The Market for Defense: An Application of Moneyball

Billy Beane

We all know the story. Financially strapped, the 2002 Oakland Athletics rose to prominence through the shrewd market analysis of General Manager Billy Beane and Co. This simple plotline, of course, is the premise of Moneyball: the theory, the book, the movie, and now culture, that has both revolutionized talent evaluation in Major League Baseball and permeated the vernacular of fans and nonfans alike.

The Moneyball hypothesis focuses primarily on the undervaluation of a player’s ability to get on base. Given its contribution to a team’s likelihood of winning, the statistic On-Base Percentage (OBP) was not adequately compensated on the open market. This inefficiency allowed for teams such as the A’s to purchase these critical statistics at affordable rates. However, it is a widely held conception that the Moneyball hypothesis has now dissipated, largely due to the dissemination of knowledge across MLB. Naturally, once other teams catch on, the market inefficiency can no longer exist.

But have market inefficiencies totally eroded?

Find out after the jump.

Not quite, according to our analysis.

If the market is efficient, we expect the correlation between team winning percentage and team payroll to be quite high. That is, teams pay players to win games, so if they are spending money wisely, these two figures will fall in line with one another. In 2011, the correlation coefficient between winning percentage and team salary was a modest .41. Clearly, this relationship is still far from perfect.

This insight opens the doors for future discussion. Even if Moneyball has largely dissipated, it is almost certain that other market inefficiencies are at play. One of the hallmarks of the Moneyball hypothesis is that defense does not matter. But perhaps this disregard for half the sport stems from a failure to objectively and accurately quantify baseball’s mysterious final frontier. After all, the best defensive metrics are still far from ubiquitous.

Though much more research still needs to be done with respect to the usefulness of defensive statistics, we can use the ones at hand to see if the market for defensive skill is functioning optimally. In the spirit of Billy Beane, we must evaluate this question analytically. To do so, we will compare the correlation between UZR/150, a sabermetric statistic that, according to FanGraphs, quantifies “the number of runs above or below average a fielder is, per 150 defensive games,” and team winning percentage, with the correlation between UZR/150 and team salary.

In 2011, the correlation coefficient between team UZR/150 and team winning percentage was a modest .349. This figure indicates that UZR/150 contributes to 12.2% of the variance in team winning percentage. To place this in figure into perspective, team OBP and team winning percentage feature a correlation coefficient of .551. As such, OBP accounts for 30.4% of the variance in team winning percentage. Pursuant to this somewhat crude analysis, Beane was correct in his assessment that offensive trumps defensive value.

Next, let us compare these correlations to the correlations with team payroll. We should expect that, in an efficient market, the correlations would be similar, since, as stated prior, the overarching goal of paying players is to win games. However, the correlation between UZR/150 and salary is just .04. Thus, less than 1% of the variance in salary is accounted for by UZR/150, a shockingly small figure. Interestingly, our results indicate that OBP is undervalued as well accounting for just 14.8% of the variation in salary with a correlation of .38. The results are encapsulated in the chart below:

R-Squared Values			Ratios
	Salary	WPCT	Sal/WPCT
OBP	14.80%	30.40%	48.70%
UZR/150	0.20%	12.20%	1.60%

What can we take away from this analysis? For one, though neither statistic is totally justifiably compensated, offense is more fairly remunerated than defense on the open market. But the scope of this difference is startling. The ratio of salary accounted for to win percentage accounted for by OBP is 48.7%, indicating the market is operating at less than 50% efficiency. Surprisingly, this would suggest that the Moneyball hypothesis is still relevant.

More shocking, however, is that same ratio for UZR/150 equals only 1.6%. Yes, 1.6%. In light of its contribution to winning percentage, UZR/150 is only accounted for by 1.6% of what it should be in salary determination. Granted, the validity of UZR/150 is not necessarily accepted, but this utter lack of relevance is still inexplicable. Though UZR/150 accounts for relatively little in a team’s variance in win percentage, it is still disproportionately undervalued.

Evidently (at least in 2011), the original Moneyball hypothesis is still alive, as is the possibility (or plausibility) for future Moneyball endeavors. Perhaps when front offices can more effectively operationalize the obscurity that is defense, we will see new small market teams rise to power through Beane-like market analysis.

