case 2: assessing the value of alex rodriguez teresa sonka gail bernstein
TRANSCRIPT
Case 2: Assessing the Value of Alex Rodriguez
Teresa SonkaGail Bernstein
Alex Rodriguez
Year
Team Batting Avg.
Home Runs RBI Stolen Bases
1996 Seattle 0.358 36 123 15
1997 Seattle 0.3 23 84 29
1998 Seattle 0.31 42 124 46
1999 Seattle 0.285 42 111 21
2000 Seattle 0.316 41 132 15
•First overall pick in the 1993 Major League Draft at age 17
•Played with the Mariners for 5 years
•Set the American League record for home runs by a shortstop
•Became a free agent in 2000
Texas Rangers
Owned by the Southwest Sports Group The strategy of the founder, Tom Hicks,
was to spend considerable resources on talent
The Texas Rangers were one of the main teams interested in Rodriguez
Needed to determine the incremental benefits of Rodriguez
Wanted to determine an offer price that would attract Rodriguez without overvaluing him
Hitter is the Center of Attention All eyes are on the hitter and no one notices
the other basemen and outfielders until the ball comes their way
We don’t notice the third baseman until a hitter smashes a ball down the third base line and the third baseman makes a diving stop to throw the hitter out
o Runs win games and hitters create runso There are more significant offensive than defensive statistics
What is the most important offensive statistic for a baseball player?
A. RBIB. Batting AverageC. Home RunsD. On-base percentageE. Slugging average
Important stats according to Moneyball
Slugging Average: Total Bases/At Bats Each base is weighted differently SLG = (1B + (2 x 2B) + (3 x 3B) + (4
x HR))/ AB For example, if in 1 inning a team sent 4
people to the plate and 1 got a home run but the other 3 struck out, the slugging average would be a 1.0
Rodriguez 2000 Mariners’ season slugging average: .606
On-Base Percentage Measures how often a batter reaches a base OBP= (H+BB+HBP)/(AB+BB+HBP+SF) H= home run, BB= walks, HBP= times hit by
pitch, AB= at bats, SF= sacrifice fly An on-base percentage of 1.0 for a team
would mean that every hitter got on base; theoretically a team could then score an infinite number of runs because they would never get an out
On-base percentage is given a higher weight than slugging average for this reason
Rodriguez 2000 Mariners’ season on-base percentage: .420
On-base Plus Slugging
Weighted addition of on-base and slugging percentages
Convential baseball wisdom assigns on base percentage a weight of 1.5 and slugging a weight of 1
Paul DePodesta, Oakland A’s statistician, assigns on-base percentage a weight of 3
Rodriguez 2000 Mariners’ season statistic according to the Oakland A’s weight: 1.866
Runs Created
According to Bill James: Runs Created=(Hits +Walks) x Total
Bases/(At Bats + Walks) Used to determine how many runs a
team will score Batting average and stolen bases,
two traditionally important statistics, not included as factors
AVM Systems Founded in 1994 by two former
derivatives traders Wanted to find the “derivatives” of runs;
to value the worth of each tiny event in a baseball game and extract luck
Aimed to assign values to the minute components of a baseball player’s performance by analyzing the value of these events on average in the past
Turned every major league diamond into a mathematical matrix of location points
They did not reference any traditional baseball statistics For example, hits were defined by their
velocity and trajectory
How do these statistics relate to Rodriguez?
Rodriguez had both great traditional and unconvential stats for his 5 years with the Mariners
The key to the Oakland A’s (a team with one of the lowest player salary budgets in MLB) success is recruiting based on performance statistics
Performance statistics are especially important when paying huge salaries
Was the Rangers decision to sign Rodriguez based more on his outstanding statistics or the glamour factor?
References
Lewis, Michael. Moneyball. New York, NY: W. W. Norton & Company, 2004.
Cohen, Randolph B. and Jason Wallace. A-Rod: Signing the Best Player in Baseball. Boston, MA: Harvard Business School Publishing, 2002.
http://www.baseball-reference.com/r/rodrial01.shtml
http://www.latinosportslegends.com/stats/baseball/Rodriguez_Alex-career_stats_highlights.htm