On Oil Barons, Guggenheim, and Metropolitan Living

On Saturday, the LA Dodgers completed a massive trade with the Boston Red Sox where the most noticeable entity trading hands was money.  A trade completed after the trade deadline that has so many (former) stars, such complexity, so much money changing hands and two of baseball’s richest organizations is sure to garner a lot of attention and analysis.  Despite other more insightful or accurate analysis regarding how bad this deal is for the Dodgers from a value based standpoint, I felt compelled to write about this because of the interesting possibility that the Dodgers aren’t actually crazy.

Honestly, part of the problem in analyzing this trade is separating the difference between the actual (or likely) value that the Dodgers traded for and the perceived value or initial reaction to the Dodgers acquiring half of the most recognizeable stars from one of the most popular teams in the country.  Indeed, if this trade was made at the end of 2008, the 3 headlining players the Dodgers traded for would be about to put up a massive 17.6 WAR in value – Adrian Gonzalez-6.2 WAR, Carl Crawford-5.9 WAR, and Josh Beckett-5.5 WAR. On paper at least, that’s enough to take a team from below average to division winner or even home field advantage through the first rounds of the playoffs.  However, the year is 2012 and, despite the Dodgers paying salaries concomitant with those elite performances, only one of these three players still has a realistic chance to be elite moving forward. 

That player is Adrian Gonzalez, the 30 year old, patient, powerful and defensively elite first baseman that has some familiarity hitting in an NL pitcher’s park, who struggled so much in the first half that he was a below average hitter regardless of position (93 wRC+), but since June has returned to his usual ways with a 150 wRC+ in the second half that looks awfully similar to his previous three years.  Owed $106M over his age 31-36 years, it’s certainly not inconceivable that a player who has played at an elite, 6 WAR level for the past 4 years (minus this spring’s rough patch) could end up averaging the All Star level performance (~4 WAR) that it would take to be worth his contract.  Josh Beckett, owed $31M over the next 2 years, is probably more average than elite going forward (with the more friendly run environment likely counterbalanced by age-related decline) and thus worth something closer to $20M than $31M.  $137M (+ this year’s outlay) is a lot of money for everybody except the Yankees.  Regardless, if the Red Sox offered these two players to the Rangers for a pu pu platter of Mitch Moreland plus some non-elite prospects, I would be happy if the Rangers accepted. 

Of course, this is avoiding the elephant in the room.  Upon signing with the Red Sox, Carl Crawford plummeted from the All Star to elite level that he had maintained for most of his time in Tampa to something…much worse.  While his walk and strikeout rates have both gone the wrong direction quite quickly in Boston, the 31 year old has also seen his immense defensive value disappear.  The worst part, of course, is the contract.  It’s not hard to talk yourself into Crawford returning to be an above average player over the next few years, assuming he can finally get healthy, but the chances of him playing at the All Star level for which he will be paid ($102.5M) over the next 5 years during his age 31-35 seasons seems highly suspect.  If he is average over that whole stretch, which is probably generous, the Dodgers are looking at eating a staggering $50M of lost value. 

The obvious conclusion from this is that the Dodgers have lost their minds.  Even in light of what now looks to be a weak free agency this offseason, the odds that the Dodgers couldn’t find a better way in the next 12-18 months to acquire roughly $230M in guaranteed payroll to be doled out over 5 years seem low at best.  That’s probably enough to sign the two remaining elite free agents, Zack Greinke and our own Josh Hamilton, which seems like a better gamble, though I can see how others would disagree. 

However, I’m not sure the Dodgers have lost their mind.  They have not gotten value based on the analytical tools that were developed by looking at the league as a whole.  With the purchase of the Dodgers by Guggenheim Baseball Management for two billion dollars, it was clear that the Dodgers would be looking to use their current and incoming financial might to improve the team as quickly as possible, thus making valuations based on what the rest of the league (minus the Yankees) are paying almost irrelevant.  Unfortunately for Dodgers fans, even those who disagree with or avoid advanced baseball analysis seem shocked by this deal.  It suggests that taking on this much money for these players is crazy even for a big spending club using a valuation system that is more forgiving.