Joe Paterno: A Legacy Tarnished

(Editor: A reminder of the disclaimer on the bottom of this site: "The views expressed by the writers on this blog do not necessarily reflect the views of the Cornell ILR Sports Management Club")

It should come as no surprise that the sex abuse scandal at Penn State University is dominating the national spotlight. This story is stealing headlines, in part, because this unfathomable act of pure evil has seemingly infiltrated something our nation once viewed as the ultimate example of integrity and innocence--sports. While a sports team and its coaches are the focus, this crisis presents a moral dilemma that challenges even the most casual sports fan. These events have also forced us to re-evaluate the standards of responsibility that our society should expect from its citizens and have shattered the notion that so long as an individual adheres to a strict interpretation of the law, he should be free of guilt. We are now confronted with the reality that adherence to the bear minimum of the law may not be enough to fully satisfy one’s civic duty. While failing to act beyond the reach of the law may not be an act punishable in a court of law, this case has amply demonstrated that an individual may still be held accountable in the court of public opinion. The speed at which Joe Paterno lost his once untouchable position as head coach of Penn State’s Football Team is a testament to this fact.

*Joe Paterno’s role in the Jerry Sandusky episode reaches back to a reported incident that took place in 2002. At that time, Sandusky was employed as Defensive Coordinator of the Penn State men’s football team under Head Coach, Joe Paterno. On March 1, 2002, a graduate student, Mike McQueary, entered the team’s locker room and witnessed Sandusky raping a boy who, at the time, McQueary estimated to be 10 years old. The next day, a distraught McQueary visited Paterno at his home and divulged what he had seen. Paterno then relayed this shocking information to his superior, Athletic Director, Tim Curley. Later in the month, Curley held a meeting with McQueary and the University's Senior Vice President for Finance and Business, Gary Schultz, to question McQueary about what he had witnessed. The meeting concluded with Schultz and Curley stating that they would investigate the events further and take appropriate action. On March 27, 2002, Curley called McQueary to advise him that Sandusky’s locker room keys had been confiscated and that the incident has been reported to The Second Mile, the foster home Sandusky had founded. McQueary was neither questioned by University police nor did any of her group inside or outside of the University discuss the matter with him further until McQueary testified in a December 2010 grand jury hearing. Paterno was had no other involvement in the case until he was called to testify before the grand jury in March of 2011.*

It is clear from this series of events that Paterno’s participation was limited to reporting to his superior, Tim Curley, the incident that was communicated to him by McQueary. While facts remain to be revealed, it appears that Paterno took no additional steps to insure that Penn State was taking appropriate action to address this situation. Between this incident and the spring of 2008 when another victim’s mother reported Sandusky, nothing more was done to prevent Sandusky (pictured left) from continuing his nefarious actions. Worst of all, Sandusky

continued to have access to the Penn State campus and the team’s facilities and, in fact, was even permitted to continue to maintain an office there. Two days after Sandusky was arrested on November 5, 2011, Pennsylvania Attorney General, Linda Kelly, said Paterno would not be a target of the investigation into how the University handled the accusations of child abuse. Although, at least for now, Paterno has avoided legal prosecution, it is clear that society is not ready to completely relieve him of responsibility for these events.

On November 9, 2011, news outlets around the country went viral with reports that Joe Paterno would be fired from his position as head coach of Penn State’s Football Team. Paterno is the longest reining head coach in NCAA Football and has been a fixture at Penn State for more than six decades. His 409 victories rank higher than any other coach in NCAA Football. “JoePa” has done it all, winning two national championships and twenty-four bowl games. He remains one of the most iconic sports figure for not only his ability on the field, but also for all that he contributed to Penn State University over the years. Ultimately, however, his ousting is not due to something he did, but rather something he did not do. It is this sin of omission that has Paterno feeling such great remorse and is what prompts discussion about his poor handling of these tragic events.

It is plain for all to see that by simply following the law and reporting the incident to his superior, Paterno was not doing all that he morally should have. While we hope that a governing system of law reflects all that society holds morally dear to it, Paterno’s actions suggest otherwise. By only reporting Sandusky’s activities to his chain of command, Paterno was released of all legal liability. Nevertheless, it is apparent that by simply communicating Sandusky’s alleged crimes, Paterno had not done enough to completely take the many victims in this case out of harms way. Thus, this situation presents a conflict between morality and law, where the law did not prescribe a morally correct standard for holding those involved in these horrible offenses responsible. Paterno himself admitted that he needed to act beyond merely communicating what McQueary had observed. “It is one of the great sorrows of my life. With the benefit of hindsight, I wish I had done more," Paterno stated.

For now, Paterno has avoided any legal prosecution, although he could still be charged with perjury, obstruction of justice, violating the state's Child Protective Services law and even be subject to possible civil suits from the victims’ families. Joe Paterno has always been revered as a college football head coach who did the right thing. Unlike many other coaches, his record of NCAA violations remains spotless and he always ensured that his players graduated at high rates. Although Paterno has always been characterized by laudable qualities like charity and public good, this tragedy, in which Paterno clearly failed to meet his moral duty, will always remain as an indelible stain on an otherwise sterling reputation.

