Baseball Versus Real Life

A True Story of one time when I had a real impact in the corporate world. I was a lowly production scheduler working at Fluke, and I received a copy of their quarterly press release and actually read it. They used the word "verses" over and over when they actually meant "versus," as in "Q1 1996 verses [sic!] Q1 1995." I knew one of the executive secretaries, so I called her and told her that they were using the wrong word. In the next quarter's press release, they changed it to "versus."

Now that's impact.

But this post is more about how baseball players are treated differently from most of us in the corporate world.

Pay Disparities

Baseball of course has a system where a player is tied to one team for about five major league seasons, and that creates a disparity of pay. But beyond that, if you just look at how much free agents are paid, there are huge differences. Robinson Cano plays for the Mariners, and he makes $24 million per year. Chris Iannetta also signed as a free agent and makes $4.25 per year. There are free agents who make less. So one player can make several times what another player makes, even when you compare two starters on the same team. This does not happen because Robinson Cano has a different job from Chris Iannetta; second basemen and catchers are paid comparable amounts around the league. Cano is paid more simply because he does what he does really well.

You may argue that, in most professions, there just are not the same disparities in talent, but my observation is that there are great differences between people. However, the differences in pay are much, much smaller in most professions. When I was a manager, I was able to give my best people maybe a 5-6% raise, while the mediocre ones would get 2-3%. (If someone was clearly below average, you couldn't just pay them less and have them do work suitable to their talents; you had to get rid of them.) After a few years, if the best ones had reached the highest non-managerial level and could not be promoted, they would get to a point on the pay scale where it became harder to give them 5-6% raises, while average performers were always eligible for a decent raise. As a result, less-capable employees drifted toward the middle of their pay grade, while the best people got stuck at maybe 10% - 20% above.

Robinson Cano makes nearly six times what Chris Iannetta makes. That's a lot more than 20% more. And while I am not sure that any Senior Accountant is worth six times what another one makes, I always thought that there were really substantial differences in contribution. If I had been asked to cut staff costs by 50%, I would have kept the most talented people -- either the best ones or ones I thought would become the best -- regardless of salary, and let the rest go, because I always thought my best people were worth way more than the so-so ones. I suspect most managers feel the same way. The differences in salary don't reflect the differences in production.

Promotions

On a related, but not quite the same, note, Robinson Cano was able to climb the ladder to success without ever changing jobs. If baseball were more like the corporate world, Cano would have topped out at some salary, let's say $4 million per year. Then, because he is good at hitting a baseball, he could maybe be promoted to hitting coach. Being good at hitting is no guarantee that one will be good at coaching hitting, but to earn more money, he would have to "move up" to coaching. If he happened to be successful as a hitting coach (which by the way baseball savants say there is really no way to tell if any hitting coach has much of an impact), he might then move up again to manager. If he succeeded as a manager (also very hard to judge), he might get the completely different job of general manager. And that would be his path to a really high salary.

And if he failed as a general manager (and this one is much easier to evaluate)? Maybe he would be able to get work again as a minor-league manager, or as a hitting coach. But all along, he was most valuable as a baseball player. Baseball recognizes this. The corporate world does a little bit with certain jobs, but mostly you have to move "up" to get higher pay, and up means managing.

Baseball Managers Do Not Make the Most Money

This is again a related but not quite the same topic -- baseball managers do not make as much money as a lot of the ballplayers, because in baseball they realize that managers do not have as much impact as individual players. In the corporate world, there is a supply and demand issue, because I think that for the most part being a manager is more work and more stress than being an individual contributor, but that may well be true in baseball as well.

I think it is quite possible that, in many cases, managers contribute less than the people working for them. I know that it is very common that the individual contributors perceive it that way, and people are not stupid, not all of them. After all, managers spend a lot of time dealing with email, attending meetings, distributing work to other people, and communicating with the people above them in the food chain, while individual contributors do the actual engineering, accounting, design, etc. Which things are really the most important?

Evaluation

The ability to evaluate players is one of the most interesting things about baseball, especially when you consider how it relates to most jobs. Baseball players are much easier to evaluate than most workers, because everything they do is in plain sight and being watched by their bosses, and in case the bosses miss something, it is being recorded. Also, a baseball player's goal is pretty clear -- to win games, and there are only so many ways to contribute to a baseball victory.

Nevertheless, when statisticians started paying close attention to the value of baseball players, and to the value of decisions made by managers (like when to try to steal a base or when to bunt), the math guys figured out that baseball teams were often mis-evaluating their players, in some cases very badly, and they were also making some really bad tactical decisions. The book (or movie) Moneyball is really the story of how the Oakland A's took advantage of the the mistakes other teams were making and  began using better information to out-perform other teams with a lot more money. It turned out that the difference between well-informed decisions and the common wisdom of the industry was huge.

And the interesting thing about that is, if experienced baseball people watching their players for decades make such poor decisions about their players that a team with a more rational approach can outperform everyone else by a pretty significant margin, how accurate is is the typical manager in a big company, trying to evaluate people they speak to a few times a week, people doing a wide variety of tasks with a nebulous connection to actually making money for the company? They don't stand a chance. The truth is, it is really very unlikely that such a manager gets it right, or anything close to right.

And so...

One has to think that baseball, compared to the corporate world, does a better job of putting people into the right situations and paying them appropriately, because they live in such a competitive environment, and they get quick feedback to help them refine their methods. I suspect that some or all of the above issues represent shortcomings in the corporate world, things that could be done better if we were better at understanding the value of employees.

And the problem with getting it wrong is, people know it. At some level, a lot of employees sense that something is wrong -- that their manager contributes less than they do, that they are not really paid enough for their good performance, that management has no idea how well they do their job or how well the person next to them does his or her job. In the end, I think most of us accept that working for a big company will never really be just or fair, and that we are probably being underpaid for our contributions, but we make the best deal we can and keep looking for something better.