What makes trying to beat the stock market so difficult is the fact that once you have a system which consistently beats the market, people will notice and the secret will get out. Soon enough, the market adjusts and the system is no longer effective.
Baseball general managers often have the same difficulty in picking players that investors have in picking stocks. GMs are always on the lookout for some edge which will help them pick up undervalued players to help their team win, while investors want to find undervalued stocks to make money.
In Michael Lewis’ Moneyball, published in 2003, we learn about Athletics GM Billy Beane. He uses advanced sabermetrics to try and find undervalued talent to help his team win on the cheap. In the book, we find out the focus of Beane’s efforts when it came to offensive players was finding guys with high on-base percentages (OBP).
At the time, other GMs didn’t value a high OBP, instead preferring to stick to batting averages or other measures of offensive capability. The result was Beane was able to get players on the cheap who didn’t make outs.
Well, the secret is out. More teams are valuing OBP and GMs are looking deeper into statistics to give them hints as to what players they should recruit.
This doesn’t mean there isn’t undervalued talent available. All-around players, players who are good-to-average at both defense and offense, aren’t getting the huge contracts their offensively-gifted brethren are.
At the shortstop position, Derek Jeter makes a lot of money because he’s the best offensive player at his position. He’s also the worst fielding shortstop in the majors.
For just a quarter of Jeter’s salary, Jack Wilson labors in relative obscurity (though presently on the DL). Wilson is an above average hitter among shortstops and is near the median defensively. He offers his team a lot of value at an affordable price.
And there are a lot of guys like Jack Wilson, just at shortstop there are guys like Jose Reyes and Khalil Greene who can be had for less.
These players are also available in trades. Jason Bartlett, an above average defender and slightly below average bat was traded by the Twins to the Devil Rays.
These guys are out there at every position and the market may not be able to adapt quickly either.
Many baseball teams are still using bad fielding stats (like fielding percentage and errors) instead of more useful ones (like Zone Rating) and so called “holy grail” or fusion stats (specifically, Win Shares) which try to marry offensive and defensive contributions haven’t been widely adopted yet.
At least for a little while, savvy GMs should be able to get more value at a lesser price by focusing on “all rounders” rather than offensive statistical leaders.
comments (12) write a comment »
write a new comment
6 months ago
A guy like Adam Everett has been given more than 2,000 major league at-bats with an on-base percentage of .298, and you think teams are ignoring their defenses?
from 6 months ago
One, I'm not saying guys like Adam Everett are not valued, of course they have value. In fact, I think the elite glove men like Everett are priced right. Because Everett is considered among the elite fielders at his position, it is easy for him to find work and a contract which reflects his contribution to a team.
Even guys I mention in the column have value, Jack Wilson and Jose Reyes both make lots of money and thus have value. What I'm trying to show is that there are guys who are UNDERVALUED. Jose Reyes provided the same WinShare (24) last year that Derek Jeter did and Jack Wilson provided a 19 WinShare. These guys are available at a fraction of the cost of statistical leaders like Jeter or Miguel Tejada and thus are undervalued compared to their contribution.
Since guys like Reyes and Wilson don't rank among the top players at their positions in statistical categories like Zone Rating or OPS, they get passed over despite their relative worth because they are all around good players. Being average at both fielding and hitting isn't a jaw dropping accomplishment yet the value of someone at shortstop who is average all around far surpasses their present pay (at least among the examples I gave).
I hope I've made my point clearer.
from 6 months ago
Well, actually my point was that you say that teams ignore fielding and prefer guys who are only good hitters, but I think teams know the value of defense, and that's why they let Adam Everett stink at the plate every year. Rey Ordonez and Pokey Reese are similar examples.
Also, I don't know why you cite Jose Reyes...every team knows Reyes is one of the most valuable - if not most - shortstops in the league (apologies to Rollins and HanRam)
from 6 months ago
I didn't say teams ignore fielding. If you'll look, you'll even see I say in my reply to your comment that teams do value defense. Good defensive players get playing time. So enough already.
I'm talking specifically about the contracts players who are near the median in both fielding and hitting get compared to other players who lead in specific categories. Jack Wilson, Khalil Greene and even Jose Reyes will never see as lucrative a contract as Derek Jeter or Miguel Tejada have. Maybe I should have talked more about the actual salaries of the men mentioned in the column.
I'm not talking about recognition or reputation, I'm discussing down and dirty economics, WinShares per Dollar if you will.
But, to take your point, defensive specialists who are terrible in the field still provide a lot of value at a lower costs. It depends on the player, but Adam Everett is probably undervalued and the market is perfectly effecient when it comes to defense. However, I still think defense is generally efficiently valued, and certainly it is priced better (as a measure of player's contracts) than the players I'm trying to highlight.
6 months ago
I don't believe in the really deep areas of Sabermetrics. While I'm starting to come around on OBP, I think things like "Win Shares" are completely pointless. It just seems like the people who created these stats and PECOTA and what have you never have played the game and never look at the other factors of baseball that make it great—clubhouse attitude, the intensity some players bring, hustle, etc. There's much more to baseball than trying to make up mathematical formulas, folks.
6 months ago
What does batting average offer that on-base percentage doesn't, JJ?
I'll wait for your response, it should be a doozy.
You know what? I'm a nice guy, I'll save you the time: the answer is nothing. In fact, the formula used to get a player's batting average is IN the formula for on-base percentage.
