Ethics Heroes: The New York Yankees

Yankees Wallpaper

You know how hard it is for the co-creator of “Pennant Pursuit, the Boston Red Sox Trivia Game” to write this.

It can’t be avoided though. The New York Yankees have, and not for the first time, upon reflection, demolished the oft-stated accusation that Major League Baseball is no longer a sport, but a business. This was always a false dichotomy, for from the days of rag-tag 19th Century baseball to the present, The Great American Pastime That Does Not Require You To Cheer Young Athletes Guaranteeing That They Will Spend Their Retirement In A Brain-Damage Haze has always been both, with each side constantly yielding to the other.

Coming off a disappointing season (the all-time most successful team in pro sports history missed the playoffs for only the second time in 19 years) and faced with an aging, injured, question mark-filled roster despite the highest payroll in the game ($228,995,945; the Houston Astros, in contrast, spend about 24 million, or less that the Yankees paid their steroid cheating third-baseman), and faced with baseball’s team salary luxury tax, which charges teams with a payroll exceeding 189 million for every dollar over it, the Yankees discarded their announced business plan of cutting back on salaries to avoid the tax threshold, and instead went on a spending binge. They snapped up most of the top free agent stars peddling their wares this winter, committing themselves to a staggering boost in contract obligations that will approach a half-billion dollars by the time the dust clears.

Anyone who tries to argue that this made business sense for the Yankees has an impossible task. Yes, the TV ratings for the Yankees sagged and attendance was down last season, because Yankee fans are spoiled rotten (The team has won more World Series championships than the next three most successful teams combined), but the franchise remains a money machine. There is no set of calculations by which the recent spending spree doesn’t subtract from the bottom line—especially since even with all that moolah being handed to players and their agents, the Yankees still look like long-shots to make the play-offs. But the Yankees recognize, as all the responsible baseball teams do, that they are a public service, a cultural touchpoint and a spiritual center for their city, and that the team’s fortunes are inextricably connected to New York’s image and the self-esteem and pride of its residents. New York, in legend, lore and truth, is about the biggest of big, brash cities always striving for the flashy success and the rich jackpot, and the New York Yankees are as much a part of that identity as the Empire State Building and the Statue of Liberty. The Yankees don’t care if the city’s new mayor is a vocal foe of the “1%”: the team stands for the spirit of enterprise that declares that success is nothing to be ashamed of, and that there is nothing wrong with cheering winners, and aspiring to be one.

To be absolutely clear: I hate the damn Yankees. Yet I admire them too, especially now. They have a job to do, expectations to meet and a city to lift up, and no matter what it costs, they are going to do it, or go down trying.

 Yay.

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Graphics: Alphacoders

23 thoughts on “Ethics Heroes: The New York Yankees

    • Really? A corporation spends money it doesn’t have to in order to make a city happy, to the detriment of the bottom line, in a setting where even PR and adverting couldn’t justify it in business terms. You don’t find that remarkable and altruistic? Name three similar examples, outside of the realm of sports. A half billion dollars of discretionary income, just to make those who identify with the team feel good. Surely you can’t miss that.

      • I think that this argument is short-termism, at least in your somewhat simplified economic arguments.
        By spending way too much now, they will retain their aura and fans, and thus the 500 million needs to be seen in the context of a large number of years (at least that is a vague counter argument).
        There is no way of knowing how the different spending patterns over a large number of years will affect their success rate, fans and thus the bottom line, without doing some real economic and success probability modeling, but I think that in order to really call them ethics heroes requires a bit more certainty about the economics.

        • You’d think that, but you’d be wrong. By any business measure, these moves are bats (no pun intended). Past experience indicates that the kind of long term contracts the team has signed are absurdly risky, and from a baseball standpoint, these were not even carefully considered moves, since the match between the needs of the team and the available talent was poor. Unlike the last time NY spent like this (in 2008-2009), the edn result (so far, at least) is not even a favored team. But yes, there is no way of knowing, and half-billion dollar investments with no way of knowing (few sports are as capricious) can’t be defended on traditional business models. It’s just not a business decision. It’s a pure sports, let’s so anything we can to win as much as we can decision.
          In the auto industry, this is like “let’s build the best car in the world, no matter what it costs or how many people but it, because our investors care most about prestige, not profits.” That would be misfeasance in a business, gross incompetence.

          • “You’d think that, but you’d be wrong. ”

            If you’re going to make such a strong statement it would be nice to see some modelling by economists. Otherwise you’re basically making rhetorical arguments, which may sound right, but don’t necessarily have any basis in fact.
            Your analogies are just that .. analogies. Baseball leagues are not free-market (there are a limited number of teams, plus all sorts of financial capping).

            I am perfectly willing to admit my counter argument may be incorrect, but in general I don’t try and win arguments by force of personality.

            I’m a scientist, my first reaction is always …” Show me the data”.
            To me this is a “I just don’t know … but neither do you” sort of thing.

