The Minimalist's Thirty-Million-Dollar House

Near the end of May 2013 it was reported that New York Yankees third baseman Alex Rodriguez’s Miami home had sold to an unnamed buyer for $30 million, making it one of the most expensive home sales in the city’s history.

Rodriguez bought the property for $7.4 million in 2010, and spent roughly the same amount on building the house, which was finished about a year later. Less than four years after starting construction, Rodriguez was able to sell the house for a profit of somewhere near $15 million.

Now, we don’t object to making a profit—in fact, if we someday sell our own home for an extra fifteen million dollars, then so be it. That bothers us even less than it bothers us for ESPN.com to describe a 20,000-square-foot house—one with nine bedrooms, eleven bathrooms, home theater, and an outdoor kitchen (as well as the more mundane indoor gourmet kitchen)—as “minimalist.”

See if you can guess which of these houses is the quaint,
minimalist bungalow formerly owned by Alex Rodriguez.

We do admit, however, to being a little puzzled. In one of the worst housing markets and worst overall economies most living Americans have seen—or at least can remember clearly—this house was sold after less than four years for twice its previous price. What kind of luck is that?

Honestly, who on Earth gets paid tens of millions of dollars in order to get something that’s just going to sit there, inert, doing nothing but getting older and more and more run-down, and may well have been built using illegal materials in the first place? 

What?

 Hey—

  
Oh wait—

Yeah, we remember who now. Alex Rodriguez.

A New Reason to Hate the Yankees

I am not one for hating on the Yankees. Yes, the New York Yankees make more money than any other team in baseball, and of course they, correspondingly, spend more money on players than any other team. For reasons that I understand but do not agree with, this makes some people irate and many others quietly perturbed. Don't hate the Yankees because they operate within the system at their maximum potential to win baseball games. Further, I concede that the system may be flawed but do not agree with implementing a salary cap. I have not heard a cogent suggestion for how to fix the issue that I can get on board with.

So I am conceptually fine with the inherent advantages the Yankees have in the economics of baseball. But what if the Yankees get an additional competitive advantage from the vast (and evil, by the way) media outlets in the immediate vicinity of New Yankee Stadium? Having just traded for Curtis Granderson, a very good, if somewhat over-rated, center fielder formerly of the Detroit Tigers, it appears the GM of the Yanks shipped off some prospects to fill a hole with a player they can certainly afford. Here's the rub - they got the player they wanted and only gave up an over-rated prospect (to be fair, he could be pretty good eventually) and a marginal major league starter and a couple relievers (neither very good - these grow on trees in major league baseball). What if the mega-media outlets, who talk about the Yankees' prospects all the time, have contributed to that team's prospects being over-rated on a consistent basis? This would lead not to better home-grown players on the field, but to better players available by trade. Consequently, not only would the Yankees be able to buy the best players, but because their prospects are hyped way more than any other teams' maybe they also have the advantage when it comes to trading for the best players too.

Gosh. Maybe this is a bit out there, and certainly not something I would normally advocate. And I definitely do not qualify as an expert on any teams' prospects. But after watching the rumors float in the world of the LA Dodgers that such and such teams want the Dodgers' top four prospects plus some major league talent for certain players in trade, it does make me wonder if other teams believe the hype given to the Yankee youngsters by the Yankees media conglomerate a bit too much when I see trades like the Granderson deal.

Maybe something I'll look into. Any ideas how to prove this from the Bowling faithful? Just what we need - another reason for everyone to hate the Yankees.

A Salary Cap Would've Stopped Hitler!

Alan Greenspan comes to me for discussions on economic theory and Bud Selig gets my input of baseball issues of the day, so I occasionally feel the need to spew my knowledge to the masses. It’s just the right thing to do, yo. Hence, we’re here to celebrate the Yankees of 2009 and World Series Champions (I hate that “world champions crap – did they beat everyone in the world? No!) as they prove the point about money being meaningless in baseball. Huh? you might ask? Didn’t the Yankees spend way more than everyone else and buy the title? In the words of the great White Goodman, let me hit you with some knowledge.

