Baseball Economics and Real World Economics

Nick Castellanos, who will turn 28 on March 4, just signed a 4 year contract with the Cincinnati Reds for a reported $64 million. Let's unpack that sentence. The Reds are one of the smallest of the small market teams, with absolutely no history of major free agent signings. Nick Castellanos is a good player, who had good seasons the last three years. His OPS (the favored metric for evaluating offensive play, On Base Percentage plus Slugging Percentage) for each of those seasons was .811 in 2017, .854 in 2018, and a career-high .863 in 2019. His career OPS is .797. An average OPS for a major league hitter is .750. Finally, I make $64 million for 4 years an average salary of $16 million.
The Boston Red Sox are all hot and bothered to trade Mookie Betts. The stated reason is that they need to get under the luxury tax line in 2020. That line (which baseball, with one of its typically absurd euphemisms, calls the Competitive Balance Tax) kicked in for 2019 at $209 million in player payroll. The Red Sox spent $240 on player payroll, and they had been above the line for some period of years (I don't know, or care, how long). The baseball luxury tax bumps up as a team's payroll exceeds certain levels, and also rises as the ceiling is exceeded for multiple years. With all of the permutations of the rules, the Red Sox are being assessed a luxury tax of just over $13 million for 2019.
The Boston Red Sox were purchased by billionaire John Henry and a consortium of minority partners on December 20, 2001, for $660 million. In April, 2019, Forbes Magazine released its annual valuation of Major League Baseball teams. Forbes estimated the value of the Boston Red Sox at $3.2 BILLION, exceeded only by the NY Yankees, at $4.6 billion, and the Los Angeles Dodgers, at $3.3 billion. I wonder how many investors would like to get their hands on an asset that would rise, in only 18 years, from a value of $660 million, to $3.2 billion? Pretty much all investors, I'd guess. To review, this is a business valued at $3.2 BILLION, owned by a group headed by a man whose net worth is estimated at $2.6 BILLION.
Now, Mookie Betts. Betts turned 27 on October 7, 2019. He's six months younger than Nick Castellanos. Betts was named the 2018 American League Most Valuable Player. He is not the best player in baseball, as Mike Trout has that position nailed down. But he's definitely in the conversation for #2. Betts has a career OPS of .893, almost 100 points higher than Nick Castellanos. Mookie's career-low OPS was .803, six points HIGHER than Castellanos' career average. Betts produced an OPS of 1.078 in 2018 and .915 in 2019. Over .900 is a baseball superstar. Over 1.000 is incredible.
The Red Sox ownership has decided that they need to trade the man who is, arguably, the second best player in all of baseball to save an amount of money (luxury tax) that wouldn't even have signed Nick Castellanos. A $3.2 billion corporation, owned by a man whose net worth is $2.6 billion, is worried about $13 million, and is so determined to save that $13 million that they are determined to eliminate their most significant asset.
This ownership group was, of course, not in place 100 years ago when a financially struggling Red Sox owner traded Babe Ruth, and all of the Red Sox' success, to the Yankees for $100,000 cash and a guaranteed mortgage on Fenway Park, but they seem committed to behaving just as stupidly and short-sightedly as their forebear.
Over an amount of money less than that the Cincinnati Reds could afford to pay one slightly above-average player.

Managing Problems

This week has brought a renewed, if unwanted, focus on Major League Baseball's managers. AJ Hinch of the Houston Astros, Alex Cora of the Boston Red Sox, and Carlos Beltran of the New York Mets were all with the Astros in their World Series winning season of 2017. Hinch was manager, Cora was bench coach, and Beltran was a player. All three were named in the Commissioner's report on the Astros' sign stealing cheating in that season.

All three of these managers were fired by their teams this week, after the Commissioner's report became public. Hinch was also suspended for one year by the Commissioner. Cora and Beltran continue to wait on word as to any suspensions they will face.

I believe that each man deserved/deserves a suspension. I believe that they deserved to lose their current jobs.

But the firings of Cora and Beltran highlight another, even more significant, problem.

There are thirty Major League Baseball teams. There is one African-American manager in MLB, Dave Roberts of the Los Angeles Dodgers. With the firings of Cora and Beltran, there are three remaining Latino managers: Dave Martinez of the Nationals, Charlie Montoyo of the Blue Jays, and Rick Renteria of the White Sox. Roberts is the first minority manager the Dodgers have employed, but the team of Jackie Robinson has been admired for its progressive approach to the game for decades. The Nationals, Blue Jays, and White Sox have all employed minority managers previously, as have the Mets. They are each to be commended for their openness. Cora was the first minority manager for the Red Sox, who were the last team in baseball to bring a black player to their major league roster when Elijah "Pumpsie" Green was called up in 1959, a full twelve years after Jackie Robinson's advent in Brooklyn.

Most major league teams have never had a minority manager. That fact is hard to understand when you consider who comprises baseball teams.

Cora and Beltran represented 40% of baseball's Latino managers, and 1/3 of baseball's minority managers. I can only hope that the three teams who have sudden and unexpected openings for Major League Manager will consider a wider range of candidates to fill those positiions.

It is shameful that only one team is led by an African-American manager. And it is absurd that only three teams are led by Latino managers.

Baseball must do better. And wouldn't even have to try very hard to do a whole lot better.