Using batting average to analyze a hitter and willingly refusing to use on-base percentage is like intentionally asking your doctor to write you a weaker prescription for your eyeglasses. It's like you willingly do not want to see the whole picture.
"never look at the other factors of baseball that make it great—clubhouse attitude, the intensity some players bring, hustle, etc."
How do you quantify that?
You can't. It's more scientifically unjust to factor in those qualities when there's no way to quantify it. It's all subjective and none of it is provable.
And, considering we're talking about Major League ballplayers -- the cream of the crop -- it's entirely likely that those qualities don't make a hint of difference. The players that can't handle pressure situations, or get along well with teammates, or run out ground balls* likely got dropped a long time ago.
* I know some players don't but it's a rare occurrence for them and it only happens with a very minute amount of players.
"There's much more to baseball than trying to make up mathematical formulas"
The formulas aren't really "made up." There's a cohesive thought process that goes into each formula. And the great thing about science and mathematics is that they're self-critical.
Sabermetrics are by no means perfect, but they're the best we have right now and they will always continue to improve, which is more than can be said for a lot of other methods of analysis.
6 months ago
It seems to me like there are two sorts of analysis of ballplayers, qualitative and quantitative. Qualitative still seems to run the business. Scouts are generally baseball lifers. They live in a world of "stuff", "arm-angles", "bat speed", and "make-up". They seem to be the gatekeepers, allowing amateurs into the ranks of the minors. But once there it seems like Quantitative takes over. The last decade has brought us GM's who are more concerned with Stats. Beane is the poster-boy for this movement, but others like Ricciardi and Epstein have taken on the mantle as well. I think that to field a successful team you need a happy medium of both.
6 months ago
"It just seems like the people who created these stats and PECOTA and what have you never have played the game and never look at the other factors of baseball that make it great—clubhouse attitude, the intensity some players bring, hustle, etc"
Why does it seem that way to you?
How do you know they haven't played the game or don't consider make-up?
Has it ever occurred to you that they do considered these aspects and use more advanced stats to augment their player evaluation?
5 months ago
This is why someone like Brooks Conrad deserves a shot. I've said it so many times I must sound like a broken record by now, but when a guy switch-hits, can play seven positions, and LED THE MINORS IN XBH WHILE IN AAA, he is better than Tomas freakin' Perez. There are still plenty of Quad-A guys out there, who can help a club on offense, defense, or both.
Isn't the Bartlett/Reyes/Greene thing kind of moot because of the salary structure? It's not like they were free agents signed to a low salary; if you don't have them and want to get them, you have to pay the price through a trade (eg Delmon Young in the Bartlett deal...that's the only time it will ever be called "the Bartlett deal haha). I think that the inefficiency here is more with guys like Conrad, Danny Klassen, Cody Ransom, and Marshall McDougall--minor league free agent types or Quad-A guys who can be had for nothing who can provide above-average offense at up-the-middle positions. Just my thought on it.
from 5 months ago
The great thing about baseball is that there will always be undervalued players. This column wasn't about AAAA or "Replacement Players", who are very undervalued, nor is it about the pay structure of baseball (which creates a huge gap in wages based on service time), it is about a single instance where I found a market ineffeciency, "all rounders".
Say a team (like the MN Twins) is 15% below last year's payroll and is looking to buy some veteran help for the ballclub. Never mind veterans are already overvalued, if they have 2 choices, to spend 5 million dollars on a guy like Jack Wilson or to spend 10 million on a "star" like Derek Jeter, my point would be that going with Wilson would be the better, more economic choice.
But my point also works within the framework of minor league free agents, trades and even prospects. Teams might notice a guy for his bat, or might notice a guy for his glove (and especially notice someone with both) but they might miss out on guys who are average hitters and average fielders (and that that all around player provides the same value to team and most likely can do so at a lower price).
You mention ineffeciencies, and there are a lot of them. So many deserving players lose their opportunity to play in the majors because a washed up veteran is needed for their "bench presence" or some such nonsense.
I was merely trying to point out a single one.
from 5 months ago
OK, yeah, agreed that Wilson is worth more than half as much as Jeter, etc. And fair enough; it seems like "all-bat guys" get first crack at jobs, and then "all-glove guys" get the next shot, whereas more balanced players (one example is Joe Thurston, who the Red Sox called up yesterday) just kind of rot down the depth chart.
All I was saying is that saying "Jose Reyes can be had for less" is a rather dubious proposition. Yes, the Mets pay him less, but any team that wanted him from the Mets would have to pay way more than the economic equivalent of Jeter's salary in talent.
Completely agree on "bench presence" and inefficencies, although I find there are way more inefficiencies in hitting then pitching. Whereas many deserving hitters are in AAA or even AA ball, it seems to me like the bottom 70% of MLB bullpen arms are just about the same as the top 70% of AAA bullpen arms.
Sometimes, the proliferation of inside-the-box thinking in MLB front-offices is nothing short of infuriating.
5 months ago
I think the assertion that SABR is taking over is a little bit of a leap. GMs still look at value and return. Jeter, while not worth the money he is paid ON the field, is certainly worth it to Yankees fans. He will undoubtedly go down as one of the most loved Yankees of all time. Think if he would have been traded 2 or 3 years ago, Cashman wouldn't have a job.
Another factor, GMs look to take advantage of the market. Which is what Moneyball was about and something you alluded too. OBP is now overpriced (see David Dellucci in Cleveland) and toolsy players with outstanding defensive abilities who contribute more overall are not underpriced (see Mike Cameron in Milwaukee).
write a new comment