*Please see the Grand Jury Report for a complete account of the events that transpired

Event Preview: Mark Tatum, NBA

11/17 -- 3:30 PM -- Ives 107

(Picture: Cornell University)

On Wednesday, November 16th, the ILR Sports Management Club will meet with Mark Tatum, Executive Vice President of Global Marketing Partnerships for the NBA. This event will take place from 3:30 pm – 4:30 pm in Ives 107. Mark is a Cornell alum, looking forward to interacting with Cornellians, and sharing with us his insights and experiences.

Tatum has worked in many capacities for the NBA over the past 11 years. Prior to becoming Executive Vice President of Global Marketing Partnerships, Mark held prominent roles, such as Senior Vice President, Vice President of Business Development, Senior Director, Group Manager of Marketing Properties, and Director of Marketing Partnerships.

As EVP of Global Marketing Partnerships, Mark is responsible for all of marketing for the NBA, WNBA, NBA Development League, and USA Basketball. He also works closely with popular brands to guide their NBA promotions and advertising. Additionally, he is responsible for overseeing Business Development and Media groups for the NBA, directing the league’s media sales and marketing plan and strategy.

Mark has had great success with the NBA, as evidenced by the marketing activities and commitments during the 2010-2011 season, which was one of the best in league history. He has also been honored for his successes by sitting on the Board of Trustees for the Naismith Memorial Basketball Hall of Fame and being recognized by Sports Business Journal as a Forty under 40 winner from 2006-2008.

Prior to working for the NBA, Mark has worked in the MLB’s Corporate Sponsorship and Marketing Department, as the Regional Sales Manager for The Clorox Company, and in the Sports Marketing Department for the Pepsi-Cola Company.

Since receiving his Bachelor’s degree in Business Management and Marketing from Cornell University in 1991, Mark has remained active in the Cornell Community serving as Vice Chair of the Administrative Board, sitting on the Advisory Council for CALS, and also participating in the Athletic Alumni Advisory Board. Mark also graduated from Harvard Business School in 1998.

This event is open to all who wish to attend. If you have any questions, please feel free to contact our Vice President of Events, Robbie Cohen (rnc48@cornell.edu).

Radio Show Update

Sports Inc., the Cornell ILR Sports Management Club's radio show, can be heard every Wednesday at 5 PM on Slope Radio.

While you wait for this week's show, take the time and listen to some of our past broadcasts.

After listening, feel free to come to the blog and react to the day's topics or even make a blog post if something was really grinding your gears.

For any questions regarding the radio show, feel free to email Scott Weiss (scw63) or Joey Shampain (jrs433).

Event Preview: Michael Levine, CAA Sports

11/8, Ives 111, 4:30PM

On Tuesday, November 8th, the ILR Sports Management Club will be meeting with Michael Levine, co-head of CAA Sports, via Skype. This event will take place from 4:30 pm – 5:30 pm in Ives 111. Michael is a Cornell alum, who is looking forward to interacting with the ILRSMC, as he did at the 2010 Ivy Sports Symposium.

Only five years old, CAA Sports has already established itself as the leading firm in talent representation, representing players, coaches, and broadcasters, among other sports personalities. Some of their top clients include LeBron James, Derek Jeter, Sidney Crosby, and Cristiano Ronaldo. CAA Sports has also worked with major corporate sponsorships and properties, such as the new Yankee Stadium and Madison Square Garden.

Levine has been recognized for his success by the Sports Business Journal, which named him one of the Top 40 Under 40 nationwide executives in 2006 and 2007 and inducted him into its Hall of Fame in 2008. Prior to working for CAA, Levine was the president of Van Wagner Sports Group, LLC and worked in various positions for the SFX Sports Group (now a subsidiary of Wasserman Media Group.)

This event is open to all who wish to attend. If you have any questions, please feel free to contact our Vice President of Events, Robbie Cohen (rnc48@cornell.edu).

RSVP on Facebook

Radio Show Preview [11/2]

Wednesday, 5PM, Slope Radio

On this week's radio show, we will be covering an array of topics in the sports world, ranging from Tebow Mania and the media's role in creating hype, to the ongoing lockout situation in the NBA.

The rest of the topics after the jump.

Roid Rage

Tebow Time: Tim Tebow has perhaps been the most adulated and criticized player in recent memory despite just making 6 NFL starts. We will discuss the media's role in how he is perceived, the difficult situation this forces the Broncos into, and their commitment (or lack thereof) to the "Mile-High Messiah."

Ron Washington: We will talk about the mismanagement of his bullpen in the epic Game 6, as well as the decision to take out his closer, Neftali Feliz, in the bottom of the tenth with a series-clinching win on the line.