            • Well, I could mail you this http://www.amazon.com/The-Business-Sports-Scott-Rosner/dp/0763780782, which is on my top shelf. Are you really arguing that the Yankees, after announcing in public that their business plan would require them to reduce their annual payroll, went on a half-billion dollar buying spree because they could justify it with economic models? It’s not that complicated. The team is valued more than any other baseball franchise, and they have money to spend, or keep. They could have kept it, and still prospered.

              I base my conclusions on my knowledge of the history of the sport. Some owners, like several Yankees owners, Boston’s Tom Yawkey and some others, ran their teams as a hobby and essentially a gift to their communities, risking and often sustaining huge losses. Others used the tax benefits and other factors to make the game a profitable business, even when losing on the field.

              I’ve seen the data, which is voluminous, confusing, equivocal, and contradictory. I guarantee that those who decided in the span of a few weeks to go from cutting 40 million from payroll to spending a half-billion to add to it did not base their decision on careful analysis of the data, but rather a simple, emotion-based proposition: we can’t sit back and let our fans experience a losing team.

              I know you’re a scientist, and this forum permits neither the time nor the space to accompany posts like this with all the data you would need to concur with my conclusion. Here’s what I know to be true: the team spent 500 million dollars in present and future obligations with no guarantee–I would say even likelihood—that it would achieve a championship as a result. How could that ever be a rational business decision?

  1. I remain to be convinced by your argument. At least in parrt because there is an underlying assumption that breaking the salary cap is ethical – or at least that the penalties imposed sufficiently punish the teams for breaking it.

    If on the other hand the salary cap is in fact motivated (at least partially) by ethics (not a completely unwarranted supposition), by breaking it, they are in fact acting unethically.

    As I understand it the salary cap is there in part to retain competitiveness between teams which is certainly an ethical issue. (OK it’s also there so everyone and not just high profile teams can make a profit )

      • Then it sure isn’t working.
        If the poorer teams operated like the Yankees, it would lead to even higher salaries. But too many take their tax income and take a profit while letting the team on the field stink. Houston, for example.

      • But, since one of Jack’s suppositions is that a baseball team is important to a region’s “feel-good” factor, then anything that increases competitiveness increases the net feel-good factor.

        (I would argue this is not a zero-sum game, since being “in the running” for a pennant will increase the “feel-good factor” irrespective of whether they win or not. Thus a league dominated by a single team will have less net effect that a league in which 3 or 4 teams (or more), have a chance at the pennant).

        From this point of view a salary cap is ethical. This is also the point of draft numbers (by your argument also unethical). This is very important in a league which is closed (compared to the European leagues where the bottom teams are relegated to lower leagues).

        • And the Yankees are unique. While being competitive is enough in most cities (that give a damn about baseball, meaning that cities like Tampa and Miami and some others don’t apply)—the excitement I found in Cleveland as the team made the one-game AL Wild Card team play-off game (and lost) was amazing—in the New York (for the Yankees, not the Mets), anything less than a championship is failure. It’s a ridiculous standard, but it has historical support. The Cubs have a fan base that has embraced failure (the last Cubs championship was 106 years ago.) Just not embarrassing themselves is enough. Not NY.

          • Definitely.
            I also think this an important thing to remember in terms of economics – particularly with regard to mechandising. When you go to New Yor, NYY ball caps are everywhere … but I’ll bet you that the expectation is so high that significantly less people buy merchandise when they’re not winning.
            (One of the reasons I’m not quite convinced that spending such a huge amount of money is totally bats).

            In the UK they talk about “plastic fans”, those fans who only turn out when their team is winning.

            Since you’re a Red Sox fan – which is almost precisely the opposite!, maybe this is why you see the Yankees move as heroic?
            (In built bias about the nature of fans because of the history of the Red Sox?)

            • Actually, I also see it as stupid. Any purely rational team would have used the trade deadline to clean out bad contracts and old player, accumulate some young prospects, and rebuild for a year. The NY fans would hate that, but they are still loyal, and the long term results would be more promising. NY does not have a lot of plastic fans, much as Red Sox fans will claim otherwise. They would lose money in merchandise, TV revenue and tickets with a bad season, no doubt. I would be shocked if they honestly think this expenditure is sound business, as opposed to good sportsmanship and “doing what our fans want.”

  2. “…and that the team’s fortunes are inextricably connected to New York’s image and the self-esteem and pride of its residents. New York, in legend, lore and truth, is about the biggest of big, brash cities always striving for the flashy success and the rich jackpot…”

    Yeah, keep the progressives in charge up there and New York City will be Detroit in about a decade.

  3. They’re going to spend their way out of this debt and recession. It’s a stimulus bailout on a Pro Sports scale. Let’s see if that works out!

    • Well they’re unlikely to go bust (or they won’t be allowed to) – I doubt the Steinbrenner’s will sell (or be forced to sell). They already had the city help pay for a fancy new stadium (which as I recall was fairly contentious) so they’re unlikely to get any more money from that source …

      So it will be interesting to see how they get out of it in the long run. But they will … somehow.

      • If they’re paying more than people who care about it are willing to pay and then others have to ante up that’s far from ethical in my book.

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