The Road to 100 Losses: Spend Less, Get Less

In the first installment of the The Road to 100 Losses, I looked at the primary culprit of the Washington Nationals' consecutive 100-loss seasons, their pitching staff. Today, I'll look at some players who might also be worthy of blame, even though their play is helping the team's short-term production.

What am I talking about here? One of the things that has caught my interest since I began climbing my sabermetric learning curve is the value of a win, or in most of our analysis, a WAR. As of now, the rate most of us are using for WAR is $4.5M, as detailed here. This means that we would expect to pay around $4.5M per WAR to acquire a free agent. This last clause is critical because for many teams, contention cannot be solely bought on the back of free agent dollars.

Consider that a team can be considered a "playoff team" or "contending team" if it reaches 90 wins. If we consider a replacement level team to be capable of around 48 wins, that would mean a team would have to manufacture 42 WAR to be "in contention." At the going market rate for free agents, that 42 WAR would cost $189M of payroll, a salary currently only eclipsed by one team, the New York Yankees. In other words, successful teams need to find ways to build surplus value beyond free agent value to be a contending ballclub.

How do you build surplus value? The primary and simplest way to do this is to invest in the farm system and the draft, as cost controlled players in their first six years in the major leagues usually provide the most value, even at the lowest production levels. However, it seems like the Washington Nationals did not receive this memo.

Lacking in Surplus

I refer you to today's Graph of the Day, courtesy as always of Justin Bopp and Walter Fulbright. In it you'll see that the Nationals have a projected surplus value of about $32M, almost all of that tied up in Ryan Zimmerman's excellent season. Unfortunately, that total is the fourth lowest surplus value in baseball, leading only the injured New York Mets, the Houston Astros (see here for their surplus value; in case you had not heard, they're run poorly as well), and the Chicago Cubs.

I did a rough calculation of surplus value for each of the Nationals' years in Washington and compared their surplus value to the league. Using Cot's Contracts values for Openign Day salaries (also understanding that this could over or understate teams that made deadline moves) and WAR and dollar value totals from FanGraphs, I came up with the estimated surplus value for each team in the league from 2005 to 2008. The results for the Nationals are not pretty.

The team hasn't gotten much surplus value at all, ranking in the bottom ten in baseball in each year other than 2005. Combine that with their 27th ranked performance this year, and you have a team which is producing only a few million dollars more than they would have if they were purchasing free agent players for the entire team.

Perhaps the most egregious issue with the Nationals' inability to produce surplus value is that their payroll is also low for the type of surplus value they're receiving. You could excuse a team like the Yankees for getting equal or less than free agent value for their WAR, because the Yankees have such a high payroll that they can pay free agent rates for WAR and still eclipse 40+ WAR for their team. Similarly, teams like the Red Sox, Tigers, and Mets can afford to rack up only $40M in surplus value and, due to their already fairly high payrolls, still reach the contention mark. However, in each of the years I looked at outside of 2005, for teams that were either $10M above or below the Nationals in terms of surplus value, only the Pittsburgh Pirates had a lower payroll than the Washington Nationals. In other words, the Nationals are neither paying a lot for free agent WAR nor are they receiving surplus WAR from sources such as cost-controlled players, a proposition which is sure to lead to terrible seasons such as the ones the team has suffered this year and last.

Priorities are not straight

This phenomenon is fairly evident of bad teams; I mentioned the Pirates in the previous section, and they've been quite the example of mismanaging resources over the past (insert long number here, Pirates fans) years. But the smart teams learn that, if your payroll has to be low, either by choice or because players won't sign with your club, you have to find a way to use those limited resources in a more efficient fashion. There is the classic Moneyball approach of finding undervalued commodities in the market and paying below-market rates for their production, There is also the methodology of focusing on the farm system and the draft, finding value in actions such as reaching out to the international markets for more talent or signing overslot to guarantee your draft picks will join your team. Most of the so called smart teams do a little bit of both methods.

The Washington Nationals have chosen to do none of those things.

This is no more evident in their free agent signings and extensions. The last few seasons, the team has executed some puzzling signings, exactly the sorts of signings a low-to-medium payroll team with mediocre major league talent cannot afford to do.

The Free Agent

The Nationals failed to sign Mark Teixeira this past offseason despite offering what appeared to be slightly more than the going rate; as we all know, Teixeira eventually signed for an extra year and a similar amount of money with the Yankees. Adam Dunn was the Nationals' consolation prize. The slugger and sabermetric poster child (both good and bad) signed with the Nats for two years and $20M. This means that he was to average around $10M of value each year, or around 2.2 WAR per season (really it's 1.8 WAR this year and 2.6 WAR next year, but that's splitting hairs).

The problem was that, according to FanGraphs, Dunn had missed that 2.2 WAR mark three out seven times in his career, and two of those three times happened in the last few seasons. While the rest of the world had mostly caught on to the value of Dunn's offensive approach, only some of them had caught on to the fact that he was hurting his play severely with his terrible defense. Even then, most saber-pundits said that Dunn's offense and defense were likely to balance out and he'd be yet again around 2 WAR, thus the Nationals would likely get their money's worth.

