Can Money Buy Championships?
Plus: Which teams have spent the most (and least) effectively?
As a baseball fan and statistics nerd, “Moneyball” is naturally one of my all-time favorite movies. I love the concept of a small-market team being able to out-smart the league and pull together a championship-caliber team for a low cost. However, those situations are more of the exception than the rule. Recent history has shown that, with some exceptions (**cough cough**, the New York Mets), teams who spend more win more, and have a greater chance of going far in the post-season.
Buying Wins
The more teams spend, the more likely they are to win more games. The chart below shows the average payroll, adjusted to 2024 dollars1, for teams winning at least 70, 80, 90, or 100 games dating back to when the league expanded to 30 teams in 1998.
Using two-sample t-tests, we find the payrolls at each of these win thresholds to be significantly different from the rest.2 A linear regression model predicting wins from payroll suggests that one additional win can be “bought” with around $2.5 million.3 Consider that a team on the cusp of the playoffs - say with 85 wins - can essentially “buy” their way to 90 wins and theoretically lock a playoff spot with a $12.5 million payroll addition.
Playoff Success
Winning games in the regular season doesn’t guarantee post-season success, however. Just ask the ‘01 Mariniers or 2022 Dodgers, who won 116 and 111 games, respectively, but both failed to reach the World Series. In the case of payroll however, the relationship remains the same. Teams who pay more go further in October and are more likely to win it all. The table below examines the payrolls of teams across levels of playoff success from 1998-2023.
Again, the payrolls at each playoff level are significantly different from the rest of the league4, indicating the teams that go further in the post-season do, in fact, tend to pay more.
Smart Spenders
Not every team has the same amount of money in their banks to work with, however. Certain teams have spent their payroll dollars more wisely than others. The chart below plots each team from 1998-2024 based on how many dollars each team has paid per win. The trendline through the graph represents the average dollars/win across the league during that time span. Teams plotted above the line have paid less per win than the average - thus spending more wisely - while teams below the line have paid more for each win.
While the Yankees and Dodgers may get some criticism for their deep pockets, they know how to spend wisely. Nobody, however, has spent their money more wisely than the Cleveland Indians/Guardians over the past 27 seasons, averaging just $1.66 million per win while averaging 89 wins each season. If we want to drill down to individual seasons for each team, the 2020 World Series runner-up Tampa Bay Rays paid a mere $690,000 per win and had a winning percentage of .667, good for 108 wins over a 162-game season (reminder - 2020 win totals were projected to a full 162 game season based on winning percentage).
So as much as we love the saying “money can’t buy championships”, it kind of does. What looks to be equally, if not more important though, is how efficiently teams spend the money at their disposal. While the Yankees and Dodgers may have some advantage in their deep pockets, smart spending by teams like the Rays and Guardians can bring success just the same.
Attained by multiplying each team’s share of the total league payroll in each season by the 2024 overall league payroll. This not only puts all numbers relative to 2024 dollars, but also neutralizes fluctuations in MLB payroll levels.
Measuring each win level against all others (i.e., teams that won between 70-79 games vs. those who won a different number of games).
After reaching a 10 win-per-season level (which any group of 27 adult men with a pulse should be able to do in their sleep).
Measuring each playoff level against all others (i.e., teams which made it to the World Series vs. those that did not).
Absolutely love this content and the results makes a ton of sense. Beyond that, I appreciate it when analysts combine the business side of sports with the usual numbers analysis. Sports are a business after all, and understanding the financial side of these businesses is huge to an overall understanding of the ecosystem. This is something that most fans/pundits have no awareness of at all and fail to identify and appreciate when they criticize smart moves driven by valid business considerations.
Thanks also for calling out the Guardians. As a one-time Cleveland resident, I tend to still follow them and have always felt that their front office was stellar and every bit as good as other big market teams that are lauded ad nauseam by the media. I include in this their quick decision to dump Lindor on the Mets...a decision that led to an immense amount of criticism on the MLB Network and elsewhere by professed experts. Lindor struck me as already regressing a bit at the time and heading towards an enormous contract that his declining play would likely not justify - a poor business investment. The media was myopically viewing it as simply a lost "star" with zero appreciation of the fuller context for the transaction. I loved the move for Cleveland and what it said about their front office philosophy, and I continue to believe they won that transaction by moving a declining overpriced asset a year early rather than a year late for valuable pieces.
Finally, a pure suggestion. What I would love to see added to this great work is an overlay of farm system excellence and how it impacts roster expense. Part of that is obvious. If you have great young talent - I'm looking at you Baltimore - your performance will be a value play for some time. However, a robust pipeline can have many other financial benefits to the roster build.
For example, the LA Dodgers seem to have an incredible player identification and development system that leads to a constant stream of young talent. It also converts talent from other organizations. Max Muncy after being dumped by the lowly A's became a star after a short period in the Dodgers' system.
That pipeline is also an asset that can be leveraged to create greater outcomes than might be expected from roster expense alone. The Dodgers can certainly better address injuries as they arise and sustain performance during disruptions (see 2024), but they can also quickly trade these pieces to obtain established talent in the marketplace as needed. That's much tougher to do for teams that have few pipeline assets because teams that will trade good established talent are likely rebuilding for a future window where your young talent will entice a trade. Teams without a good pipeline will have to spend more for less results because the marketplace is less available to them to solve needs.
Thank so much again and appreciate the great work here.
In MLB, I think the only time it doesn't make sense for a competitive team to spend money is when that team is going to sign a free agent the next offseason who received a Qualifying Offer, because the draft penalties are pretty severe. Otherwise, spend it!