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SABR 40: day two, post four

August 06, 2010 By: Cecilia Tan Category: Baseball History

Okay, gearing up for the last five research presentations of the day. I might have to miss the last one in order to get the bus to the ballpark in time. I probably should have not paid for the bus and just taken MARTA instead, but when I was buying my tickets months ago it had seemed like a good idea. I actually went and took a nap instead of eating lunch, because my eyes were trying to shut during the last two presentations before it.

This afternoon it is really difficult to choose which presentation to see, but I decided to start with Vince Gennaro because every year he comes up with something very sharp and insightful. It means missing Gary Gillette’s presentation on disappearing Negro League ballparks, but I figure I can get Gary to give me the gist of it later if I see him in the bar or at the game.

The slate:

Vince Gennaro – Measuring the asset value of players: A framework for evaluating trades

Geri Strecker – Whose dream was it?: Revisiting the formation of the Negro National League in 1920

Ross Davies – Chinese-U.S. baseball diplomacy before the Great War

Will Dahlberg – A tool for diplomacy: Baseball in occupied Japan 1945-1952

Robert Fitts – Babe Ruth, Eiji Sawamura and war

Measuring the asset value of players: A framework for evaluating trades
Vince Gennaro

In particular, Gennaro here focuses on the trade deadline deals, when teams are making those trades to fix up their rosters for the end of the season, the time value of players as teams re-set their rosters for the stretch drive.

Gennaro has the ability to make economics seem simple and straight-forward, at least while you’re listening to him. It’s a bit like when Richard Feynman would explain particle physics, making it all crystal clear… at least until you try to repeat it to someone else and realize how much depth of understanding goes into what was said, because even if you can parrot it, it isn’t always as clear later. I will, however, try to lay out the facts as presented by Vince. They’re quite convincing to me.

You used to see name players traded straight up for each other, Tris Speaker for Sad Sam Jones, Colavito, etc. You see some of these today but they are not the predominant form of trade. They are more about reallocating playing assets to help a team reach the playoffs. Some are dumping salary and restocking the farm system while others are renting a player looking for the financial boon of reaching the postseason.

Recent examples:
Abreu to the Yankees in 2006
Carlos Lee to the Rangers in 2007
Teixeira both times
Sabathia to Milwaukee
Manny to LA
etc etc

Why has the style of trade changed?

Free agency has created higher salaries. Rising salaries and revenue growth are taking place at vastly different rates for different teams. When the Yankees went into their new ballpark, the delta change in their revenues alone was greater than [the total revenue for] about 8 teams. From a revenue standpoint it’s as if the Yankees annexed the KC Royals without taking on additional costs.

Team revenues are highly sensitive to winning. $25 to $50 million in revenue can be got just by reaching the postseason ONCE. (As anyone who has read Vince’s articles in the Yankees Annual already knows.)

It’s no longer about TALENT evaluation and today is about a little talent evaluation PLUS asset evaluation. Roster management is about having ENOUGH good players to contend for the postseason and reap the big postseason boon. Playing assets should be shifted to where [or when] they have the highest return. Not about having the BEST players you can have, just have enough to place you in contention in order to reap best financial reward for minimum cost.

Teams tend to be in one of two scenarios at the trade deadline.
1) no chance to contend: trade today’s win for future wins
2) need last piece of puzzle: trade future wins for today’s wins

GM’s job is more like a portfolio manager of investments.

Player’s Value as a Team Asset:
the dollar value of having control of a player is based on
-number of years remaining*
-expected performance of the player
-financial impact of the performance

(*residual value when control ends, ie Type A free agent, gets draft picks)

Vince then shows the Win-Curve graph about how teams make more if they win more games in the regular season. People who read his piece in the Yankees Annual a few years ago or his book DIAMOND DOLLARS are very familiar with this graph. (I think he won the SABR research presentation award for the first presentation he gave that included this, a few years back.)

The Postseason Effect: The Game Changer
Fans get dissatisfied with seat choices and the price of playoff tickets or how hard they are to get. The result of that is:
-strong season ticket renewals
-high demand for new season tickets
-advance sales are strong
-stronger broadcast ratings
-corporate sponsor demand
-suite demand increases
-ticket prices overall increase

In the wild card era, postseason teams tend to raise prices 5% for the following season.

Guess what? The economic bump is not just a one-year effect. Multi-year revenue stream effect from reaching the postseason. Vince shows a graph showing the effect falling off only gradually as the years go on. Uses White Sox as an example, where season ticket base doubled and although they haven’t gotten there again, they have not dropped off all the way to where they started.

The Brewers did get the payoff for renting CC Sabathia.

