Is Strategy Baseball's New Market Inefficiency?
Michael Lewis’s influential book Moneyball explained the concept of exploiting market inefficiencies in the context of building a baseball team. Exploiting market inefficiencies begins with avoiding paying for the skills or commodities that the market overvalues, while identifying and buying at a discount the skills or commodities that the market undervalues. The example throughout Moneyball was that on base percentage was a historically undervalued skill and players who walk a lot were not compensated in a way consistent with their value. This specific example no longer applies in baseball as many teams now understand the value of a player who can consistently get on base by drawing walks.
Market inefficiencies, naturally, evolve over time; and identifying new market inefficiencies can be an important ingredient for success. This offseason there has been some talk that the new market inefficiency is defense as some teams, most notably the Red Sox seem to be more accurately measuring defense and trying to strengthen their team by adding players who are demonstrably good defensively. Some have even suggested that older players are the new market inefficiency because many older players who can still play are not being offered contracts anywhere near what players of comparable value and age would have commanded a few years ago. The best example of this type of player might be Johnny Damon.
One additional possible market inefficiency worth exploring is strategy. This sounds like strange idea as strategy is something that generally becomes important once the game starts and market inefficiencies are more relevant for the construction of a team. However, the market may currently undervalue players who can implement different strategies.
Strategy works differently in baseball than in other sports. In many instances there is little strategy involved in the game. On a ground ball to the shortstop, the shortstop is not faced with a strategic choice. He must field it and either throw or carry it to a base to retire a runner. Similarly, on a fly ball to centerfield, the centerfielder is not faced with a strategic conundrum. He simply needs to catch the ball. Baseball players need make quick decisions, like the shortstop who may have to very quickly determine to what base to throw, but this is different than, for example, football where decisions about what plays to run are a constant feature of the game.
There is more strategy on the offensive side of baseball, but there is little evidence that any of these strategies are, with some exceptions, very useful. Hitting and running, bunting, stealing bases and the like may lead to more strategic baseball, but it is not evident they contribute to more winning baseball.
There are at least two dimensions of baseball where new strategic approaches could help a team win and would have an impact on roster construction. The first is in the structure of pitching staffs. The way pitchers have been used has changed significantly over the years, so there is precedent for this. The current system of 12, occasionally 13, pitchers on a team, seems to be very inefficient with valuable roster spots being taken up by the 5th or 6th right handed reliever rather than a decent pinch hitter, at least one left handed reliever who is not expected to do anything other than pitch to one or two batters, and fifth starters who, on many teams, have ERAs over 5.50.
The teams that can create more efficient and rational pitching staffs, and find players who can work in these structures will earn an advantage. This is not just a matter of finding better pitchers, but of using pitchers differently. Some ways to do this would be to switch to a four man rotation lowering pitch counts for some of the starters, replace the fifth starter with a group of relievers each of whom would be expected to pitch two or three innings, have two left-handed pitchers alternate between being the fifth starter and the loogy, use back end of the bullpen pitchers as pinch runners when needed. These examples are meant to be illustrative, rather than specific recommendations, but they represent the kind of thinking that could give a team willing to combat the risk aversion which underpins a resistance to change throughout baseball a real advantage. Some pitchers would obviously oppose these ideas, but if embracing ideas like these, was a way for a pitcher to stay on a major league roster, they would almost certainly go along with it.
Another strategic area where teams can begin to exploit market inefficiencies is using and acquiring players who are more versatile. This should be done in a strategic way. Simply acquiring players who can play a number of different positions, like the San Francisco Giants seem to be doing, in not the answer. However, given the degree of specialization needed in baseball today, versatility can help address this issue a market efficient way. For example, pinch runners and third catchers are valuable, but teams cannot afford to carry a player who can do little more than pinch run or catch. However, a back end of the bullpen reliever who could pinch run, or a third catcher who could also play the corner infield positions, or hit lefties decently would have great value. Similarly, a fifth outfielder, particularly in the AL is a luxury that some teams cannot always afford, but if that fifth outfielder could play first base, or even third base, he would be much more valuable.
Players who are more versatile make the roster seem bigger and give the manager more options. Currently, versatility is neither encouraged nor valued very much. A team that acquired and cultivated more versatile players would gain a small but meaningful advantage-particularly in the post-season. Players might first balk at this, but it would also increase their value. The aforementioned Johnny Damon, for example, would have a lot more value today if he could also play first base. Any pitcher competing for the spot as the 5th righty out of the bullpen would have an edge on his competitors if he was able to pinch run and if his manager understood the value of using him in that capacity.