This is the second article in a series dedicated to revealing what I consider to be the underlying principles to building a winning baseball organization.
[Editor's note: The first installment of David's multi-part series, entitled "You Can't Build A World Series Champion" and first published on June 20th, 2009, can be viewed here.]
PRINCIPLE NO. 2 -- FREE AGENTS ARE FOR SUCKERS
In the past four years, major league teams have signed free agents to contracts with salaries that total $4.75 billion. In 2009, free agents signed in the past four years are scheduled to earn $1.02 billion of the $2.75 billion that major league teams are scheduled to pay this year. Twenty-five percent of player payrolls are scheduled to be paid to the 65 free agents who earn at least $5 million per year.
On average, these recently signed free agents make more than three times what other players in the league earn per year, which begs the question -- are free agents worth the price? To answer the question, win shares were used to compare the productivity of free agents to non-free agents.
WIN SHARE INTERLUDE
The win-share concept is a Bill James invention that seeks to sum a player's offensive and defensive contributions to his team during a given year. The total number of win shares for the players on a given team is equal to three times the team's win total, thus each win share is equivalent to one-third of a win. Using this standard, a player with 24 win shares for a given season would theoretically have accounted for eight wins for his team. While the accuracy of the defensive metrics that are included in the formula used to calculate win shares has been questioned by some, the metric does provide a reasonable way to rank players for a given year.
To provide a sense of how win shares correspond to player performance, it is worth noting that the average number of win shares for players who spend at least half of the season in the major leagues is approximately nine. According to The Hardball Times, Albert Pujols led position players with 35 win shares in 2008, while Cliff Lee led starting pitchers and Mariano Rivera led relievers with 25 and 17 win shares, respectively. Seventy-eight players finished the 2008 season with at least 20 win shares, including Josh Hamilton, Ian Kinsler, Milton Bradley, and Michael Young. In general, All-Star-level position players accumulate 25-35 win shares, All-Star-level starting pitchers have 22-30 win-shares, and All-Star-level relievers have 15-20 win shares.
FREE AGENTS VS. THE OTHERS
The comparison of the performances of free agents to non-free agents was restricted to the 2008 season, since that is the most recent data available. The free agents included players who were signed to contracts in 2006, 2007, or 2008. The 'others' category included everyone else and was dominated by players on pre-arbitration and arbitration contracts, as well as deals that were signed by teams prior to allowing their own players to become free agents. Although free agents accounted for more than 35 percent of player salaries in 2008, there were no free agents among the top 10 players ranked based upon 2008 win shares, only two free agents among the top 25, seven among the top 50, and 13 among the top 100.
When viewed as a population, the performances of recently signed free agents were surprisingly underwhelming. Shown in the table below are the average 2008 win shares for 661 non-free agents and the 118 free agents who played in 2008 (an additional 45 free agents were paid a cumulative $145 million, despite not playing in the major leagues in 2008).
Comparing free agents to non-free agents reveals that teams that fill roster slots are generally receiving below-average performance. Breaking the free agents into the filthy rich (30 players with annual salaries greater than $10 million), the very rich (28 players with annual salaries of $5-10 million), and the merely rich (41 players with annual salaries of $2.5-5 million) reveals that highly paid relievers tend to significantly outperform their less well-compensated counterparts. Free-agent position players earning in excess of $10 million also outperform their non-free agent counterparts, though only slightly:
COMPARABLES FOR AVERAGE FREE AGENT PLAYERS
To provide a sense of the on-field performances that teams received for their free agent investments, consider that the average $10 million-plus free agent starting pitcher would have ranked behind Dana Eveland, Jon Garland and Jorge Campillo in 2008 win shares. The average free agent starting pitcher earning $5-10 million in 2008 would have ranked behind Cha Seung Baek, Jeremy Bonderman and Dallas Braden.
The average $10 million-plus free agent reliever finished tied with Joey Devine, Darren Oliver, and Dan Wheeler. The average $5-10 million free agent reliever finished tied in 2008 with three injured or discarded Rangers: Kameron Loe, Franklyn German and Joaquin Benoit. For position players in 2008, the average highly compensated free agent would rank behind a couple of former Rangers (Fernando Tatis and Jerry Hairston Jr.), while the $5-10 million free agents would rank alongside Gabe Kapler, Brad Ausmus and Ryan Spilborghs.
WHY FREE AGENTS ARE BAD BETS
Signing free agents tends to be an extremely risky affair due to three factors:
(1) With rare exceptions, players available on the free agent market are in their 30s. The peak performance for the vast majority of players occurs when they are in their mid-to-late-20s. Teams typically pay free agents for their post-peak performance at a rate that is set by the numbers that they put up during their peak years, since their peak years immediately precede their free agent years.
(2) Teams often sign their best players to contract extensions, rather than allow them to test free agency. This means that teams signing free agents are often paying top dollar for players that were considered expendable (or at least too expensive) by their parent teams.
(3) Signing a Type A Free Agent (as defined by the esoteric Elias Rankings) requires that the signing team give up their first- or second-round draft pick to the team losing the free agent.
One thing that is often overlooked by sportswriters and fans alike is the often-devastating effect that lavish free agent spending can have on a team's ability to maintain its core players. For instance, had the Rangers succeeded in signing Barry Zito in 2006, would Tom Hicks have been as willing to sign Ian Kinsler to what now appears to be an extremely team-friendly contract in 2008? And if the team had decided to put off signing Kinsler to save a few bucks in 2008, then they would now be faced with trying to sign him to a contract worth two to three times the one that he signed or risk losing him to free agency after the 2011 season.
For those who were disappointed that the Rangers failed to sign a starting pitcher like Derek Lowe or Oliver Perez or A.J. Burnett during the off-season, it is worth considering what effect adding one of those players would have on the Rangers' willingness to sign Josh Hamilton or Derek Holland or Jarrod Saltalamacchia or Elvis Andrus or Chris Davis to a long-term, team-friendly contract in the next few years.
Although signing big-name free agents can be a great way to create off-season buzz, the practice is far more prone to creating problems than solving them. Smart teams tend to eschew lavish free agent spending, instead using their available budgets to sign their own young, productive players to long-term contracts.
[Additional Reading: "You Can't Build A World Series Champion" (David Brown)]