Rob Neyer of ESPN has a terrific blog, called Sweetspot. Check it out. It’s not quite as terrific as Bowling in the Dark…but not much is. Some Guy and I have a media behemoth on our hands, and the Rob Neyers of the world can get in line! Anyway, Neyer wrote a good blog entry about this topic. The basic point is that the Yankees can buy a playoff spot every year, but the last eight years (many of which the Yanks outspent everyone by even more than they did this year) taught us that the championship cannot be bought (only some timely talent and Lady Luck can grant that).

Isn’t revenue sharing a good thing? How about the luxury tax? The Yanks pay way more than anyone else – is that a bad thing? It’s a problem that the clubs are not required to re-invest monies earned through the luxury tax or in revenue sharing in the team. This has NOTHING to do with a salary cap. Simply implementing a rule that says “All clubs must invest the money they receive through the luxury tax or revenue sharing back into the team payroll” would probably alleviate a lot of what the lazy mainstream media types are complaining about.

I find it irritating when people talk about teams forcing cities to build them new stadia (plural of stadium?). It’s not true that a team does not have to pay for a new stadium. It’s simply market forces. The team says “you, Mr. City, build me a stadium or we’re leaving”. And most of the time Mr. City does just that, not calling the bluff of the team. The City of Tampa has called the bluff – no new stadium for a long time. It’s ludicrous when the team doesn’t build its own stadium. For the Yankees to get this grand new stadium (with some tickets costing $5K a game!) for free is a bunch of garbage. But no one made Mr. New York City do that for the Yankees. Screw you, Mr. New York City!

Next – we all talk about “small market” and “large market” teams. Do you know which teams are which? Below is a chart of the baseball markets arranged by population, using numbers from the 2000 census:

Markets of more than 10 million people
--------------------------------------------------------

21,199,865 New York Mets, New York Yankees
16,373,645 Los Angeles Angels, Los Angeles Dodgers

Markets of 5-10 million people
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9,157,540 Chicago Cubs, Chicago White Sox
7,608,070 Baltimore Orioles, Washington Nationals
7,039,362 Oakland Athletics, San Francisco Giants
6,188,463 Philadelphia Phillies
5,819,100 Boston Red Sox
5,456,428 Detroit Tigers
5,221,801 Texas Rangers

Markets of 3-5 million people
--------------------------------------------------------

4,682,897 Toronto Blue Jays
4,669,571 Houston Astros
4,112,198 Atlanta Braves
3,878,380 Florida Marlins
3,554,760 Seattle Mariners
3,251,876 Arizona Diamondbacks

Markets of 2-3 million people
--------------------------------------------------------

2,968,806 Minnesota Twins
2,945,831 Cleveland Indians
2,813,833 San Diego Padres
2,603,607 St Louis Cardinals
2,581,506 Colorado Rockies
2,395,997 Tampa Bay Devil Rays
2,358,695 Pittsburgh Pirates

Markets of 1-2 million people
--------------------------------------------------------

1,979,202 Cincinnati Reds
1,776,062 Kansas City Royals
1,689,572 Milwaukee Brewers


A few things jump out on this list, at least to me. Look at the 5-10 group. Why are the Cubs, White Sox, Orioles, Nationals (get a pass for recent move), Phillies, Tigers and Rangers so bad more often than not? Okay, perhaps one could argue that more recently the salaries have grown more disproportionate, and the Cubs and Phillies (at least) have been competitive. But then why are the others so bad? One may also argue that the 5-10 is too large a spread to look at. Perhaps, but note that the first three cities share two teams each. The same person is highly unlikely to attend games of both teams or buy stuff from both teams. Next, look at the 2-5 million ranges (smushing two groups together – and yes, I just used the word “smushing”). Atlanta, Minnesota, Toronto, Cleveland, Arizona and St. Louis have been fairly regularly competitive. What advantage do they have over Houston (also pretty competitive, but less consistently so than the first group), Seattle, San Diego, Colorado, Tampa and Pittsburgh? Florida is a special case, as they have no attendance and build up for a run then tear down (no other team has this particular model). I also think Minnesota is a special case, as its owner is one of the richest in the league, and they don’t spend up to their revenue level. So how does one analyze that?

