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Tanking is profitable, so don't expect it to stop

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Is tanking about game theory or a way to stuff revenues into the owner's pockets?

Troy Taormina-USA TODAY Sports

For a long time, most baseball fans just assumed tanking would never be a problem in Major League Baseball the way it has been in the NBA. It always seemed that there were too many factors and too much development time standing between prospects and success for a team to risk the strategy. But then the Houston Astros made the playoffs after one of the worst — and cheapest — stretches in baseball history.

It was like a bankrupt, old-fashioned business owner torching his establishment in order to invest in a tech startup with the insurance money.

The success of the Astros' unorthodox plan presents a few questions:

Did Jeff Luhnow reinvent the wheel? Or did he just aid ownership in saving millions upon millions of dollars by stripping the team down to a listless skeleton when he could have been simultaneously rebuilding and attempting to put together a decent team in the interim? Is the handful of draft currency the Astros procured by being one of the worst teams in recent history really worth the hundreds of millions of dollars the team withheld from their payroll from 2012 to 2014? Where did that money go? Houston is, after all, the fifth-largest baseball market in the country. Is the money they saved targeting those early draft choices under a luxury mattress somewhere waiting to be unleashed?

If ownership is simply keeping that money for themselves, but the team is able to win pennants anyway, does it even matter?

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Tanking in baseball has become a popular topic. Recently, FanGraphs’ David Cameron asked if baseball really had a tanking problem, saying he "just doesn’t see it." However in his article, Cameron really only addresses whether or not MLB and the NBA have the exact same problem. The interests of ownership, the league’s role in incentivizing failure, and the nuance — not to mention the substantial ecumenical differences — are never considered. If Cameron really doesn’t see tanking as a problem for Major League Baseball, that might be because he was only looking for it in the NBA.

Other articles on tanking seem to be focused on simply explaining the process or mythologizing it as some kind of keening ultramodern innovation rather than a well-marketed shell game for the fanbase.

SB Nation's Grant Brisbee has also joined the conversation. Brisbee mostly concerns himself with criticism of Scott Boras' proposed E-Systemin which teams winning 68 games or more would designate certain draft-eligible players as "elite" in an effort to unincentivize tankingand pointing out the necessity of cost-controlled players within the current economy of the game. Like Cameron before him, Brisbee ignored the benefits of tanking for ownership.

However, Cameron and Brisbee are right. Major League Baseball isn’t the NBA. And a perfect system doesn't exist. The first few picks of the MLB Draft can net players like Kris Bryant and Carlos Correa … but for every Correa there’s a Mark Appel and for every Bryant there's an Albert Almora. The success and failure rates of prospects vary drastically from year to year, so the chances of a team landing a "superior" player with one of the first few selections in the draft are a relative spin of the old Goldstein Wheel.

And there are very real concerns about how to police tanking, but advocating a furtherance of the status quo or denying that tanking is an issue altogether are positions that could just as easily sustain or lead to further a corruption of the competitive obligation teams have to their fans.

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Some might only see the competitive advantages of tanking, but the concept is based on the idea of guaranteeing failure for three to five seasons (maybe more) for a chance at being competitive in the future. The only guaranteed part of the loophole-dependent gimmick is short-term failure. Well, that and the money ownership saves by gutting payroll and avoiding free agents.

Prospects are risky. Even if a team collects them from the top of pile for three to five years, there’s no guarantee they can put it together in a meaningful way. And no matter how great a draft prospect looks before he's a professional, no single ballplayer can carry a team from number one (in the draft) to number one (in the standings).

The Savior Fallacy, as it’s called in Derek Thompson’s article on tanking for the Atlantic, isn’t as much of a problem in baseball as it is in the NBA and NFL, but that doesn’t mean fans don’t expect a teenage savior to lift them out of the cellar when their team finishes last in their league.

"The big lie about tanking is that it’s a prudent long-term strategy, when in fact it’s just another get-rich-quick scheme. It invites fans to see spectacular failure as a kind of trampoline that will catch teams at their nadir and launch them into the stratosphere. The truth is boring and simple. In the short term, average teams are more likely to become good, because they’re already closer to being good."

