Does higher spending more yield more World Series titles? Part II

This is Part II of a three-part series. This section will determine the relationship between spending and winning, both in the regular season and postseason. 

In Part I of this series, we found that opening day salaries in major league baseball rose 85.6% from 2000 to 2013, a 37.2% real increase. In addition, 18 teams spent record amounts on their opening day roster in 2014.  

In Part III of this series, we’ll explore the concept of “Moneyball,” and determine which teams spent their payroll dollars most efficiently. 

Money may not buy happiness, but does it buy wins?

The New York Yankees are often criticized for their high payroll, with detractors saying that the lack of a salary cap gives them a significant advantage over their competitors. But the Yankees have only won one championship in the last 13 seasons, despite having an inflation-adjusted opening day payroll 37.8% and 64.4% higher than the next two most expensive organizations from 2000-13. This year is the first since the 1990s where the Yankees didn't lead the league in payroll.

Before getting into championships, we have to start in the regular season. After all, a team has to win from April-September to qualify for October baseball. 

To account for the rise in opening day payrolls, even beyond inflation rates, we’ll be using a metric known as payroll rank, as explained in Part I. We found there was 90.8% correlation and 88.9% R-square between payroll rank and adjusted salary paid.

In the first scatter plot show below, each individual payroll rank from 2000-13 is on the X-axis and where that team finished is on the Y-axis with the theory being that spending causes winning. The raw data doesn’t support this hypothesis because the two have just a 38.4% correlation, with 0 being the minimum and 1 (or -1) being the max. We can also only explain 14.7 percent of the variability between payroll rank and average salary rank.

A related graph with inflation-adjusted payroll on the X-axis and winning percentage on the Y-axis yields a similar 39.1% correlation (not pictured). Another almost identical graph (again not pictured) reveals a correlation of 38.9% with payroll rank and win percentage from all data 2000-13. The discussion ultimately doesn’t end there. If we take the average finishes instead of each individual data point, we find much stronger correlation. This next scatter plot has the exact same data, but averages the MLB standing for each payroll rank from 2000-13.

Not surprisingly, our correlation has spiked to 81.6% and we can now explain nearly 70% of the data. The Y = X graph is shown to indicate what an identical relationship between the payroll rank and average MLB standing would look like, but this is not the best-fit curve. The top opening day payroll averaged fourth in the standings (all the Yankees), while the second-highest annual payroll finished at an average of 10.5. 

In the graph below, the X-axis remains unchanged, but average winning percentage is used instead of MLB standing on the Y-axis. We found in Part I that there is a 97.6% correlation between these two variables, so naturally, there is almost an identical correlation between the two graphs. There appear to be two outliers in this graph, with the 11th ranked payroll winning at a 54.9% clip (second-most) and the sixth cheapest payroll at 51.1%.

From these graphs above, we can conclude winning and spending are moderately related over the long-term, but on a year-to-year basis, there are too many other factors that constitute winning.

For the rest of Part II, we'll look at the postseason to determine if winning buys championships. This first chart compares the amount of playoff appearances with each payroll rank, clustered in groups of five. There were 116 playoff appearances in the stretch (14 seasons * 8 teams + 4 additional wild cards). There are 420 observed teams, so the league average is 27.6 percent chance of making the postseason.

What we found is that it is most likely that a team makes the postseason if they spend more money.  Since 2000, not one team has appeared in postseason with the lowest opening payroll or the ninth-worst. The data is clustered because of some oddities, such as the second-worst spending team having advanced into the postseason more times (four) than the third-most expensive team (three). Teams in the top-third of payroll comprised of one-half of all postseason appearances, while the middle third had 31.9% and the bottom third 19.1%.

Now that we've made it into the postseason, it's time to find out if those expensive teams actually win more championships.

Granted it's still a small sample size, but 13 of the 14 World Series winners and 24 of 28 to make it to the final series had opening day payrolls in the top half of MLB. The only team in the bottom half of payroll to win the World Series was the Florida Marlins (25th) in 2003. What's interesting is No. 16-20 did not appear in the World Series from 2000-13, striking out on all 16 postseason appearances.

Teams in the top half of MLB in opening day payroll appeared in the World Series during 30.4% of their postseason appearances, with the top rate (42.9%) belonging to the No. 11-15 cluster. Teams in the bottom half of MLB in opening day payroll converted 10.8% of their postseason chances into World Series appearances, although Nos. 1-5 (25%) and Nos. 6-10 (26.9%) didn't perform drastically better than Nos. 21-25 (20%) and Nos. 26-30 (18.2%).

These next two tables compare how differing seeds in the postseason fared and the numbers behind each finish in the postseason, all from 2000-13. I'm excluding the wild card loser (which consists of four teams) in the the first set.

What's interesting is the wild card teams finish with a better record than the No. 3 overall seeds. These days wild cards teams are severely punished for not winning their division, having to face each other in a one-game playoff to move on to the Division Series. The MLB postseason is often criticized for its crapshoot nature. One example is that wild card teams have been to the World Series more times than any other seed from 2000-13 and the World Series winners have lower regular season winning percentages than teams that lose in the World Series, ALCS/NLCS and ALDS/NLDS.

Teams that made the postseason spent more than teams that didn't. Those teams with home-field advantage drastically spent more than any other seed, while the World Series winners only outspent the league championship series losers when converting historical dollars into 2013.

Check back later in the week for Part III!