In fact, the most compelling argument FOR a cap may just be the final four teams on the list. Pittsburgh, Cincinnati, Kansas City and Milwaukee have certainly been the most inept teams over the last 20-30 years. But does correlation equal causation? Certainly, a significant part of the reason for their ineptitude is revenue-driven. But it’s important to recognize that a significant part is also inept-management-driven. Is the fortune of those four teams enough to drive the creation of a salary cap? And if you believe that it is, how do you explain the similar results seen by fans in Baltimore, Dallas, Detroit and Chicago (until recently)? Thus, I think that population is not what you’re looking for as an explanation.

Population is only a part of the equation. What you really should look at is team revenue. This is somewhat population-driven, but not always. Seattle is a large-revenue club. Oakland is a small-revenue club. Why? Too many reasons to list here. But the point is that if you talk population and not revenue, you’re not seeing the entire ball of wax. Is there a correlation between revenue and post-season potential? Of course. Let’s explore that next.

There is a good book that I have only read parts of thus far, called “Baseball Between The Numbers”. Since only 12 of 30 teams can make the playoffs in a given year, most teams won’t come close to making the playoffs (2008 being an outlier there, as deep into the season there was a disproportionately large number of teams still “in the running” for a playoff spot – I think this is also evidence against the need for a salary cap, but I digress). So let’s look at playoff appearances over time, since one of Some Guy’s main arguments has been that the higher-spending teams will be more consistently competitive than the lower-spending teams. Doing some statistical analysis that I am way too dumb to understand, the authors found that the correlation between team revenue and post-season appearances (the R-squared) is .51. Meaning that half of getting to the post-season is determined by revenue. Is that enough for a cap? I don’t know. But the authors make a good point – teams make a lot of money by getting to the post-season, so could the correlation really be telling us that those who make the post-season have higher revenues? Maybe, but this isn’t what we want to know. So they did a comparison of appearances in the playoffs to TV market size – go back to the above chart. It is here that my analysis above really shines (the chart was from a different source, and the analysis was all mine. Eat it Greenspan!). The correlation between post-season appearances and TV market size is only .11, meaning that only 11% of the reason for a team making the playoffs is due to TV market size. This, it should be obvious, is not enough to support creating a salary cap.

I really believe that when people say “a salary cap would be good for baseball” they really mean “I hate the Yankees for being able to buy all the best players.” “Baseball Between The Numbers” goes on to discuss how the authors believe a cap would (or would not) affect the competitive balance, and I won’t go into that here. But to quickly look at football’s cap – the Cowboys and the Raiders spent the most money on salary in 2008 (there are many complicated ways to fit lots of salary into a hard salary cap under the NFL rules). Where did that get both of those teams? The lesson, from this admittedly tiny sample size? Even with a cap, there are teams that have more money to spend than others – and even then, you’re still not guaranteed to be any better than any other team.

Rob Neyer thinks that the Yankees can buy their way to the playoffs every year. He’s a smart guy and maybe they can, but most large-revenue teams cannot. It’s pretty hard to argue, however, that revenue has no bearing on the fates of baseball teams. Spending has escalated in the past twenty years, but in 1990 the Baltimore Orioles were the highest spending team. The Dodgers have spent money like scary monkeys for a long time, with only the recent playoff fruit to show for it (and that is in SPITE of some terrible spending, on the likes of Juan Pierre, Andruw Jones and Jason Schmidt).

Okay, maybe money is not irrelevent, as the first paragraph of my post suggested with tongue firmly in cheek. But spend wisely, my billionaire team owning friends. Go ahead and try to buy your way to the playoffs. Good luck once you’re there.