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A Tale Of Two Cities: Red Sox/Yankees Economics In The 21st Century

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A Tale Of Two Cities: Red Sox/Yankees Economics In The 21st Century
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Lieutenant Island Views: Commentary About Finance, Politics and Baseball

A Tale of Two Cities: Red Sox/Yankees Economics in the 21st Century

The last five years have been the best of times for Red Sox fans. Starting with their infamous collapse in 2004, they have been the ugliest, if not the worst, of times for Yankee fans.

One could argue that the performance dichotomy is the result of two disparate economic strategies. The Yankees continue to follow strictures established by Col. Jake Rupert in 1920: spend significantly more than any other team to hire away the biggest names in the majors. The Red Sox operate with a hybrid version of Moneyball, relying heavily on home grown talent, making strategic bets on reclamation projects like David Ortiz, Bill Mueller, Mike Lowell, Brad Penny, John Smoltz et al. and using sabermetrics to execute on the field as well as in drafting players.

The two strategies are also seen in their approaches to free agents. The Yankees tend to use muscle to outbid others for big name free agents regardless of the cost. In dealing with free agents, their own and other teams’, the Red Sox tend to have price limits and stick to them (this even was true with Daisuke Matsuzaka). The Yankees hardly ever are outbid in auctions unless it is a onetime sealed bid process where they do not have a chance to up their offer (this is how they lost Daisuke Matsuzaka).

This year, the Yankees out did themselves with signings of CC Sabathia, AJ Burnett and Mark Texeira. The Red Sox made a run at Texeira but would not match the Yankees bid. Their real focus was to add four reclamation projects (Takashi Saito, Brad Penny, John Smoltz and Rocco Baldelli) for a combined annual compensation level less than any one year salary of the three big Yankee additions.

Surprisingly, though the Yankees are the huge spenders, they exhibit less alacrity than the Red Sox at jettisoning stars or exploring new strategies. Midseason trades of Manny Ramirez and Nomar Garciaparra were bold moves by the Red Sox which improved team chemistry without significantly reducing run generating firepower.

The Yankees seem less willing to adopt new approaches. Perhaps this is why they still stick with the almost 90 year strategy of Jake Rupert.

The sad reality is that, since 1978, their high priced players strategy has been a bust. The Yankee championship teams of the late 90s were built along the lines of the Red Sox model. This happened during a period when George Steinbrenner was banned from baseball.

In Steinbrenner’s absence, Gene Michel and Buck Showalter were able to develop home grown players like Derek Jeter, Bernie Williams, Jorge Posada, Mariano Riveira and Alphonso Soriano who took them to the promised land. As those players aged, and Steinbrenner was reinstated, it was “déjà vu all over again” with more spending, off the charts payrolls and diminishing performance.

One has to wonder what goes through the Steinbrenner’s heads. If there is a proven strategy to win more games win with less expense, why not try it? It could result in less gut wrenching failure and greater profitability. Red Sox fans regularly thank the lord that George and his boys have not figured out the new paradigm. They do this because they know that God IS a Red Sox fan!!!

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