Normative Narratives

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Monday Morning QB: The Tanaka Effect

The subject of this blog is Japanese pitcher Masahiro Tanaka. The MLB pitching market this off-season has been non-existent, as teams looking for top-notch pitching wait to see if Tanaka is an available option. The issue surrounding Tanaka’s potential availability is a proposed rule change for the “posting fee” a MLB team has to pay its Japanese counterpart for the rights to negotiate with a player (original article):

Japanese pitcher Masahiro Tanaka’s baseball future was thrown into flux Thursday when the president of the Tohoku Rakuten Golden Eagles told a newspaper that the team might not make the prized starter available to major league teams as a free agent this winter.

Yozo Tachibana told Sponichi that the Golden Eagles might refrain from making Tanaka available through the posting process. Under a proposed system, major league teams would submit maximum bids of $20 million for rights to negotiate with Tanaka, and Tanaka would be free to sign with the club of his choosing among those that meet the threshold.

Previously, major league teams would submit bids and the club with the highest offer would receive exclusive rights to negotiate with the player.

The proposed rules would result in a significantly lower payout to the posting club — in this case, Rakuten — while giving Tanaka a wider range of teams in the bidding. According to reports out of Japan, 11 of Nippon Baseball’s 12 teams agreed to the $20 million maximum fee and the proposed system, while Rakuten was the dissenter.

Officials from MLB and its players’ association are hoping to get Tanaka’s situation resolved as quickly as possible, because his status could have an impact on Matt GarzaErvin SantanaUbaldo Jimenez and other top free agents who might have to wait in line to see how the market for their services shakes out.

Lets consider how this rule change might affect all parties involved:

The Nippon (Japanese) Baseball Team:

As the article clearly states, under proposed rule changes, the posting fee would be capped at $20 million dollars. While multiple teams could post this $20 million dollar fee, only the team which successfully signs the player pays the fee.

$20 million would be a substantial decrease in revenue for the Japanese ball club. Comparable free agents Daisuke Matsuzaka ($51.1 million) and Yu Darvish ($51.7 million) commanded much higher posting fees. The lower posting fee may make the Japanese club reconsider letting their best player go; for $50 million they will likely give up our best player, for $20 million they may not.

The Free Agent:

The financial benefits go to the player in question. The player will command a bigger contract under the proposed system for two reasons:

1) Competition: Under the old system, there was no competition from other clubs once a posting fee was accepted by the Japanese club. The only two options for the Japanese pitcher would be to either sign with the MLB team or reject the offer and return to the Japanese team. Under proposed rule changes, multiple teams will have the right to make offers, and the player can negotiate with any team that makes the posting fee.

For a player in high demand (such as Tanaka), this will bid-up the price of the player as teams compete for their services.

2) Total Cost: Teams generally have an amount (or range) they are willing to spend in order to sign a player. When it comes to Japanese players, this total included both the posting fee paid to the team and the contract signed by the player. With less money now going to the Japanese club, this frees up more money for the clubs to offer the player.

MLB Teams:

As stated before, MLB teams will likely have to offer a larger contract to highly desired Japanese free agents, as they will have to bid against one another. There is another small caveat that should be mentioned here, regarding teams that are trying to get below the luxury tax threshold.

As it currently stands, the posting fee is not factored into the teams payroll and therefore is not counted against the luxury tax threshold. Therefore, a Japanese player is even more attractive to a team that is near the threshold, as it can theoretically sign a higher caliber player while taking less of a payroll hit. This is part of the reason why a team like the New York Yankees is very interested in signing a player like Tanaka.

If the rules are changed, more of the cost of the player will be reflected in his contract, and therefore count as part of a teams payroll / luxury tax burden.

Other Free Agents: 

Often times, players must wait until the most sought-after free agent at a specific position is signed before they start to receive offers. This top free agent “sets the market”, and once they are signed, other players at that position receive offers from teams that could not sign that most sought-after player.

