Baseball Musings: Other People's Money

November 29, 2005

Other People's Money

Richard Griffin offers advice to people upset by the size of the contract tendered to B.J. Ryan:

It should be noted, in support of the Jays and any other sports franchise with uber-critical, hyperventilating fans, that as long as the front office is not publicly whining about having enough money, then size of contract should not be an issue.
Dudes, relax. It's not your cash. The one gauge should be results. Shut up and appreciate that the Jays, with their much-maligned, albeit personally defensive GM have actually started to spend some of that extra $60 million promised by the great Canadian Ted Rogers.

Giles and Burnett are next up for Ricciardi. J.P. is actually using the Yankees model of free agency; identify the best player(s) available and sign them. If the Jays manage to land the Fish and the Friar, they'll bring home the best reliever, starter and hitter available this off season.

Update: David Gassko at the Hardball Times crunches the numbers, and it appears the Blue Jays got a bargain.

Correction: Fixed the spelling of Gassko.

Posted by David Pinto at 08:41 AM | Free Agents | TrackBack (0)

Comments

I think there is a flaw in Glassko's methodology but his article has no place for posting comments and I hadn't gotten to e-mail him yet so I'm taking the lazy way out and posting here, hopefully he'll see it here.

My concern was over his choice of 10% salary inflation during the contract period. I've been informally collecting contract data and had found that salaries were on a downtrend in the early 2000's - I used the top 5 contracts signed on a per-year basis for comparison. This was corroborated on a mass basis by one of Glassko's colleagues at Hard Times, Dave Studeman in his article "A Good Starter is Hard to Find", which also found a down trend as well (to 2003).

Now that's the rub: salaries have been increasing again since 2003, I know it did in 2004, but never got around to collecting the 2005 data so I'm not absolutely sure. His calculations are based on 10% inflation of salary over the length of the contract but that seems to be a figure plucked from the air than even simply analyzed as the growth of salaries in 2005 vs. 2004.

But it is not even the last annual increase. In the article, he notes "Every year, the average major league salary increases by about 10%. That's held true for the past five, fifteen, twenty-five, thirty-five years." As his colleague had found, no, it's not held true for at least the five year period he covered, from 1998-2003, salaries actually fell for the data Dave Studeman found.

And the conclusion of his analysis basically revolves around what this inflation figure is. It appears that 10% is the tipping point - any higher and Toronto got a bargain, any lower and Toronto overpaid. Perhaps he can get Studeman to update his study to cover 2004 and 2005 salaries as well to see what the inflation rate from 2003 to 2005 is.

However, if he uses the 5-year rate, 2000-2005 could not be that high an inflation rate as 2000 is a peak or near-peak year (depending on which data of Studeman you use; I think Studeman should have only included multi-year contracts and excluded the one-years), which should dampen whatever rate is determined for that period.

Despite this problem, I think the article overall is a great piece of analysis and that people should read it, it is very interesting.

Posted by: biasedgiantsfanatic at November 29, 2005 12:38 PM

I took the 10% figure to be a long term average. If you look at the stock market over long term stretches, it always seems to gain at about 9% a year. I got the feeling that's what he was driving at in the article. It's not 10% every year, but if you look at most long term horizons, 10% is the figure you get.

Posted by: David Pinto at November 29, 2005 12:56 PM

I think Glassko uses too small of a sample size (10 pitchers) to meaningfully project the next five years for Ryan. That's not necessarily his fault - there are only so many 20+ save relievers in Ryan's age group in recent history - but it still makes the projection dicey. The fourth year out, for example, shows an adjusted ERA far superior compared with the earlier years, which doesn't make sense.

That said, Ryan may turn out to be the bargain that Glassko predicts. I just wouldn't want to take on that risk for five years.

Posted by: Ken at November 29, 2005 04:24 PM

Since 1990, the average salary of an MLB player has risen 11%, vs. general inflation of 3%. I don't have the 2005 figures, but given the cash position of major league teams and the overall economic inflation rate, I think 10% is very appropriate.

Posted by: studes at November 29, 2005 04:57 PM

Rob McMillian points out that if the loonie appreciates as it has in recent years (and you can make a case for it), then the contract becomes cheaper for the Jays.

It's the inverse of what the Canadian NHL clubs suffered through in the 90s -- paying people in more valuable currency than they were taking in.

Posted by: Chris Marcil at November 29, 2005 09:22 PM

Color me unconvinced by Glassko's argument. Why is Ryan's 2005 the only year of his career considered? Using Glassko's method you could declare any massive contract given to a guy coming off a careeer year a bargain.

Posted by: Floyd McWilliams at November 29, 2005 11:56 PM

David, thanks for posting this. Though there's no "l" in my last name. I don't know why so many think there is (I've seen some very interesting variations on my last name in the past few months, mostly from posters on Baseball Primer). It actually comes, as far as I can surmise, from the French region of Gascogne, where I guess I had ancestors in the middle ages.

Anyways, to answer concerns about the methodology. Studes suggested the 10% increase rate, and while I was at first skeptical, I looked at the numbers, and he was completely right. There is a pretty consistent 10% ris year-to-year in the average baseball salary. Over almost any period of time.

As for my method itself, it has its pitfalls. I did not really use Ryan's career year though; he was just as good in 2004, and almost as good in years before that. His 2005 pitching level is close to his "true talent". Using 10 comps is a little dangerous, I know, and it did result in that one strange year, but I suggest people look at the overall results. My projection suggests that Ryan will average 52 IP/year over the next five years with a 3.46 ERA. Does that sound reasonable? It does to me.

Posted by: David Gassko at November 30, 2005 12:39 AM

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