As opposed to basketball's annual search for a savior, baseball has gravitated more toward a nadiral front office messiahs (See the Cubs' Theo Ex Machina and Houston's somehow-publicly-graceful Luhnowian purge circus.)

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Timing is also a big part of the recent renaissance in MLB rebuilding. The Cubs — who also slashed payroll leading up to the arrival of their top young players, although not nearly as drastically as the Astros did — also made the playoffs in 2015 after a long period of incubation. Kris Bryant, Kyle Schwarber, Jorge Soler, Addison Russell, and even yet-to-actualize prospects like Javier Baez and Arismendy Alcantara all debuted over the last two seasons. The Astros’ plan has unfolded similarly. Those rosters speak for themselves. They went from a collection of quadruple-A placeholders to an inexpensive, well-rounded playoff team under Epstein and Luhnow’s respective guidance.

The results can’t be argued with. The Cubs and Astros have some of the best collections of controllable talent in baseball.

But isn’t the point of procuring surplus value to put that surplus to use in fielding a more competitive team? If the surplus is simply funneled down the owners’ lurching gullets like rat chunks through a dancing cobra, doesn’t its perceived value lose all meaning to the fans?

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The Astros payroll dropped as low as $22.062 million in 2013. Based on their market size, they should be spending at somewhere just outside the top ten clubs. Payrolls fluctuate for every team, but a club like the Astros dropping from over $102 million in 2009 to just $22 million (!) four years later is evidence of much more than a remodeling effort.

The short-term gains for ownership based on gutted payrolls are clearly a huge benefit for owners. Houston saved between $70M and $100M in 2013 alone, based on average and median payrolls that season. Since 2011, the total savings can be estimated at somewhere between $200M and $250M over the last five seasons. Revenue was almost certainly lower as well due to depressed fan interest, so not all of that total is profit for ownership, but the correlation between revenue and payroll is not 1:1 — especially not when the bottom drops out on one end the way it has in Houston over the last few years. They might push their payroll back up to market-appropriate levels, but it’s exceptionally unlikely that they will reinvest those savings in the team. So the question is: Is tanking about rebuilding or profit?

The answer is, like most things, a little of both. However, tanking is clearly not the only way to reboot a franchise, so it seems as though the main objective is profit — which is no surprise considering the influx of executives with backgrounds in invest banking and hedge fund management. Teams like the Athletics, Cardinals, and Giants have shown that consistent success is more than possible without resorting to tanking — a strategy that only has fringe benefits in terms of acquiring talent.

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As usual, Scott Boras has chimed in.

"[T]here’s this dynamic that goes on that says you can’t use free agency and the draft in unison to win. You have to pick one or the other. And therefore it’s the shadow approach where if I’m not using free agency, then I have to use the draft system and basically I’m non competitive for a period of time. And there are incentives, grand incentives, to tank a season."

If players make less, he makes less. So, naturally he’s going to be an advocate for free agency. But that doesn’t mean he opposes rebuilding efforts wholesale. Some of his clients are draft prospects, after all.

Boras seems to think it would take "seven or eight years" of losing to develop enough draft currency to make a tank worthwhile. The Astros proved their method to be more expedient. So did the Cubs. Of course, Boras knew that. He might have just been exaggerating because of his designs against tanking. Or, perhaps he was hedging against a potential bottoming-out of the Astros' and Cubs' recent surges.

Either way, Boras has a point. The qualifying offer system is likely to change in the next Collective Bargaining Agreement, but will it help to curb the germinating trend of tanking in baseball?

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The idea is that teams will save money over the rebuilding period and then splurge when the core is ripe, like the Cubs have with Ben Zobrist, John Lackey, and Jason Heyward. However, this is also deceptive. It’s not a zero sum game for the fans. Ownership doesn’t reinvest everything they save in rebuilding years. Teams like the Cubs (and presumably the Astros at some point, or perhaps that was just the theory and in reality Luhnow & Co. will keep the payroll absurdly low in perpetuity) should have been spending at these levels all along. The Cubs dropped as low as 23rd in 2014. They should, by all accounts, be in the top five every year, and it’s not as if the Cubs are going to consistently eclipse the luxury tax threshold any time soon. They will likely continue to promote a tempered approach to payroll, alluding to good WAR/$ ratios and other practices that result in more profit for ownership.

