Inspired by my post about Bruce Bochy and what he could have done for San Diego with a little more in payroll and by recent comments by the Padres front office indicating they intend to increase payroll, I set out to see how much salary really matters in terms of wins.
The New York Yankees have spent more than every other team in baseball for what seems like forever. And they've won. Some may end the argument there. The Yankees spend more and have the most World Series titles. However, questions remain.
Billy Beane is famous for his approach to payroll and evaluating players with the Oakland Athletics. While the A's have not seen much success of late, Beane revolutionized the game. His approach and utilization of Sabermerics to help evaluate players turned the A's into a contender. And he did so with a lower than average payroll.
The Rays made it to the World Series in 2008 with a payroll under $40 million. The Marlins won the World Series in 2003 with a payroll under $50 million. So it's clear that success can be had without over-spending. But how much do wins and salary correlate?
Using Baseball-Reference's salary figures for every Major League team from 1998 on (the year the league expanded to 30 teams), I have analyzed the correlation between success in terms of salary. The salary figures do not include every bonus a player made and often miss mid-season call-ups, but overall they are as complete as it gets.
I've broken the results down by periods of four years for 1998-2005 and five years for the 2006-2010 seasons just so that we could include the 2010 season in the results. I've also compiled the overall results.
First, we'll take a look at the seasons ranging from 1998-2001.
With the data in place, I ran a correlation analysis. The result is the "r" figure you see in the top right of the graph. The closer to 1 that number is, the better the correlation between two pieces of data. In this case, the data is salary vs. wins.
As you can tell, r is only 0.45. While there is some correlation, it is not a very good one.
Next we'll move on to 2002-2005.
Again, we see minimal correlation between salary and wins. The correlation coefficient for 2002-2005 is only 0.48.
Now, we'll take a look at 2006-2010.
The correlation actually decreases for the most recent seasons. Interestingly enough, this is also the first data set to include a salary over $200 million. At 0.42, there is not much correlation seen between salary and wins.
Finally, I put it all together. Here are the results for 1998-2010 combined.
As you can see, the correlation coefficient for all the years combined is just 0.40. Keep in mind, when analyzing correlation coefficients, anything less than 0.50 is considered to be a bad correlation.
Sure, there is some correlation. There has to be. Otherwise, every team in the league would be paying players the league minimum. However, I'd be willing to bet that removing the Yankees from the evaluation altogether, would cause the correlation coefficient to decrease even more. Let's find out.
And there you have it. If we don't count the Yankees, the correlation between salary and wins becomes an almost non-existent 0.35.
With the understanding that teams can win without spending hundreds of millions of dollars, it's surprising more GM's don't employ Billy Beane's philosophy. Create a balanced team, built for the ballpark they play in, and focus on development rather than buying talent.
This is not to say I'm not all for teams spending a little more money if they have it, but the money needs to be spent wisely. The Mariners spent over $100 million in 2008 and still lost 101 games. They spent over $80 million in 2010 and again lost 101 games.
Money doesn't buy happiness, and it would seem money doesn't buy wins either.
To take a look at all of the salary figures I used in my analysis, click here.