Total Market Freedom

Share

The other day I was thinking about the Cubs’ financial situation and how much of an advantage they would actually have over most of the other MLB clubs given the new CBA environment.  I don’t think the Cubs are Oprah-rich (or Yankees-rich, anyway) but they’re not Royals/Rays/A’s po, and they’re certainly not Jeffrey Loria evil either.  There should be a way to exploit their resources and I would trust the very smart folks in the Cubs front office to figure that out quickly.

In the new CBA environment, everything is now geared towards the owners.  Before, when there were only “suggested” slot amounts at each draft position, teams could spend whatever they thought a player was worth to pick him at any position.  In 2011, right around when Jim Hendry was fired, the Cubs finally went to this strategy, possibly because they knew that the new CBA was about to kick in.  They got some first-round level talent in late rounds because of their spending.  This strategy is no longer feasible under the restrictions set forth in the new CBA, either domestically nor with foreign free agents.  And with the impending implementation of the international amateur draft, it might get even worse.  For example, Mark Appel, who should probably have been the best pitching prospect in the draft last season (and possibly this season as well), was passed over by Houston in favor of Carlos Correa, and then had to go back to college because Pittsburgh picked him at #8 and could only offer him MAYBE $3MM instead of the $8MM or whatever that the Astros could have maxed out at the #1 spot.  This is a far cry from the lucrative deals that Bryce Harper and Stephen Strasburg got from the Nationals pre-CBA.  The new CBA also prohibits deals like the ones that the Cubs signed Jeff Samardzija and Matt Szczur to.

We’ve gotten used to the idea of the draft in most sports, including MLB, for decades now.  The draft-as-gospel is why we think about cultivating prospects as we do.  In the absence of change, a team or organization has to do the best they can with the tools and resources afforded to them, and for the most part, Theo Epstein and Jed Hoyer have done that very well in their respective careers.  They will have to figure out how to exploit the new Rule 4 draft environment, how to maximize their return on foreign free agent signings, and then transition to how to allocate their resources to the international draft whenever Bud Selig and Friends shoehorn it into the season like they did with the extra wild-cards last season.

But what if there was no draft?

Before we go on, let’s set up a disclaimer.  Baseball players, while some of the most gifted and entertaining athletes on the planet, are still human and as such are entitled to certain basic rights and privileges.  That said, baseball players, especially when they make it to the bigs, are paid quite a bit of money and there is a reasonable expectation of curtailed rights and privileges that come with getting armored trucks full of money.  As in any business, whether it’s the local dry cleaner or Wal-Mart, the owner wants to keep costs down and profit margins way up.  That’s business and capitalism in a nutshell; why do business if you can’t make shitloads of money?  I guess the politics of business deal with how much of the pie the owners actually deserve and how much should go to the employees for helping make money for the owners, which is the crux of why the major sports leagues (including the NHL, most recently) have gone on strike to try to get better revenue sharing.  But that’s probably another blog topic for another day.

What brought this on today was a nice article from Patrick Hruby, a guy who I think used to write for Page Two on ESPN back when I thought ESPN was cool and Bill Simmons hadn’t completely jumped the shark for me.  The premise of Hruby’s article is to dump the NFL Draft, which is incredible timing since the NFL Draft starts TONIGHT.  Way to piss people off, Hruby. Lulz.

Sort of like the NFL Draft, the MLB Draft now gets the first round broadcast on MLB Network and I enjoy watching it.  Unlike the NFL (and other pro sports) draft(s), the teams in MLB cannot actually trade draft picks.  Except in cases of compensation or potential competitive balance picks, teams are locked in to their draft positions.  The draft in all sports is designed to create a competitive advantage for teams by awarding shitty teams with the first picks of a vast pool of talent in the hopes that they’ll pick Michael Jordan instead of Sam Bowie.  However, competitive balance doesn’t always work out via the draft:

The NFL has a salary cap. Revenue sharing. Franchise tags. Restricted free agency. A limited number of roster spots per team. It has a whole host of socialist mechanisms geared to limit talent stockpiling — mechanisms that mostly don’t exist in international soccer — and all of them (especially the salary cap) are arguably more important than the draft. Indeed, I’m not convinced that the current college player selection system does anything to help poorly-managed teams avoid or erase bad personnel decisions, let alone ensure semi-parity.

MLB doesn’t technically have a salary cap (I think the players’ union would flip out if that happened) but they do levy a substantial luxury tax on any team that goes above a certain payroll threshold, so much so that even the Yankees are trying to trim payroll and eventually the Red Sox and even the suddenly spend-happy Dodgers will have to follow suit.  MLB rosters are limited to 25 active (26 on doubleheaders, 40 in September) and similar restrictions are in place at each level of the minors.  And bad decisions do happen in all sports, so that’s not really an issue we’re discussing here; however, I will say that the hope now is the Cubs will draft more Bryce Harper types and less Hayden Simpson types (we’re dreaming now…moving on).

