For as long as there have been sports and competitions, there have been people trying to gain every advantage possible over their opposition. The ancient Olympic Games were known for bribery being a recourse to ensure victory or even the consumption of wild boar manure to gain a competitive advantage. Rosie Ruiz was an out-of-shape marathon runner who tried to cheat her way to victory at the Boston Marathon in 1980, Madeline de Jesus suffered an injury at the 1984 Los Angeles games and substituted her identical twin sister in her place to run the next qualifying heat. There have been cheaters at the Olympics, cheaters in international races (Lance Armstrong, anyone?) and cheaters in professional sports (the 1919 World Series was rigged for the financial gain of a gangster/gambler). As the old adage goes, “if you ain’t cheatin’, you ain’t tryin’.” Feel free to share that with your kids.
The problem with this, besides, you know, the whole moral issue of cheating at things in life, is that it’s generally frowned upon. It’s such a faux pas now that Major League Baseball is trying to levy double-length suspensions on some players for a second PED offense, despite there never being a first PED offense. My personal feelings on incentives outweighing punishments aside, cheating just really is hard to get away with these days.
So instead of cheating, professional sports teams are trying to exploit market inefficiencies. For the economically uninitiated (my university minor was in political economics, something I wouldn’t wish on my worst enemy), a market inefficiency in sports is anything that can give a team an advantage over its competition despite its perception of relative unimportance, and that relative unimportance means that the inefficiency is cheap to acquire. This concept was brought to the foreground of the sports world with the release of Michael Lewis’ book Moneyball. The concept in this book was that there were certain statistics (that were mathematically linked to team success i.e. wins) that were undervalued by baseball teams and thus undervaluation was reflected in the contracts given to players. Johnny Damon was given a four-year, $31-million contract in 2001. In the 2001 season, he was 120th among qualified Major Leaguers in OBP and 143rd in OPS. Teams with money were over-paying for talent that was seen as “safe” or had name recognition with complete disregard to actual win probability-added or declining skill sets.
There has been a lot of talk in recent weeks in the NHL blogosphere with regards to this Moneyball concept. There was a great article written by Broadstreet Hockey’s Eric T talking not only about market inefficiencies in the NHL but also how metrics are used in arbitration or contract negotiation processes. In short, they aren’t used. The fact that these metrics aren’t used will help Mark Fraser, a defenseman for the Toronto Maple Leafs, at arbitration this summer. Despite facing relatively easier competition, Fraser was a weak possession player who just happened to play a lot of 5 on 5 time on the ice with Nazem Kadri and James van Riemsdyk. This, combined with the non-sustainable skill of a high on-ice team save percentage, led to Fraser being a +18 this year, just a couple ticks back of players like Henrik Sedin, Marian Hossa and Pavel Datsyuk. This guy is going to get paid despite his career 82-game average of nine points and bad possession numbers.
Teams and individuals are always trying to get an advantage over their opponents. In the NHL, there was a lockout to save owners and general managers from themselves. Declining players were being given massive amounts of money for perceived skills rather than actual value. Scott Gomez was given a contract with an average annual value of $7.35 million despite having one 20-goal season in his first seven years; Rick DiPietro was given a 15-year contract worth over $60 million despite his best season being a .911 save percentage year in 2003-2004, 25th in the NHL that year; the New Jersey Devils are still paying their penance for circumventing the salary cap with their Ilya Kovalchuk contract. Teams were (are) shooting themselves in the foot by tying up loads of salary cap space for several years with lesser players and weren’t winning games because of it.
In steps puck possession. Despite what you may think of metrics, there is an undeniable connection between puck possession and team success; I will continue to post this chart until the cows come home. So while some teams are stuck on the perpetual Ferris wheel of paying for perceived performance in declining players rather than actual performance in prime or not-yet prime players and are unsuccessful year after year because of it, other teams are loading up on players where it matters and are winning Stanley Cups.
What some teams have found is that you can get players for cheap that can contribute greatly to winning. It’s not a straight line or automatic jump either, a player’s development can take years before we really have a good idea of whether or not they will be a good possession player. We saw this today with the signing of 23-year-old Josh Bailey by the New York Islanders. Typically not a good possession player (although to be fair, the Islanders had been a bad possession team for years before this season), he had a better year this year. It also marks the third straight year that his CorsiFor% has increased. This is a player getting better at what a team needs to be successful and he was rewarded for it.
This market inefficiency, the undervaluation of good possession players, is what some teams are exploiting and they are finding success at it. Just look at the last three Stanley Cup winners (Chicago, Los Angeles, Boston); how many high-priced free agents did these teams sign? Michal Rozsival was Chicago’s biggest off-season signing last year at one year, $2-million; Los Angeles acquired Ethan Moreau and Simon Gagne for just over $4 million a season combined; Boston didn’t sign a single UFA/RFA who wasn’t already on their team and contributed to their Stanley Cup run. None of the last three Stanley Cup winners signed a free agent the season prior to their Cup win to more than $3.5 million a season. They acquired all their pieces either through the draft or through trades. These teams know that paying David Clarkson over $35 million is probably not going to pay off and will tie up their resources that can be better used elsewhere.
Teams are already trying to evolve from this market inefficiency to find the next one. The Pittsburgh Penguins are trying to acquire players that can be used to drive shooting percentage rather than drive puck possession, despite overwhelming evidence that this is not sustainable. That’s how badly teams are trying to look for market inefficiencies in a salary cap system; they are willing to try and prove math wrong. Good luck with that. It’s not about “out-smarting” traditional scouts who thinks some prospect “has what it takes” to be a good player anymore. You’re trying to out-smart mathematical models that are proven successes. This is a completely different animal from MLB’s Moneyball of over a decade ago.
Where is the next frontier in NHL market inefficiencies? Who knows. If I did, I wouldn’t be writing this. There are scores of data-types trying to figure this out as we speak. What we do know is that teams that aren’t exploiting the puck-possession inefficiency are falling behind (sorry, Maple Leafs and Flyers fans) while other teams are getting ahead (my hatred of the Bruins doesn’t cloud the fact that GM Peter Chiarelli is an exceptional general manager). It’ll be interesting to see where the next quantum leap will be.