This is likely what we are seeing with the market for pitching this off-season. While many big name players like Robinson Cano, Jacoby Ellsbury, and Brian McCann have signed lucrative contracts, big name pitchers such as Matt Garza and Ubaldo Jimenez have not. Once the Tanaka situation is resolved (one way or another), expect teams to more aggressively pursue the other available free agent pitchers.

MLB Fans:

Fans may bear the greatest cost of the proposed rule change, if they are deprived of the opportunity to see Tanaka pitch in MLB games.

I do not see this as a likely scenario, but it is something the Tohoku Rakuten Golden Eagles are threatening if the new rule is passed.

Update: Tanaka-claus is coming to town!


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Transparency Thursday: Is There Anything More American Than Baseball?

Baseball is America’s pastime. Despite the NFLs meteoric rise as America’s most popular sport, and the global expansion of basketball, baseball remains uniquely American in more ways than most people generally realize.

For one, baseball is “Americas Pastime” because it has been around longer than football. The exact origins of baseball are debated, but historians agree that it has existed since the early-mid 19th century. In a way, American and Baseball grew up together, and will be forever intertwined. The dog days of summer, hot dogs and cold beer, and watching a baseball game have become an enduring image of American culture. The image of the hard working American also has parallels to baseball players, whose 162 game schedule is unrivaled by any other major sport.

The following analysis is much less nostalgic and much more economical. It is inspired by the fast-approaching beginning of the 2013 MLB season, and a recent report by Forbes which states that the average value of MLB baseball teams rose by 23% last year, the “biggest year-over-year change in valuation ever calculated by Forbes magazine”.

“In its report, Forbes, which has been tracking the league’s finances since 1998, revealed that the money that all teams made from the $450 million sale of the Montreal Expos in 2006 was invested in hedge funds that are now worth more than $1 billion.

“The value of a team used to be about a team itself,” Forbes executive editor Michael Ozanian said in a phone interview with “Then it shifted to the stadium value and then to the television deals, and now it’s more about what’s not on the field at all.”

Is there any other sport that parallels the U.S. economy so? I think not. Both represent capitalism in their purest forms. America is one of the strongest pro-market advocates of all the world powers. MLB has the most free market-driven amongst major sports.

In baseball, there is no salary cap, and competition is protected through a redistributive luxury tax system. In the U.S., as in baseball, the open market determines someone’s wages, and poorer parties are compensated by redistribution of wealth to help ensure equality (who does this better, the U.S. or MLB, is open to debate). Other major sport’s wages are also determined by market forces, but are influenced in general by salary caps, which distort market values.

The MLBPA is the strongest of all the players unions. Strong unions, believe it or not, used to be a bastion of American wealth. The MLBPA was perhaps too strong, to the point where regular steroid threatened the integrity of the game. Just like in America, vested interests continue to hold sway until the system is “brought to its knees”, and only then is real reform discussed (in baseball it is PED testing, in the American economy financial and tax reform).

Baseball as a sport exemplifies American ideals, and as a business mirrors the U.S. economy. Teams increased value represents not an increase in popularity of the sport, but savvy off field investments by teams.

How would you feel if your team lost lots of money in the financial market and it affected the on-the-field product? We already saw this to a certain extent with the Wilpon-Madoff debacle, but most people assumed this was an isolated issue—the recent Forbes report suggests perhaps all teams are more vulnerable to financial market shocks than we may realize.

But restricting team’s investment opportunities would be decidedly un-American. Perhaps MLB should put a limit on the amount a team can cut it’s payroll from year to year, ensuring that off-the-field investments do not affect the product a team puts on the field?

Most people will not care about this issue unless it affects them directly—out of sight out of mind. Mets fans were outraged that their team’s payroll took a hit when the Wilpon’s lost money in the financial market. I would also not be surprised if eventually we find out the Marlins salary-dump was somehow linked to losses not directly related to baseball activities.

Perhaps investment in financial markets is an unstoppable force, and that any entity that has a large amount of capital—including major sports organizations—will naturally be drawn to it. I do not know if the commissioner’s office has the power to regulate how owners invest their profits even if it wanted to.