Isiah Thomas Award

The worst personnel decision of the week was made by Glen Sather and the management running the New York Rangers, exiling the controversial Sean Avery to the minors, then desperately bringing him back to the team, searching for a spark for a mediocre team. Avery is the Tebow of the NHL in terms of polarization.

Business Breakdown

We'll focus on West Virginia's law suit against the Big East in order to try to break away and join the Big 12 in football. This is the latest development in the changing landscape of college football, as major conference football programs play musical chairs in the pursuit of greater financial gain.

Also:

-Effects of the NFL lockout on injuries, team cohesiveness, and Chris Johnson

-NBA Lockout Update: Derek Fisher trying to strike a side deal

-Ramifications of declaring for free agency in MLB

-How to build World Series teams - The Jon Daniels blueprint

-Nolan Ryan as the new Steinbrenner

-World Series ratings up

-Citi Field bringing in fences

-"Suck for Luck" Update: Lots of Suck For Luck contenders looking competitive in Week 8

-Cashman and CC get new extensions from the Yankees

-Stanford-USC game

-Preseason All-America in college basketball - NBA lockout increases overall interest

Our show is airing at 5PM this Wednesday on www.slopemedia.org/radio/

Event Recap: Gary Schueller

On Friday, October 28th,the ILR Sports Management Club was privileged to have Gary Schueller from GroupM as a guest speaker.

Gary graduated from the School of Industrial and Labor Relations in 2003 and was able to offer our club great insight regarding the relationship between the professional sports world and sponsorship. Read about his presentation after the jump.

Gary first developed a love for sports as a kid. He does admit that his athletic abilities may not have been on the same level as his passion. (though claims to still hold the record for goals allowed in youth soccer, but we may need Elias Sports Bureau to check on that.) He began his career in sports in 2000 working for the Hudson Valley Renegades, a minor league baseball team currently affiliated with the Tampa Bay Rays. Gary stated that his experience working for a minor league club was valuable—he was able to get hands-on experience and get involved with the higher-ups of the minor league organization, an opportunity that would most likely not be available for a big league club at such a young age. While still in college, he was also able to intern for the New York Mets, the US Open (Tennis), and WFAN Sports 660 AM radio. Each job led to different learning experiences, and contributed their own challenges to help him learn how to conduct himself in certain situations.

Many of the job functions involved public relations and marketing, while others included local community work. For example, he played a central role in the U.S. Open's getting Vanessa Carlton to perform for Arthur Ashe Kids Day.

After graduating from Cornell, Gary went on to have jobs with Major League Baseball in Australia, the New York Yankees and the Jackie Robinson Foundation, where he again was involved in public relations and building relationships with MLB. He was also involved with the New York Rangers for three seasons, where he was part of a team called the Rangers Game Night Staff that executed in-arena promotions and worked on activation elements for team partners (sponsors). After returning to business school at Columbia University, he then landed his current job at GroupM.

After business school, Gary wanted to transition from working in public relations, as he had in the past, to working in sponsorship at GroupM. Many people believe that sponsorship is simply the transfer of money between two parties. Gary, however, describes sponsorship as “rigor and analytics combined with magic and art." It would be more apt to call the profession as a form of “partnership”that is mutually beneficial to two parties.

Media has transformed over the past few years, and GroupM hopes to shift the art of sponsorship from “interrupting what people are interested in to beingwhat people are interested in.” Among other things, GroupM is involved in naming rights and the art of negotiation to find the right mix and match of advertising for organizations. Gary discussed how the value of sports media will increase exponentially over then ext few yeras, especially as rights fees continue to skyrocket as they’ve done recently.

For example, Gary showed a graphic showing the eye-popping value of a 30-second commercial for Sunday Night Football (upwards of $500,000), which nearly doubled the price of commercials for other popular shows such as Dancing with the Stars.

In the coming years, Gary says to look for social media to be integrated in more sports-related campaigns. An example of this is the Patriots incorporating a JetBlue-sponsored virtual tailgate each and every Sunday. Teams will also need to be more concerned with providing a unique live in-stadium experience, as fans are starting to be able to have comparable experience in their home with crystal-clear pictures on gigantic TVs. In addition, brands will move in the direction of focusing on more user-generated contact, such as the FanCaveof the MLB.

Near the end of his presentation, Gary offered some tips and advice on the next steps to ultimately land a job in sports. While it is important to know what you want, Gary points out that it is equally important to know what you don’t want. He encourages students to read voraciously and build a brand, which involves making yourself marketable based on your owns values, skills, experiences, and personality that are unique to you. Lastly and arguably most importantly, Gary urged us to both build and maintain relationships, the latter part being equally important. Go the extra mile, and if you work diligently, your hard work will almost always pay off!