Spending Freely Can Maintain, but It Rarely Builds, Success

Off topic, but it was the Bleacher Report “open mic” topic of the week and it sounded interesting. Sue me. Sub in “boosters” for owners and T. Boone Pickens and Phil Knight for some of the names, and it still works for college football.

One of the things that makes Major League Baseball unique from the other four major North American sports leagues is its lack of a salary cap. It is the only sport left without one after the NHL adopted a cap in the aftermath of its lockout.

Because of that lack of a salary cap, it is frequently singled out as the league with the biggest problem of free-spending owners. The sentiment has been repeated many times: the big market teams keep the small market teams from competing. We hear that more and more despite some small market teams like Minnesota, Arizona, Florida, and Oakland making impacts in the pennant races over the last decade.

While baseball has the biggest image problem in relation to lavish owners, the other major sports are not immune. Mark Cuban and James Dolan are two owners who are not shy about stretching the NBA’s soft cap as far as it will go. Some NFL owners are perfectly willing to break the bank for $100 million free agents and $60 million first round draft picks.

However, handing out lots of money does not guarantee success. Only the New York Yankees have been able to maintain a high level by simply throwing money at big names. The Mets and Tigers both have payrolls in the neighborhood of $137 million in 2008, yet both are mired around a .500 record and are well behind the Tampa Bay Rays and their $44 million payroll.

The large sums of money certainly are impressive, and they no doubt intimidate some of the more fiscally conscious teams. That intimidation factor works into the hands of the owners of largess, who can change the landscape in the free agent and trade markets just by appearing interested in players. It is a strategy employed routinely by big companies as they can sometimes freeze competition out of a market by simply saying they are interested in it.

The 1997 Florida Marlins, who basically bought their championship, are the rare exception. If you look at the repeat champions of each of the major sports in recent years, from Michael Jordan’s Bulls to this decade’s Patriots, you’ll find that most of the key players were either drafted by or primarily developed by those teams.

Great parallels in this respect can be drawn between sports teams and the titans of America’s technology sector.

The New York Yankees and Microsoft have been the big bad bullies for a while. Both really took off in the mid 1990s – the Yankees with their 1996 championship and Microsoft with Windows ’95 – with players and products that were developed in-house.

This decade however, the Yankees have been unable to win another title and Microsoft’s stock has been basically flat. They each have been making large purchases, but those buys have yet to make much of a difference. Only recently has either shown interest in winning by using the method that got them on top in the first place.

Microsoft’s traditional foil, Apple, is more like this decade’s Oakland Athletics. They both place a premium on talented leadership and management, with Apple assembling an all-star senior management team and the A’s using guys like Bill James and Billy Beane.

Once they got their teams of visionaries in place, they focused almost entirely on in-house development. However, they each have a reputation for not getting over the hump that they can’t seem to shake. For Oakland, that challenge is winning a playoff series; for Apple, that challenge is greatly expanding its market share in computers.

What about Google, you say? That company is like the Atlanta Braves of the 1990s. Google has had a lot of interesting products come out and has made some splashy purchases like buying YouTube. Atlanta had a lot of position player cogs come and go too. However, each had and has only one real moneymaker that sustains the rest: for Atlanta, it was the Maddux/Smoltz/Glavine rotation and for Google it is its search advertising business.

What does this all mean? Big spending alone can keep a team or a company elite top once it becomes elite, but it seldom is the route to the top. Just ask Dolan or Daniel Snyder of the Washington Redskins about how well that works.

In the end, the depth of brainpower running an organization is far more important than the depth of the pockets financing it.

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One Response to Spending Freely Can Maintain, but It Rarely Builds, Success

  1. mlmintampa says:

    You could make the case that Oakland is closer to IBM. Remember in the 20’s, 70’s, and 88-92 they were awesome. Just like IBM, who moved away from building PCs, the A’s moved from the power hitters that drove them (Jimmie Foxx, Reggie Jackson, McGwire) to the developing the organization (all A’s players are taught to work the count and wear white shoes).
    And because Baseball has minor leagues, intelligence is rewarded more so than in football and basketball where you basically roll the dice and hope you can get five years out of someone before free agency kicks in.

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