Banks have to have a certain amount of reserve cash to back up their assets, known as a reserve requirement. Perhaps the commissioner’s office should institute a similar policy to ensure that financial market fluctuations do not affect the integrity of the game. Or should the system stay as it is, and address teams financial woes on a case-by-case basis as it currently does ?(such as the Dodgers MLB managed bankruptcy)

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Monday Morning QB: The World Baseball Classic and Professional Sports as a Development Tool

It seems that 200 MLB players will be participating in the World Baseball Classic this March. For those of you who do not know, the WBC is a global baseball tournament held every 3 years in March–this March will be the third such tournament. You may expect the Americans to dominate on the global stage, as baseball is the “American Pastime”, but you would be wrong. Japan has won both of the two World Baseball Classics so far, the U.S. has never even made it to the finals (and only made it to the semi-finals once).

There are a number of reasons for the lack of dominance by the U.S. For one, lots of the best MLB players come from Latin America (the Dominican Republic specifically), so the MLB talent does not favor the U.S. as much as it may have in the past (when baseball was dominated by white Americans). This map from 2011 is a pretty recent visualization of how baseball has become more global in recent years, if we had an updated map for 2013 you would expect to see even more international players.

There is also the argument that “Team America does not take the WBC seriously”. Many players from MLB rosters are barred from playing in the WBC by their team (older guys, pitchers, players coming off injury traditionally do not play in the WBC). This affects the rosters for all the clubs, but disproportionately the American team as it has the vast majority of MLB players. Also, the WBC runs parallel to spring training in America; many MLB players are just getting into playing shape and use the WBC as an opportunity to shake the rust off, as opposed to some international players whose seasons may be in “full swing” (no pun intended).

There is also the argument that MLB players will not help you win this competition. Japan, the only team to win the WBC, has never had many MLB players on their roster. This year, Japan will look to defend its WBC title with zero MLB players, that should be fun to watch. With MLB players just getting warmed up, other teams have a much better chance at competing in the WBC then one may expect.

Sports can be a powerful development tool for undeveloped countries.Professional sports bring to the table billion dollar profit margins that can go an even longer way in a poor developing country than they could in the U.S. These programs are a true win-win for professional sports leagues and developing nations. The professional sports leagues can expand their markets to new regions, and the process of discovering talented new players is essential for the future profitability of any sport.

The benefits to the developing country are not what one may think. It is natural to think of the sport star who signed a big contract giving back to his home country, and for this most part this does happen. However, these benefits are small compared to the more “organic” process of economic development. By linking sports programs to educational and nutritional programs, even those who do not go on to become professional sports stars will be helped in achieving their potential. The social capital and camaraderie learned in sports is a more abstract advantage than schooling and nutritional guidance (human capital), but are nonetheless important skills for young people to learn.

Participating in these sports development programs are not only fun for kids, but they teach them valuable life skills. Instead of selling drugs, joining militias, or working as poor child laborers, these children learn marketable skills and are given the opportunity to realize their full potential (something we in the developed world often take for granted). The next great MLB player could come from one of these programs, but so could the next Nobel Prize Laureate. The benefits from these “investments” will take time to pay dividends, but the return on these investments could be absurdly large for both professional sports leagues and developing countries. These programs are a true example of a win-win relationship, and there is a strong argument for “scaling-up” these programs.
Baseballs development initiatives tend to be in Latin America and Asia, where baseball is popular. Comparable programs exist for other major sports as well. Any NBA fan could tell you about “NBA Cares“, where star players help out in poorer communities around the U.S.. Less well known is the SEEDS program, which supports similar programs in developing countries (currently operations are based in Senegal, but the organization has an ambitious goal to expand to other countries in the future).