Here’s a fun fact from Hruby:

Fact: The draft was not primarily created to help the league’s dregs. It was created to prevent costly bidding wars over incoming college talent. In 1934, the Philadelphia Eagles and Brookyln Dodgers competed to sign college All-America Stan Kosta, driving his salary up to an eye-popping $5,000 — as high as that of Bronko Nagurski, then the NFL’s best player. At a subsequent league meeting, Eagles owner Bert Bell proposed a incoming player rights draft, with a worst-chooses-first order that — totally coincidentally — would benefit his last-place team. Wary of another Kosta, cost-conscious clubs adopted the system, which has been robbing leverage-lacking rookies of market value ever since.

This is very similar to what happened in MLB once owners realized that free agent players were about to realize that they should be worth a ton of money.  Ultimately, the business owner wants to keep costs and payroll down, while the employee wants to be paid a fair wage.  That’s the way it works in a lot of different professions, and that’s why a lot of those professions, even baseball, have unions.  The only difference now is that the baseball players’ union has decided to sacrifice the guys who are just starting their careers so that veterans can earn a few extra million.  The funny thing is that the new CBA actually kind of screwed guys like Kyle Lohse this offseason, so maybe that wasn’t such a great idea anyway.

Hruby talks about guys like Andrew Luck who are making far less than they otherwise could be making as a free agent.  The same is true for superstar-in-the-making Mike Trout, whose agent was pretty miffed because the rookie pay scale made it such that Trout only makes about $600K this season, which is about $300K less than legendary Cubs third baseman Luis Valbuena.  Again, keeping costs down.

If we set aside the fact that baseball players are potential millionaires and treat them as human beings, the following is very thought-provoking:

Economic fairness aside, wouldn’t it be better if an incoming NFL player who wanted to, say, stay close to his family had some say over where he lives and works, just like the rest of us? Wouldn’t it be better if players could shop themselves to teams whose coaches and systems provided the best possible fit for their individual skills? Heck, wouldn’t a draft-free league be better for those teams, too?

….

An industry-wide system that prevents potential employers and employees from freely selecting each other. That keeps companies from building product teams and pursuing staffing goals the best way they see fit. That arguably punishes struggling firms by forcing them to make risky, double-down, blow-up-in-your-face hires – what economists call “The Loser’s Curse,” and what the rest of us call “the Detroit Lions under Matt Millen.” If the human resources department of your company came up with the idea of a draft, they’d be fired on the spot.

If you’re a good software engineer or a good web designer, you get to work for Microsoft or Facebook or Twitter or Google or whatever.  You have a choice.  Maybe you decide to work for a company close by in Chicago.  Maybe you decide Chicago sucks (blasphemy!) and you’d rather take a chance in Seattle or Birmingham, Alabama.  You have a choice.  But the athlete doesn’t have a choice in North American pro leagues, and similarly in Japan.  In college, the best athletes get recruited to the best programs.  Mike Krzyz-Ican’tspellhisnameeventhoughIwenttoDuke regularly recruits some of the best student-athletes in the world to Duke, guys who actually WANT to go to Duke.  If the Cubs drafted a life-long Cardinals fan who just absolutely despised the Cubs, the player has no choice.  He can take the job and hope that at some point he gets traded to STL a la Lou Brock, or he can sit out and re-enter the draft the next year.  Those are his only choices.

There are, of course, multiple other obstacles to building a team whether a draft is used or not.  It is insanely difficult to evaluate a baseball player because of the inherent randomness of the game and the fact that baseball is such a difficult sport to master.  But imagine in a free market where a Theo Epstein and Jed Hoyer, with the blessing of Tom Ricketts and Papa Ricketts’ money, are able to build strong scouting, renovate Wrigley, and set up an environment where players will actually WANT to work for the Cubs.  There are inherent restrictions to how much money they can spend, and how much the law and baseball’s regulations will allow them to spend, but now players can decide where they want to work as long as the money is there, no matter their service time.  Not even the Yankees can hoard all the players, and I’m going to posit that the Cardinals and Reds (and certainly not the Pirates or Brewers) can outspend the Cubs in this system. Maybe that’s just me being selfish now, but this could also be the case for places like Kansas City, Tampa Bay and Pittsburgh if they could just find the money.  It could be the case for Miami too if they’d send Jeff Loria to Cuba.  Maybe it’s the libertarian in me, but I kind of enjoy the idea of a free market, especially in this hypothetical dream world where the Cubs can benefit from it.

Leave a Reply

Your email address will not be published. Required fields are marked *

*


*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>