Talent Compression: Addressing One of Baseball's Chronic Problems

One of the blogs I regularly read is The Dodgerhater: A San Francisco Giants Blog.  The author recently reported on the spat Scott Boras made about revenue sharing, which led to a discussion about how the revenue sharing system is broken in MLB.  This probably does not come to a surprise to most of you, however if you are unfamiliar with the revenue sharing system and why it is broken, here is a quick summary:

Baseball has no salary cap.  In order to encourage competitive balance in MLB (which is good for the health of the sport and to keep fan interest), rich teams must pay into a collective pot which is distributed to poorer teams.  So, the Yankees help pay for the Marlins, Pirates, and Rays, for example.  However, despite collective revenue from this system, there is no guarantee that the teams will spend the revenue-sharing money on their payrolls.  In fact, the Marlins took in the most money in 2009, but still had the lowest payroll in MLB.  This apparently is not uncommon. The Pirates and Rays are both also guilty of hoodwinking their fans and the league in this same manner.

But, how do you fix baseball?  Forests have been felled to make the paper written about this subject.  The bottom line is you are never going to have all teams on a completely equal footing, but that is okay so long as there is some general feeling of league parity.

I do believe in salary caps and salary floors, the latter of which is hinted at by Jason Stark in the aforementioned ESPN article.  However, there is something that I rarely see discussed in mainstream baseball media, and I think this problem has led to chronic unbalance in MLB.

The problem I am talking about is talent compression.  Now what on Earth is talent compression?

Have you ever looked over old baseball records and wondered by so many of them were made in the early days of baseball?  How on Earth did Nap Lajoie hit a .426 avg in a single season?  No one has approached a .400 avg in years.  Hugh Duffy hit .440.  in one season.  Willie Keeler hit 424.  How did these guys hit so well?  They all played in the 1920s or earlier.  Were players better back then?

Of course not.  Baseball players were in no way better in the early days than they were now.  In fact, your average baseball player was far worse in the early days of baseball than the average player today.  Why?  Because of something called talent compression.

Take a society.  It can be any imaginary society.  Natural athletic talent falls on a bell curve, where most people fall somewhere in the middle.  However a small elite few land on one end.  This very small number of extremely gifted athletes are the Barry Bonds, the Hank Aarons, and so forth of the world.  Now, the larger amount of people you select from our bell curve means the larger disparity between the great players and your average Joes.  So, Nap Lajoie, for example, played in the early 1900s.  He played during an era when the vast majority of baseball players were white males from the North East.  If we made our bell curve for that "society" (white males from the American North East) we are going to have to select a higher percentage of people on the curve to be in our league, meaning we are going to have a large disparity between the good players and the not-so-good players.  If you are still confused let me put it in mathematical terms:

Imagine we have a society of 100 people.  On our bell curve 10% are too physically weak to even play baseball.  80% of our society is just average.  10% are bonafide athletes.  So, we have 10 people who are just too weak, 80 people who are okay, and 10 people who are good.  Imagine we have a league that need 30 players.  Well, we only have 10 bonafide atheletes in our society.  Assuming we draft them all, we still need 20 spots.  So, because of the way the market is, we need to bring in 20 people who are just average.  So, now we have a full league, but only 10 people in the league are actually good players.

But let's shake things up.  Let's say there are another 100 people who we previously didn't let play, but now we decided to let them play.  The talent distribution would be on the same level.  So now we have 20 people who are too physically weak to play, 160 who are just average, and 20 who are good.  Now our league has 20 good players and just 10 average players.

So what's the lesson here?  The greater the pool of people you have to make into professional athletes the smaller the disparity between good and bad players.  The above formula is exactly what happened in professional baseball.  Before Jackie Robinson broke the color barrier, MLB was largely made of white males from the North East.  After the color barrier was broken we have a lot more people we can have in our leagues, and thus the talent becomes compressed: we have more talented players in MLB.  Because baseball statistics are generally a measure of relative worth against other players, that is why you don't see batters hitting above .400 these days: pitchers are better than they were in 1900.

So you are probably asking yourself: what's the problem?  We broke down the color barrier, we opened up the game to foreign players, it seems we are allowing more people to play the game than ever before, so shouldn't the talent compression not be an issue?

One problem is that there is a lot of talent out in foreign countries these days, but not all teams can bite at them equally.  Foreign players are not part of the minor league draft.  This means they generally are available to the teams with the most money to burn, because foreign minor-league players have the ability to negotiate their contracts, whereas American players do not.  If you have been following the news lately, that is exactly what is happening with Aroldis Chapman.  It is no surprise that Chapman is being courted almost entirely by rich teams like the Red Sox and the Yankees.  He is example from the minor league draft because he is from Cuba.  Given that, poor teams simply can't afford to throw money at him.  Compare Chapman to Stephen Strasburg.  Before Strasburg signed with the Nationals, he and Chapman were considered the two best pitchers in the world who were not playing in MLB (Yu Darvish is another, however he has expressed no interest in playing in the United States).  Not surprisingly, Strasburg, the best American pitching prospect in a generation, went to the lowly Nationals.  Why?  Because he was able to be drafted.

Thus, the problem is we have opened up the international market, however because international players are exempt from the minor-league draft, we have basically created a system where rich teams can shop around the international market to select the cream of the crop.  Everyone who is not selected by these elite teams loses value and trickles down to the hoi polloi.  Thus, one thing MLB needs to do is require that foreign born players are part of the draft, or create some other system to enforce more parity among teams shopping for foreign born players.

Another problem is there mere fact that baseball must compete with other national sports for talent.  Football, basketball, hockey, and (increasingly) soccer all compete for future athletes.  MLB should do everything within its power to create and encourage little league systems in the inner-city and poor areas of the country to get more kids playing baseball, who might otherwise turn to a sport like soccer which might be more available to them.  Fostering more talent at home would create a better sport with more players of fine talent playing the game.

Without any salary caps or floors you are still going to his disparities.  If we are able to create a system that encourage more players with more talent to play in MLB, you are still going to have the best players rising to the richest teams with the lesser players falling to the poorer teams.  The difference is, with the more "good" players you put in the system, the less the difference between rich and poor is.  This is basic market saturation.  The Yankees could still buy a better team, but they couldn't buy a much better team if there are six A-Rods in the league instead of just one.  Moreover, if you saturate the market with big talent, simple economics states that the value of those players will fall.  You aren't going to see the ridiculous contracts given to the likes of Mark Texiera and Alex Rodriguez if there are a lot of those guys in the league.  They simple will not be worth as much.  If the value of players falls, then poorer teams will be able to buy more with the limited funds they have, thus leading to more parity in MLB.