Still, I remain unconvinced that the Dodgers have lost their mind.  I just don’t think that they made these moves with the sole purpose of winning baseball games.  The Dodgers organization have endured tough times over the past couple of years that basically saw Frank McCourt try to beat any and all comers for the title of Baseball’s Worst Owner.  Unsurprisingly, fan interest declined, games were significantly less well attended, and the organization lost some of it’s aura as one of baseball’s premier franchises.  A new ownership group is obviously the first step towards turning this around, but while it was always folly to expect the Dodgers to adopt a similar long-term rebuilding plan as the Houston Astros, it’s clear that Guggenhiem is interested in accelerating the reversal fan interest trends. 

The question, then, is can it work?  We have seen franchises try this approach before – Tom Hicks' Rangers, Jeff Luria’s Marlins (with a new stadium), John Henry’s Red Sox, etc – and while there have been varying degrees of initial success, it seems that nobody is able to maintain Yankee levels of spending for long…except the Yankees, of course.  Even the Red Sox can apparently get overly weighted down by bad contracts.  It doesn’t take many years of following baseball to see why we should be skeptical of this plan.  But, what if…

I’d like to take a moment to break with this fine baseball blog’s tradition of talking about, y’know, baseball, to look at how this model has actually been shown to work in a different sport on a different continent.  In 2003, Russian business tycoon Roman Abramovich spent £140M to purchase Chelsea Football Club, a soccer team in the English Premier League (EPL) located in West London that had some small degree of success in the Premiership throughout it’s history, but was not on the same level as the teams of worldwide renown that were perennially at the top of standings such as Manchester United, Liverpool, and Arsenal.  The closest equivalent I can think of would be the New York Mets or Chicago White Sox.  Abramovich’s intentions were to turn Chelsea into a club of an elite caliber; a worldwide brand that could attract the top talent from the EPL and other leagues.  He immediately spent £100M to bring in better talent, simultaneously enthralling Chelsea’s supporters and making virtually everybody else quite angry.  Importantly, he kept investing.  Despite fantastic failures that make Carl Crawford look like a bargain, Abramovich continued to spend to improve his team.  Almost a decade later, Chelsea has won the EPL 3 times, finishing second 4 times, as well as winning the incredibly highly coveted Champions League last year for the first time.  Chelsea is now one of the 5-10 most valuable soccer franchises in the world, valued in 2012 by Forbes at over £470M.  More importantly, the decade of success has seen Chelsea establish a reputation as one of the elite franchises that allowed them to recently sign one of the most highly coveted young players in Europe over fellow London rival and (former) heavyweight Arsenal.  This ability of Chelsea to sign elite young talent is a more recent phenomenom that did not come after initial English glory, but instead after sustained success (and massive payrolls). They say that imitation is the greatest form of flattery, and if so, then Roman Abramovich must be quite flattered these days as this model has been copied by last year’s EPL Champions, Manchester City, and is attempting to be copied by Paris Saint-Germain and their Middle Eastern oil-rich owners.

So the proof of concept exists.  An immense bankroll, the likes of which your league counterparts could not dream, an organization with some past history or located in a desirable place to live (or both), and the desire to not just increase the success of the team on the field, but the popularity and public awareness of the team.  The key was that the clubs kept spending, even if it resulted in some redundancy of positional talent or embarrassing flops.  The Tom Hicks Texas Rangers were not able to do so which, in part, lead to the embarrassing payrolls of the mid-aughts. 

If the Dodgers can maintain this, then this trade isn’t crazy.  It’s just the cost of doing business.  Such is life for the club whose aspiration/inspriation likely lies across the country in a borough containing the game’s most storied franchise.  Perhaps they will have the last laugh after all.