Certain sports naturally fit better in different countries. Asia and Latin America have a history of baseball. Also due to the fact that these regions are generally more developed than Sub-Saharan Africa, the cost of playing baseball is a bit more achievable (and is subsidized in certain cases by MLB). In Africa, basketball and soccer are more popular, as all you need to play these sports is a ball and an arena. Different sports for different folks, but they all have the same potential for spurring economic development and raising the standard of living.

Baseball seems to be making inroads in the African market as well. Uganda became the first African team to play in and win a Little League World Series game last year after missionaries brought baseball to Uganda in the 1990s. Some of the best athletes in the world are born in Africa, I would not be surprised to see MLB take further steps in promoting it’s sport in Africa in the coming years / decades.  South America is another potential untapped growth region for MLB to consider.

So while you’re enjoying the WBC, or the Olympics or World Cup in the future, know that you are not only enjoying sports, that you are not only displaying national pride, but that you are also (indirectly) advocating the use of sports as a poverty reduction tool. All that socially constructive behavior by sitting on your couch at home, not too shabby!!

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Monday Morning QB: Baseballs Best Outfields

The Pro Bowl was less of a disaster than last year, although Peyton Manning’s speech to take the game seriously did not seem to work for the AFC, as they got trounced 62-35 by the NFC. I think the Pro Bowl can be saved by:

A) always having it in Hawaii (so guys want to come) B) making it the week after the Super Bowl so more guys can participate (how much fun would it be to have Ray Lewis play in one last Pro Bowl after the Super Bowl before he retires?) and C) add a skills competition of sorts (NFL players are among the most physically gifted athletes in the world, lets highlight those abilities for everyone to see!).

The NHL season continues, as the Rangers seem to be getting into form. The Knicks won a nail-biter versus the Atlanta Hawks on Sunday behind Melo’s 42 point performance (including 9 3-pointers, tying a NYK franchise record). Amar’e seems to be getting back into game shape, and the Knicks as a whole are getting healthier.

Without football to focus on this weekend, my mind started to wander to the upcoming MLB season. With the trade from the Diamondbacks to the Braves, the Upton brothers will be playing on the same team next season. The combination B.J Upton, Justin Upton, and Jason Heyward have people wondering how this Braves OF stacks up against the rest of the majors. Without further ado, a ranking of my top 10 outfields going into the 2013 MLB season (for shits-and-giggles, here’s how the analysts ranked-em’, obviously lots of similarities but also some differences):

1) LA Angels: Not much of an argument here, when your outfield consists of Mike Trout, Josh Hamilton, and Mark Trumbo. This outfield has 3 legitimate MVP candidates, and should combine for 100+ HRs, 300+ RBIs and close to 300 runs. All three have above average arms, and Trout and Hamilton are both above average fielders. No other OF can compare to the Angels. (If they decide the go with Peter Bourjois for defense and put Trumbo at DH, they still have the best OF in MLB in my opinion).

2) Atlanta Braves: Wow, this outfield is currently number 2 and has a chance to be a top 3 outfield for the next 10 years if they can keep the talent they now have healthy. The Upton brothers are both 5 tool players, although Justin has showed a higher ceiling than B.J. thus far in their respective careers. Jason Heyward is another 5 tool player, who had a bounce back year last year after a prodigious sophomore slump. I look for Justin to get back to his MVP-caliber 2011 form, Jason to continue to progress into a perennial All-Star, and B.J. to have a career year as a part of this tandem. When I think of this groups potential (90+ HR, 300+ RBI, 300+ runs, 90+ SBs), I cannot think of any other OF ever to put 3 legitimate 5 tool outfielders together in the primes of their careers like this (doesn’t mean it’s never happened, I just can’t think of a comparable OF, can you?).

3) LA Dodgers: Oh boy, it’s an arms race in L.A., with the focus on big OF bats. The combination of Matt Kemp and Carl Crawford makes this a top 10 OF itself. Add in Andre Etheir, a career .290 hitter who will benefit from a stronger supporting cast this season, and you got the number 3 OF in the league.

