since the start of this decade the Yankees have not won a World Series ring to speak of, since they began their ridiculous spending spree. They have a strategy but a lot of people don't realize what it is. Let's go over it now.

Player Inflation

You know how it is, every free agent season there seems to be something like every person in baseball waits on baited breath for the big guys to sign? This year no chips would fall until CC Sabathia lanked with the Yanks. Year in, year out, this is what happens. This is no surprise: the best free agents set the markets for the lower classes. Teix signs for 180/8 and players agents' now have a standard to compare to. The more the top free agents get paid, the more everyone else down the line gets paid. This is what I refer to as player contract inflation.

The top dollars go up every year, natural due to inflation but far outpacing it because baseball's a boom industry right now. This is not sustainable in the long run as you have a hard cap after which the owners just aren't making enough money to justify the spending increases year after year. Or, well...

The Grand Yankee Strategy

Notice how the top free agents, the ones who set the market, usually seem to fall into the hands of the Yankees? Teixeira and Sabathia this year, A-Rod last year, Pavano, Giambi, etc. It doesn't happen every year, such as AJ Burnett's contract with Toronto or Barry Zito's with San Fran, but in the long run there is one driving factor to the dramatically escalating contract inflation: the New York Yankees.

With the money they throw around this is no shocking revelation. Steinbrenner wants a winning team so he pays top dollar for the top players, right? Well, that's almost like a side effect. It's more about Brian Cashman, Yankee GM, than anyone else as far as I can figure. It pays for him to pay top dollar, even if they're crap players. He has a blank check for his payroll and he can afford anything, so it's in his best interest to keep contract inflation skyrocketing. Players get signed to ridiculous contracts on other teams because their GMs want to compete with the Yankees in the FA market. They can't afford them and ownership forces them to trade them to whoever can pay their salary. But it's only the Yankees who can afford them, and they've had a couple years to look at the players and see if they're good enough for the team.

The prime example here is Alex Rodriguez. He became a free agent after his six years in Seattle and the Rangers signed him to a ridiculous ten year contract. If they hadn't, the Yankees would have. A few years in, the Rangers still aren't a great team and they have to trade A-Rod. They got a decent return for him in Soriano, sure, but A-Rod might be the best player to ever play the game. What would be happening now if Barry Zito didn't suck so much? The Giants probably would have moved his contract already to the Yankees, but now the Yankees don't want him. The risk is on the signing team, not the team that can pick up the salary dump.

So there you have it: the Yankees drive up player contract inflation so that only a few teams can afford the top players. It forces the mid-market teams who hope to contend via free agency into dumb contracts that they can't afford, and the Yankees can pick apart the carcass. That is how the Yankees compete, because baseball is like a business and like every business you need a strategy.

Tune in soon to hear the drawbacks and why it's headed towards a fall.