And then even looking at regular season, if a team thinks they’re going to win 89 games, and then they look at their win-curve graph and could improve to a 93 win season, they could bring in, say, $21 million more dollars. (The graph is going to look different for different teams, but as an example.)

Let’s look at Cliff Lee. Former Seattle LHP to Rangers at the break
To Seattle his value was his marginal revenue of about a million per win, whereas Rangers he’s probably worth $5 million per win.
To Seattle, Lee total worth $2.5 million Asset
-owed 4.5 million in salary
yielded $3 million in draft pick compensation
generates $4 million in revenue with 4 wins
nets out to $2.5

Now to the Rangers:
Cliff Lee: $19.5 million asset
-owed $4.5 million salary
yielded $3mil in draft picks
generates $21 million in revenue
increases postseason chances by 47% x $36 million

Asset values:
Seattle gave up Lee $2.5 million, plus $2.5 million in cash
Mark Lowe is a wash

Rangers gave up $16 million: Smoak, Beavens, Lueke, Lawson, mostly in SMOAK’s value

So, the Mariners gave up $5 million and received $16 million in value
The Rangers gave up $16 million in value received $22 million in value

So it’s win-win. It’s not just about who is right about the talent, it’s about how the players and assets can affect the teams positively.

Vince then shows a graph with
Roy Oswalt for JA Happ and prospects: value created for HOU $15 million, PHL get $8 million
Edwin Jackson for prospects, follows suit
Miguel Tejada for prospects. follows suit

Admits that may not be valuing the risk of prospects properly, but it can be debated.

Conclusions:
-Deadline deals have as much to do with financial management as talent evaluation
-Player’s true value is different to each team
-July trades are about swapping the timing of expected wins now vs. the future
-Teams need to incorporate risk into their valuation of prospects

(questions from the audience)

Whose dream was it?: Revisiting the formation of the Negro National League in 1920
Geri Strecker

(This segment has been removed by request of the presenter.)

Chinese-U.S. baseball diplomacy before the Great War, 1902-1907
Ross Davies

Edit: This is the presentation that would win the award for best presentation at the conference.

Ross opened his remarks by saying “This is a small debunking exercise. I’ll tell you a piece of convention wisdom and then correct it.”

The term “ping pong diplomacy” to refer to the technique of using sports as a strategy to thaw tense relations comes from the Nixon-Kissinger era, when in 1971 the Chinese invited an American ping pong team over. This is thought to be, as evidenced by the name, the first time such a thing happened. But as Ross shows in the presentation, not only had it happened before, it was China that had previously used the technique on the US, all the way back in 1902.

Back in 1902 anti-Chinese sentiment was very high in the US. Mutual hostility was at a peak then. Ross describes how both candidates running for president (Grover Cleveland versus Benjamin Harrison) had anti-immigration and anti-Chinese rhetoric in their campaigns. Likewise in China the Empress Dowager speaking out. Quick recap of The Boxer Rebellion. Western military power moves in, the eight nation alliance, wins and demands reparations. The US portion of the reparations equals about $41 million, three times again what had been spent by the US on the military operation.

At that point, China is weak, and has no diplomatic apparatus, since it had been the center of the universe for so long, it was only tributary nations to it before that. In 1901 the eight nation alliance basically forced China to establish a State Department and forced to engage with the west.

Now back up to 1863, the Chinese watched the Americans play baseball. (Shows historical photos.) And from 1872 to 1881 they would send Chinese boys to the USA to learn engineering… and they would also learn baseball while there. They would then come back to China, and would in fact beat a team of Oakland boys on their way back to Asia. (Newspaper clippings about that game.)

Here’s where Ross got very analytical, even statistical, for a history presentation. He shows a graph on use of pejorative terms for the Chinese in newspaper from 1882 – 1901 labeled “The Least-Hated Chinese.” It quantifies that in stories on opera, baseball, and museums there were relatively few pejorative terms, while those on labor, etc. there were many. Baseball seem to show the Chinese in their “least-hated” context. For contrast, another graph showed an analysis of Congressional precedings, which seemed to have pejoratives used in all contexts.

So, who are they going to send to the US to repair relations? Ross contends that the Chinese could read the American newspapers and knew that a baseball context would serve their image. They send a guy, Sir Chintung Liang Cheng, who is reported in the newspapers “at six feet in height, famed as a right-fielder and batter on the Philips Andover baseball team.” He had been one of those boys who was sent over to learn engineering, and the newspapers could not get enough of the story. They would tell over and over an Andover vs. Exeter story, with a photo of him in his old school uniform. (For those not familiar with the prep schools in New England, the Andover/Exeter rivalry is longstanding, heated, and legendary. Think Harvard/Yale only it’s prep school rather than university.)