Tanking also presents the players with another obstacle to overcome in their efforts to wrest free their "fair share" of the profits from the game: Owners implicitly colluding with one another to suppress the free agent market. When a team undertakes a tanking project, they remove themselves from the pursuit of most free agents. This provides ownership with more leverage since the players have fewer suitors with which to negotiate.

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Essentially, they’re pulling the wool over your eyes and calling it game theory. In a way, I guess it is. Actually, they aren’t even the ones making that qualification.

The mutual relationship between analytic writers and teams — one is a hiring pool for the other as of Jeff Luhnow’s sneaky hires from Baseball Prospectus — promotes the fetishization of market efficiency and the dehumanization of players as assets. Neoliberal values make the concept easy to promote. Just as the Atlantic article cites above, it’s much easier to market a complete tear down than a minor change — whether it’s more effective or not.

So, is tanking even a good path to sustainable winning? Why can’t these teams focus on rebuilding their farm systems without obliterating their major league product? Couldn’t Houston have just as easily built a club by building from a reasonably compensated base? They didn’t need to apply their advanced analytics and decision sciences departments in the manner they did. If they’re so clever, why couldn’t they come up with a plan that didn’t cost the franchise years of failure? The answer is: They could have. They just didn’t want to. The short-term profiteering is part of the plan. Houston is much more guilty here than the Cubs, but both have exhibited a willingness to gouge their payrolls.

Losses alienate large sections of the fan base, and while large groups of fans tend to flock to fresh-faced teams like the Cubs and Astros are now, there is something to be said for continuity and allegiance. The relationship between fans and organizations is far from sacred, but if teams aren’t committed to providing the fans a good experience every year, then why would the fans feel obligated to stick with one team over the other? Doesn’t this afford fans the reasonable excuse to abandon their team until the organization actually begins trying again — maybe fans can have a favorite team "that is actually trying this year" and keep their real fandom on the back burner? Would that not be fair? Doesn’t this cheapen the entire experience of spectator sports?

Disinterested members of the community that helped fund the stadia these teams use will become less interested in doing so in the future if the short-term profit scams and public-funding grease jobs are exposed for what they are.

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The success of the Astros and Cubs appears to have encouraged other clubs — like the Phillies, Brewers, Braves, Reds, and Padres — to pursue tanking methods for rebuilding their clubs into stable competitors. Not all of them with go full-tank like the Astros did. Perhaps they have a greater sense of duty and propriety — or, if you disagree with everything you’ve read so far, perhaps they simply don’t have the guts. No matter what you believe, the possibility that the allure of massive short-term profits due to gutted payrolls and the collection of pre-arbitration assets might be more of a factor to ownership than building a strong farm system still exists. In fact, it might be likely. And thanks to an analytical community that has limited motivation to criticize ownership and the general enthusiasm for prospect fetishism and game theory, these pro tempore cashgrabs — remember, we’re talking about hundreds of millions of dollars in payroll savings, not to mention the incalculable sums of money ownership saves by collusively suppressing the free agent market — can last for years without alienating a significant portion of the fanbase.

To some extent rebuilding efforts are a necessity; but when teams surrender several years of competitiveness for significantly dilated short-term profits, the collusive suppression of the free agent market, and the chance at fielding a competitive team in the future, they are not only neglecting their duty to the fanbase, but they’re also favoring a risky strategy and presenting it as the only cogent method for avoiding mediocrity.

Many people will go to great lengths to justify the actions of an owner because of an inability to detach their fandom from the business end of the equation — you know, the end that doesn’t care about them at all. Someone will take it to another level, and if it works it will be called innovation. The Astros rebuild might just be the beginning of a long trend. It’s impossible to tell how far the idea will reach, but eventually the rubber band will snap.

Unless significant provisions against the practice are negotiated into the coming Collective Bargaining Agreement, this trend will survive until the next round of CBA negotiations are completed, at least.

For now, expect more tanking.