Moneyball

Sportsmouth has just finished reading a very interesting book, titled "Moneyball". I know what your thinking this is a sports blog, not a book club, but, "Moneyball" is all about baseball, but has some valuable lessons on investing amoung other things.

What this book really opened Sportsmouth' eyes to is the fact that, one baseball players are ridiculously over paid and two they are not people but, commodities!!

Lets start with the overpaid part, some guy who can hit a baseball and catch one (with a glove) could be worth up to $10 million a season, yet he still needs a batting coach, a first base coach to tell him when to run or not, a third base coach to tell him to go for home or not, plus a team manager to tell the other coach's what to tell the player!!! I guess the clubs way of thinking is "I'm not paying you $10 million a year to think"!

Now when a player is drafted by a club, they have his services locked in for the first 6 years of his playing career (unless they trade him, that's the commodities part) after that period he becomes a free agent, so although you hear of said player getting paid $10 million a year, he, especially if he's been playing for the Oakland A's one of the poorest teams in the league, with a budget of $40 odd million per year for their whole major league squad of 25 players, has probably been getting paid less then a $1 million a year, and in some cases alot less.

The commodities part, comes with the trading of players, for example in the book, a player is traded in a round trade with two other clubs, leaving him in the situation of having played against the Oakland A's one night, then playing for them the next night against the team he was just traded from and he has no idea it's taken place until the A's GM comes down and tells him!! Now this particular player was playing for Toronto, thought he was going to get traded but to San Diego, but ends up in Oakland!

It really is interesting to see how the A's with the miniscule budget of $40m (makes NRL salary cap look a bit ordinary!) continue to have success finding players that are undervalued and getting the best out of them, compared to the richest team in the league the New York Yankees who's budget is three to four times that of the A's who only buy the so called cream of the crop, yet their regular season record is very similar!

Sportsmouth doesn't proclaim to be a lover of baseball, but it certainly changes the way I view the sport!