Follow the Money, or Maybe Not?

Based on our last post (MLB Competitive Balance Not So Much), we examined the success and failure rates of all major league clubs by creating what we term the Baseball Purist (BP) Success Rate.  We wondered though if there is a correlation between our rudimentary metric and the amount spent by each club over time.  We took the average team payroll by each team over the past 23 years (2000 – 2022) and compared that to the BP Success Metric to determine if there was a correlation between playoff and World Series success versus the average amount spent by each club on player salaries.

Our analysis showed some correlation, but it was not a slam-dunk (to borrow from another sport).  In regression analysis, the following are the meaning for the Multiple R statistic:

• 1 means a strong positive relationship
• -1 means a strong negative relationship
• 0 means no relationship at all

In our regression analysis, Multiple R resulted in a 0.6381 correlation, which means a positive correlation between a club’s player payroll spend and their success rate.  This is not a huge correlation though.  In addition, the R Square value of .4072 means that club spend only explains 40% of the success rate of each team.  The Standard Error shows the average distance from the regression line, so a lower number would show the quality of fit to our regression line.

Overall, spend is a component to success, but not an absolute. While we see teams like the New York Yankees, Boston Red Sox, San Francisco Giants and LA Dodgers spending more than any other clubs and reaping the success in terms of playoff appearances, wins and championships.  We conversely, see teams such as the Texas Rangers, LA Angels, and New York Mets spending just as heavily but having little to show for it in terms of success.  In addition, teams such as the St. Louis Cardinals and Houston Astros have spent far less, but have success results within reach of the highest spenders.

Keep in mind that our analysis covered the past 23 years, so teams such as Atlanta and Tampa Bay although above the regression line, would look far better in our analysis if we examined just success rates over recent years (5-10 years).  A team like Tampa Bay, which is normally a bottom spender but a regular playoff team would be far higher on our success metric if we only took into account recent years.

Ultimately, though we can conclude that although being a top spender in terms of payrolls does help, it does not necessarily correlate to a winning team.

Here is the data we used to calculate our regression analysis and the chart above.