When ‘Moneyball: The Art of Winning an Unfair Game’ divulged the secrets of Billy Beane – the innovative and data-driven general manager of the Oakland Athletics – it was assumed that an analytics revolution was just around the corner. Small-market teams with limited budgets could take these lessons, change the way they had previously thought about putting together a Major League Baseball team and compete on an even playing field with powerhouses.
Fast forward a decade later. Has the baseball landscape truly changed at all? Were teams spending more prudently by applying the thoughtful use of analytics? Did general managers curb their profligate spending and stop giving out exorbitant, 9-figure contracts in favor of bargain basement deals that produced a better ROI? Have we learned anything about sales management from Moneyball?
In short….not at all!
Show me the money!!
In fact, the number of $100 million-plus contracts given out over the past decade has only increased, capitulating with last week’s big news that Robinson Cano – the prize pig in this year’s free agent class – was leaving the New York Yankees to sign a 10 year, $240 million contract with the Seattle Mariners.
Cano was a great player and the face of the Yankees. Yet, his free agency was marked by his promise of simply going to the highest bidder, regardless of where and how that team was doing. Billy Beane’s main argument – that teams could spend smartly and find similar, if not better value, to the players receiving 9-figure contracts – was being turned on its face. It seems teams weren’t even bothering with advanced analytics and innovative spending anymore!
Seattle is not considered a big market team, so for them to be the winner of the Cano sweepstakes was even more shocking in the context of the alleged ‘Moneyball’ era. And maybe the contract will end up being worth every penny, assuming Cano lives up to his considerable talent.
Unfortunately, history is not on his side. Of the 48 9-figure contracts that have been lavishly bestowed upon players in history, many have turned out to be unqualified disasters. Using a statistic developed by Baseball Reference known as Wins Above Replacement (WAR) – which projects how much better (or worse) a player is than a theoretical average replacement player – here are some prime examples of bad spending:
|
Name (Team) |
Contract |
Average WAR |
|
Vernon Wells (Toronto Blue Jays) |
7/$126 million |
1.2 |
|
Matt Kemp (L.A. Dodgers) |
8/$160 million |
1.5 |
|
Carl Crawford (Boston Red Sox) |
7/$142 million |
0.8 |
|
Alfonso Soriano (Chicago Cubs) |
8/$136 million |
1.3 |
|
Josh Hamilton (L.A. Angels) |
5/$125 million |
1.5 |
Notice a trend among these examples, other than the horrific lack of production per dollar spent? These are all marquee clubs, plying their trade in some of the biggest markets in North America. While they could theoretically offset these massive contracts with their profits, the inefficiencies in spending were undoubtedly sinking them. Consider: in the past three years, the above five teams combined to make the postseason only twice.
Are teams learning?
While the overwhelming evidence suggests that teams are happy to keep throwing money at their problems, the tide might be shifting a little. The Boston Red Sox just won the World Series, largely because they shipped off many of their deadweight contracts – including Crawford’s – and returned to an analytically-driven mindset. They signed players that were lowly regarded around the league to shorter contracts. Furthermore, after their championship, they willingly let free agent Jacoby Ellsbury, one of their best players, go to the rival Yankees on a 7 year, $153 million contract they deemed to be too exorbitant.
If a team like the Boston Red Sox can win with advanced analytics and bargain shopping, surely the small-market dregs of the league – the Oakland Athletics included – can do so as well. This evolutionary shift in thinking for teams might be borne out of necessity – the gulf between the rich and the richest teams is only widening with each new TV contract signed.
What does this mean for sales and businesses?
Many small businesses don’t operate on an even playing field. The cold, hard truth is that enterprise companies with bigger budgets and more resources can afford to do things inefficiently, simply by applying economies of scale. This means that small- and medium-sized businesses need to…
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Think outside the box. Following the predecessors in their market – but doing so at a smaller scale – is not the path to success.
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Be more analytical in evaluating players. Just as the Oakland Athletics and this year’s Boston Red Sox were able to unearth hidden gems at value, so can you with your sales reps and managers.
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Dive into the metrics.
This last point is the most important thing that can put SMBs on an even playing field. Just as Billy Beane eschewed traditional scouting – using the naked eye and intuition above analytics – so can you in running your business.
That’s where InsightSquared comes in. We pride ourselves on delivering Moneyball to SMBs looking to compete with the larger companies. By diving headfirst into the analytics provided by our product and applying those actionable insights, these companies and sales teams can run more efficiently, derive a higher ROI in all areas and start winning championships!
