Austerity and Collusion

The Milwaukee Brewers rebuilding and analytics campaign fits perfectly with a new narrative of revenue reorganization within the MLB. Mirroring a broader era of austerity in the United States of America, MLB owners are redistributing revenue upwards, to the detriment of both MLB and minor league payrolls, as well as draft and international spending bonuses. At the end of 2016, Forbes reported that the MLB once again earned record revenue growth, as gross revenue expanded nearly half a billion dollars to $10 billion total (and offshoot contracts such as BAMTech poured another $500 million into ownership coffers). For this billion dollar collection, the MLB pays its prospects poverty wages and once again depressed MLB payroll spending. Opening day payrolls remained flat despite this windfall, as only $138 million of the $500 million growth and $500 million BAMTech contract were spent on labor (for reference, MLB owners could have increased payroll spending by $500 million and still taken home approximately 55 percent of revenue).

Payroll numbers are opening day figures from Cot’s Contracts. Draft and International figures are spending caps from BaseballAmerica. 

Analytics has spoken: redistribute capital upward, and spend on technology. This outcome should not be surprising as a gang of white elitist finance professionals overtake the executive (and ownership) ranks. The field of anthropology of finance, especially ethnography of finance, effectively demonstrates how institutional finance draws upon the exclusive and discriminatory networks of Ivy League colleges to create markets that serve a particular embodiment. In Liquidated, Professor Karen Ho outlines how ideals of smartness, speed, and instability are used to spur corporate raids and entrench the revolution of shareholder value within corporate America. Professor Caitlin Zaloom effectively demonstrates how markets themselves use technology to rearrange labor in an attempt to continually move capital upwards while serving a particular embodiment. Both of these exceptional ethnographies can be used to construct a sociology of the professions (or sociology of technology) to interpret current MLB hiring practices and rosterbuilding techniques alongside record-setting revenues and decreasing payroll.

Related Reading:
Improving Front Office Diversity
The New Professional Orthodoxy
OFP and Minor League Pay
Player’s Perspective on Minor League Pay

Following the revolution of shareholder value, where the interests of only one set of stakeholders is valued at the expense of other risk bearing entities (for example, the Milwaukee Brewers Ownership Board versus the Five County Taxpayers), it should hardly be surprising that a behemoth television subscription generator such as Major League Baseball would come to wholeheartedly embrace the ideals of elitist finance within their ownership groups and front offices. One should not have to squint terribly hard to see the worship of the corporate raider in the recent trend of the MLB tank or rebuild process, where one entity (an MLB payroll) is stripped apart and cashed out for more than the sum of their parts (minor league prospects). The fun of it is, prospects have “future potential,” so fans themselves can dream of scenarios in which they become their own corporate raiders, as Brewers fans do when they debate the merits of trading Ryan Braun (are you an agent of efficiency, fitness, and smartness hoping that GM David Stearns uses his Ivy League degree to dump the slugger for underpaid minor leaguers? Or are you a lazy, slothlike bureaucrat that mistakenly values the presence of an elite mid-30s slugger? Stay tuned on Brewers Twitter).

The analytics movement serves one purpose: redistribute revenue from the players to the owners. The recent trend of the “tank” or “rebuild” or “retool” is one of the most effective ways to accomplish this task: shed MLB payroll and hire as many minor leaguers as possible. This has the dual benefit of hyping up fanbases about their Top Prospect lists and placing the bulk of the organization’s assets in underpaid labor (based on MLB history, the average minor league player should earn approximately $200,000 not only for serving as a member of an elite professional organization, but for recouping some of the surplus value provided to the MLB organization). Top Prospect lists shroud the ugly side of minor league pay; it is much easier for fans to digest the fact that they are following a potential 60 OFP prospect during a five month season than heaping potential praise on someone that is probably paid less than local fast food clerks.

Yet, these minor leaguers will most likely become underpaid MLB players, as “market inefficiencies” exploited by analytical front offices drive down player payroll and even serve to distort additional price-setting functions such as arbitration. Witness Delin Betances, who holds a depreciated surplus value of $44.1 million for the Yankees, and produced 3.0 WARP on the strength of a 1.44 DRA in 2016 (worth $21 million), who is now grossly underpaid through an arbitration process that cannot recognize his value. Witness Chris Carter, a slugger offering $12.4 million surplus as an arbitration-controlled player after the 2016 season, now signed as a $3.5 million Designated Hitter despite posting TAv north of .280 in four of his MLB seasons. These are only two recent examples.

Beyond the unsavory and exploitative labor practices and executive diversity impact of the analytics movement, there is a more sinister undertone of the new MLB. These elite financial minds are not only serving ownership interests, but also aligning spending habits in highly noncompetitive manners. Analytics, through rebuilding and austerity, are effectively fixing the pennant race. Aside from luxury tax slayer Los Angeles Dodgers, a sizable portion of 2016 MLB teams reduced payroll spending in preparation for losing campaigns. Even worse, a group of competitors as diverse as Miami, Pittsburgh, Cleveland, and Toronto failed to significantly increase spending ($33 million as a group) despite fielding solid rosters (Pittsburgh and Toronto even working within relatively extended competitive windows). This group of teams adds a difficult wrinkle to the revenue distribution narrative as well, exposing to some extent the stratified ownership ranks that includes some serious have-nots in terms of television revenue. As ownership redistributes revenue away from players, they are also ineffectively redistributing it among themselves, all the while furthering limiting other areas of potential spending (such as draft and international bonuses and, obviously, minor league pay). The toothless MLB Players Association stands idly by protecting their own ranks at the expense of representing minor league interests, and despite the successful efforts of owners to squeeze revenue away from MLB players. It is difficult to find anyone to like in this tale, except for of course the players themselves and especially minor league players, who need every champion they can get.

The extended era of analytics is morphing from the feel-good story of Bill James and Moneyball into a dark tale of executive racism, austerity, and extreme competitive imbalance. Rebuilding brings the stench of collusion, and it is difficult to look at payroll shifts between 2015 and 2016 without seeing a third of the league dropping out of the Pennant Race on purpose (or, worse yet, failing to spend every resource possible, including MLB payroll revenue, to build on already competitive rosters). The Big Data Baseball champion Pittsburgh Pirates now look like a hapless organization that was so sold on their own brilliance as to misunderstand an opportunity to use revenue and win-now trades to contend for a Championship. Yet, their journey to completely rebuild the computer systems presages the MLB’s dive into exceptionally lucrative technology contracts.

So, what of the Brewers? A relatively flat offseason leaves room for a few takes on the club, one of which is that the club believes that their young core deserves a chance to play and that the club is relatively close to competing. Yet, even here this narrative becomes incredibly frustrating as ownership sits on approximately $40-to-$60 million dollars, refusing to improve the team through MLB payroll spending for the second consecutive year (with the pending sale of the Marlins revealing the significant uptick in franchise values, who can blame Brewers ownership for pumping cash to increase equity stake, even at the expense of building the best possible team? The Ownership Board will have more than one billion ways to alleviate their sorrows). There is a story of the 2017 Brewers where a gang of young, positionally flexible misfits surprises the industry, and as Spring Training opens, the lack of spending to bolster that narrative suggests that Brewers executive ranks are much more interested in the shareholder value revolution. At the very least, one can say that the current organization has indeed sold off almost all the parts for more than their sum, and effectively tanked MLB payroll. The future looks bright. But for what?

References:
Karen Ho, Liquidated (Duke University Press, 2009)
Lisa Servon, The Unbanking of America (Houghton Mifflin Harcourt, 2017).
Caitlin Zaloom, Out of the Pits (University of Chicago Press, 2006)