So far, Dunn has been worth 1.2 WAR, thanks to a career year at the plate and with the glove, going the other way. As we saw yesterday, once again in the Graph of the Day, Dunn's defense has hit a terrible low, -35 runs split across the three least-valuable defensive positions. Even with his great offense, Dunn's 1.2 WAR has been worth $5.6M, $2.4M shy of his $8M salary this year. ZiPS updated projections for the end of the year have Dunn finishing with a .403 wOBA, which according to my calculations would put him at around 2 WAR if his defense stays steady at its current number. That would mean he would be at a surplus of $1M on the year.

Without doing any projections, let's say the Nats break even next year with Dunn. That would mean that the Nationals spent an average of $10M a year, around a sixth of their payroll, and received only $1M in surplus gains. Again, for a team with a $150M payroll, this may be acceptable. But for a club who is not close to contention, is this the wisest way to spend $20M?

The Extensions

At least in the case of Adam Dunn, you were more or less assured that he would produce within the range of production for which you were paying him. However, when it came to signing extensions to players, it seems the Nats would settle for giving any veteran who played a halfway decent season a market deal. Cristian Guzman is a great example. Guzman had a horrific hitting career since his 2001 season in Minnesota. He arrived in Washington and had a horrendous hitting year in 2005 (.247 wOBA according to FanGraphs), then got hurt and missed all of 2006 and most of 2007. Then, he began tearing the cover off the ball, or rather tearing as much ball cover as Cristian Guzman could ever tear. He posted a .364 wOBA in 177 PA at the end of 2007, and was the team's lone All-Star in 2008.

That was enough for the Nationals brass to hand Guzman a two-year extension at $8M a season. Never mind the fact that Guzman fell off and reverted to the old Guzman this season. ZiPS at the start of the year projected a .333 wOBA in about 444 PA. At that total, with the kind of playing time he's received this season and a projection of his slightly below average defense, you'd expect a 2.2 WAR player worth almost $10M on the open market. Even if the team got that for two seasons, they'd only expect about $4M in surplus for the $16M they invested.

Let it be known that this is not an isolated incident. The Nationals also inexplicably gave a two-year extension at $5M a season to Dmitri Young despite the fact that they only saw about 250 good plate appearances from him at the time of the signing and that they had quality players already under contract and available to play the only positions Young was capable of playing (first base and, as a stretch, corner outfield). He's produced 0.4 WAR since signing.

Currently, the four players with the highest 2009 salaries on the Nationals (Dunn, Guzman, Austin Kearns, and Young) have combined for 2.1 WAR this season. If we give Dunn 2 WAR and Guzman 1 WAR for the season, the team's total investment in these four players would have yielded 7.7 WAR, worth around $33M, and spent $29.5M to get it.

The Alternative they didn't take

Let's compare that money spent with this example. Last season, the Nats failed to sign their first-round draft pick, University of Missouri pitcher Aaron Crow. According to sources, the Nats offered $3.5M and Crow and his agent wanted $4M, a difference of $500K which neither party wanted to close.

As a way to calculate the approximate worth of Aaron Crow to the Nats, I used the estimate of 0.85 WAR per season for 9th pick in the first round, as shown in Erik Manning's work earlier this season on this here site. I took the discount rate of 8% for the WAR for each season as suggested by Victor Wang, and got a total WAR for the first six seasons of around 4.8 WAR. Splitting up so that the arbitration years are a bit more valuable (to reflect the improvement of the player), I got this for the value of Crow.

Crowval_medium

After including the $4M bonus, you would get a surplus value of $11.5M on Crow's signing. This isn't an exact science of course, and this doesn't take into account that college pitchers are less valuable as a group then, say, hitters in general. Truthfully, the surplus could be around the $6M-$8M range easily. But the point stands that the Nationals decided that rather than picking up estimated positive surplus value from signing a draft pick that they clearly showed interest in, it would be more beneficial to the organization to pocket that extra $4M. The team then promptly spent the $4M and got $2M surplus value instead. A difference of $500K cost the team an expected surplus value of $11.5M.

Change in the horizon?

Hopefully GM Mike Rizzo can usher in change in this organization's management of its resources. The team did sign top pick Stephen Strasburg this year, so that's a start. If the team considers dealing Adam Dunn, it would go a long way towards helping them get value for the dollars they'll be spending. If it remains stalwart that Dunn is a team "cornerstone," as Rizzo has worded in a recent chat, and he is not dealt, than it is something of a sign that the team is more interested in the short-term, which with their current core likely does not include contending, instead of the long-term health of the organization. There are reasons to hope for the best in Washington, but it has to begin with a change of heart from management. They cannot continue to spend dollars essentially on free agents and compete with the budget they have. To bring winning to Washington, they'll have to develop or acquire more Josh Willinghams and Jordan Zimmermans and sign less Cristian Guzmans and Dmitri Youngs.

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