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