Marlins on a Budget: A VOC Story

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Maniac reader DavidC asked if I could take a look at the Marlins and dig through for an explanation as to why the Marlins have done so well despite a limited budget. I did something to the opposite effect for Beyond the Box Score, examining why teh Washington Nationals have done so poorly over the last few years. I decided I’d start digging through some generally accepted ideas about the Marlins and how they have succeeded on a low payroll, but I figured any conversation about this had to begin with something that related wins to money. For that, we’re once again going to turn to WAR as the answer for wins and the free agent WAR rate as the answer for money.

A brief explanation and then we’ll delve into the Marlins’ success after the jump.

Value Over Contract (VOC)

One of the best things about having WAR values for individual players is that we can use them to see how much a player contributed to team wins. Of course, WAR is mostly context-neutral, and as we know games aren’t played in a context-neutral fashion (i.e. timing matters), but if we buy that an individual’s WAR is a good estimate for that players contribution of runs to the team, we can take team WAR as a good estimate of runs/wins in a context-neutral setting. Of course, there are issues with this analysis, primarily at the setting of “replacement level” at the team level. Tom Tango uses a win percentage around .300, and so will I. In this discussion and in any discussions like these, a replacement level team is considered to be a 48-win team over the full season. There are definite disputes with that, but that’ what I’m going with.

Of course, with individual contributions on hand, we can use that information to assign dollar values to their contribution as an estimate of their worth. Overall, teams spend about $2.5M per win above replacement, but that includes players that were not available to an open market; such players had their prices deflated arbitrarily by the collective bargaining agreement. Instead of using the salaries for all players, the rate of dollars per WAR is usually calculated from free agents, because as free agents the market for players and their WAR is (mostly) unrestricted.

From this, we can then see connections between how much teams pay in salary and how much that team is worth in production. Clearly, teams will generally net a surplus with regards to production vs. salary, simply because few teams run out players entirely from the free agent pile, and indeed most teams depend on their minor league systems to fill out important parts of their roster. Consider that the current free agent WAR rate is $4.5M/WAR. A team would need to pay around $148.5M in free agent salaries to be an average (.500 win%) team. Most teams don’t have nearly that sort of budget, so clearly few teams can even consider this option.

As a result, all teams must consider how to garner Value Over Contract (VOC) from their players. This value is a surplus that a player produces above the value of his contract. The first exposure I generally had to VOC was in using Sky Kalkman’s nifty Trade Value Calculator. The presumption here is that the primary way to evaluate assets is based on how much surplus value the player brings beyond what you’re paying him, because you’re already paying for some level of that player’s production. Since pretty much every team needs VOC to win, you figure that maximizing it would be the best way to compete.

How do you get more VOC, and what does this have to do with the Marlins?

It should be obvious from the definition of VOC that the best way to easily get it is to play young players. Younger players with less service time are cost-controlled, and if they contribute even remotely, they can be of huge value to a team. Consider that a 1 WAR player on a rookie salary nets $4.1M in surplus value to a team. Over the course of three rookie-scale contract years, that can add up to a lot of surplus value.

Now you can see the clear connection to the Marlins. The team’s front office has done an excellent job in the past of building up VOC. I took the team’s VOC from 2002-2009, using FanGraphs’ WAR totals and Opening Day salaries from Cot’s Contracts. This should mostly be correct, outside of perhaps the 2004 season when the Marlins traded Brad Penny among others to the Los Angeles Dodgers and acquired Paul Lo Duca. I’m not sure, but this is a decent approximation.

MarlinsVOC1

Both the graph and the table show that the Marlins are outdoing the league average surplus each year, in particular during the last three or four seasons since the latest team purge, mostly on the back of their superior cheap talent. In only one season have the Marlins even come close to having a league average payroll, yet they have been close to the league average market value in four out of the last five years.

How do you measure “success?”

Note that the last sentence essentially means that the Marlins have hovered close to the league average in terms of WAR in those years. However, is the goal to remain around the league average? Obviously not. The goal is to make the postseason, and the border for that is a bit higher. Let’s consider that a 90-win team is a “playoff-contending” team. That would make the necessary amount of WAR for playoff contention equal to 42 WAR in a season. The bar here is set a bit high, as about only six or seven teams a season in this period make the cut, and there are of course eight teams in the playoffs each year.

The Marlins have only once surpassed this cutoff, in the 2003 season, and even then they just barely beat the cutoff. In addition, the team has only come close to the lighter 40-WAR cutoff (88 wins) once more, during the 2005 season. In other words, while the Marlins are continually gathering up surplus value from their players, the overall worth of the team is not at the level of contending, and one can blame that on the fact that the team simply doesn’t spend enough money (as you all probably know). The Marlins are currently paying for a free-agent 56-win team. In order to reach the 42-WAR cutoff for contention, the Marlins would have to produce an astonishing $153M in surplus value, 34 WAR worth. In the 2002-2009 era, the so-called “FanGraphs era” thanks to the easy availability of WAR from FanGraphs, there have only been three teams to have surpassed that many surplus wins, the 2008 and 2009 Tampa Bay Rays and the 2005 Cleveland Indians, and one more team that was extremely close, the 2002 Oakland Athletics. It’s an extremely difficult task, and very few teams are capable of doing this consistently, which is what the Marlins would need given their distinct desire not to increase payroll.

So here you have the dilemma. One the one hand, teams should attempt to maximize their VOC because it maximizes efficiency of used resources and is a necessary part to building a winning team. However, teams must also spend a significant amount in order to come close to competing, because it is an astronomically difficult endeavor to build so much surplus WAR to compete on a so-called “small market” budget. Where is the balance? In 2009, the average team built a surplus value of $67.62M, meaning that the average team got approximately 15 WAR in excess of their expected WAR from payroll. Thus, you might expect the average playoff team to pay $121.5M for them to make the playoffs. Of the six teams that made the cutoff this season, three had payrolls that were above or within 2 WAR ($9M) of this total; the other three teams each built close to $100M in surplus value.

Sort of a conclusion

Getting back to the Marlins, the Fish face a significant climb each season in an attempt to make the playoffs. They clearly build a lot value in excess of their tiny contracts, but they still struggle to come close to contention. Over the course of the offseason, I’ll delve into some of the different ways the Marlins have been attempting to build surplus value and see if investing some extra money into the team would be significantly beneficial to their playoff chances.

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