4) St. Louis Cardinals: Matt Holiday is a stud OF, who can hit for power and average. Carlos Beltran had a comeback year last year which should carry over into the upcoming season. John Jay is not as much of a household name as the other two guys, but despite injuries this kid had a great 2012 campaign which he is sure to roll-over into 2013.

5) New York Yankees: I may be accused of being a homer ranking the Yanks this high, and that may be a fair accusation. Here’s why I am so high on the Yanks OF this year (and really their whole lineup); it features a great balance of power, speed, and contact hitting. Granderson will hit 40+ HRs and should steal 20+ bases (while probably hitting .230-.260, his “Achilles heel” as a hitter is strikeouts/batting average). Ichiro hit well over .300 after coming to the Yanks, while showing both power and speed. Brett Gardner is coming back from injury and should be healthy. If he play a full year he is a lock for 50+ steals, and I believe he will finally play up to his potential and hit over .300. The Yankees outfield may not have as much power as other years, but they can all play very well both offensively and defensively. If you doubt this prediction, just wait and see.

6) Toronto Blue Jays: It is well documented that I have been “High on [the] Jays” this whole offseason, and why not with the acquisitions they have made. Jose “Joey Bats” Bautista will be among the league leaders in HRs again this year. Rajai Davis provides a spark with his speed, which should work nicely with Reyes’ speed and ability to get on base as well. The wildcard in this group is Melky Cabrera; the guy almost had a batting title before testing positive for PEDs last season. While he may not be “batting title good”, Melky is still an above average hitter and fielder in the prime of his career. The Blue Jays are no joke this year, and neither is their outfield.

7) Oakland Athletics: A surprise team from last year, whose success I expect to carry over into the upcoming season. Josh Reddick matured into one of the premier power hitters in the game last season. Yoenis Cespedis, a Cuban defect, rewarded the A’s confidence in him by producing in a big way (particularly after the All-Star break). Coco Crisp was very good for the A’s down the stretch, although it remains to see how they juggle both Crisp and the newly acquired Chris Young. Having too many good OFs to start at once, however, will not cost you a spot on this list.

8) Baltimore Orioles: Another surprise team from last year that should be as good in the upcoming season. Adam Jones has developed into a top 10 OF (arguably top 5) with 5 tool talent. Nick Markakis and Nate McClouth are both similar players. Neither one will wow you with eye-popping offensive numbers, but both will hit for a high average, have respectable power numbers, display excellent base-running skills and play great defense. The overall talent of the Orioles OF earns them a spot on this list.

9) Cincinnati Reds: The Reds did their best “Big Red Machine” impression last year, and seem likely to make another playoff run this year. The addition of Shin-Soo-Choo will bolster an OF already featuring Jay Bruce and Ryan Ludwick. Bruce is a premiere power hitter (hitting 30+ hrs each of his last 2 years and 20+ each of his first 5 seasons, it is hard to believe this guy will only be 26 years old this season). Ludwick was a pleasant surprise for the Reds, clubbing 26 HRs in a nice bounce-back season for the vet. When your OF has 100 HR potential, (although anything over 90 would surprise me), your OF gets on this list.

10) Milwaukee Brewers: The Brew-Crew finish-out this top 10 list. First and foremost, Ryan Braun has established himself as one of the premiere OFs in the league. The guy can do it all, and is a perennial MVP candidate. The PED scandal did not seem to slow him down at all last season–Braun is primed for another huge year. Carlos Gomez is one of the fastest guys in the league, and last year showed some of the “pop” that was missing in his swing (hitting a career high 19 HR last season, with 14(!) coming in the second half). Norichika Aoki showed the ability to get on base and steal with regularity, and should have a full time gig given the ineffectiveness of Nyger Morgan last season.

Honorable Mention: Nationals, Marlins, Rangers, Tigers, Red Sox, Rockies

This is certainly a topic which is open for discussion / debate. If you disagree with my rankings, be sure to let me know how you would ranks these teams in the comment section. If anyone would like me to explain any of the “honorable mentions” in more detail, be sure to ask.