A friend of his remembers him getting a game-winning home run. In fact, it was a triple, but he is a diplomat, and didn’t correct his friend right away. Subsequent stories would recount it as a triple. Because of the baseball connection, Liang was not seen as alien; he had an American love of baseball. With the help of the newspapers, Liang kept the story alive. It became a Horatio Alger story.

Liang was in fact the kind of man who walks softly and carries a big stick. Teddy Roosevelt had used the phrase in a speech just six months before Liang’s appointment. Liang’s recounts of the story included many elements that would disarm (or modestly chastise) American listeners. He described fans yelling pidgin English at him from the stands, making fun of him, says he got angry at that, showing that he was passionate and not “inscrutable,” and he delivered the goods, the game-winning hit, essentially saying to Teddy Roosevelt “you must respect me.”

In 1905 Liang suggests to the secretary of state that the amount of money be revised, because it would be in the “spirit of fair play.” (Not coincidentally, the Chinese people were boycotting US goods in 1905.) By 1907, the US gave back $27 million of the $41 million that had been paid.

After he gets called back, the next two replacements they sent were also touted as baseball fans. Another graph then, showing the use of pejorative words for the Chinese in 1902-1915 news stories. There are still plenty of pejorative stories, but Liang was able to personalize his own relations with the government enough to deliver the goods.

Further reading suggested: Taking in a Game, Joseph Reaves

A tool for diplomacy: Baseball in occupied Japan 1945-1952
Will Dahlberg

Will opens by saying that academia there is the “so what?” factor. Today, August 6th is the anniversary of the dropping of the atomic bomb on Hiroshima. “I hope my research will illuminate how such catastrophic and devastating events can be followed by a bonding tie between the occupiers and occupied. This will be a significant part of my masters thesis at Dartmouth. This period sets the stage for our current state of baseball both in the USA and in Japan, where baseball is fanatically followed.”

MacArthur faced a tough road in rebuilding Japan. For him it was the great experiment in liberation from totalitarian rule, and in liberalizing government from within. One million Japanese soldiers had been killed, two million homes had been destroyed, factories were gone, and seven million more soldiers were repatriated. The people had been told all throughout the war that their victory over the barbaric, rapacious Americans was assured. And then they lost.

MacArthur thought Japan needed to be purged of its old military leadership and hyper-military culture. His closest staff, “the baton boys,” were his inner circle in running the country.

When it comes to baseball, though, Major General F. Marquat was MacArthur’s second hand man, He was seen as a simple-minded man, but he might have been smarter than you think. He was charged with re-doing the educational system, and he instituted two years of physical education. But they were not allowed to do the old budo pursuits of judo, kendo, etc… and they replaced it with baseball. (Interesting side note: this isn’t the first time that the Japanese took up baseball in place of budo. In the 1890s when the samurai way of life was outlawed, there were those who turned to baseball then, as well! I have a young adult book called Samurai Shortstop on the subject. I should probably drop Will Dahlberg a note about it.)

It took some time though to build the baseball fields and import the equipment. “wholesome, democratic games” were to take the place of the war-like sports and “reduce the problems of the occupation.” (quoted from a request to requisition the equipment needed to put the physical education plan into place). “Without this equipment they will not be able to institute democratic games for the budo sports.”

In setting out to get the equipment, they got donations from major league baseball, MLB players, the leagues, as well as schools and universities.

Before they could get hardballs, they had 30,000 teams registered of “rubber ball” teams.

Many cool photos shown which I can’t recreate of course. Even the Japanese Diet played games. (The House of Representatives won 32-2 in the photo shown.) Photo of the Emperor’s personal guard playing outside the palace.

“It is the duty of the people in Japan to reconstruct their society as a democratic society.” And sports plays a role in that. National Athletic Meet, had tens of thousands of participants.

Marquat was also approached by the Yomiuri newspapers and the national commission on juvenile delinquency. How to deal with the leisure hours of the youth? Baseball was seen as one of the best sources of recreation to promote juvenile welfare. In 1950 they held a 3 day meet for juvenile baseball, with students arriving from all over the country, with thousands and thousands of players all taking an oath. They gave prizes to every child that played.

As baseball caught on more and more, their official efforts could die out because they had become self-sustaining.

All culminates in the tours of Joe DiMaggio and Lefty O’Doul, and adoption of American baseball heroes, and then the creation of the truly professional Japanese baseball major leagues.

Unfortunately, I couldn’t stay to see Robert Fitts speak on “Babe Ruth, Eiji Sawamura and war” because I had to run to put my computer away before getting the bus to the ballgame!

(Did you enjoy reading this blog entry? Please consider buying me a hot dog.)

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