No decision is made in a vacuum. Consequently, all analysis must take into account the context in which decisions are made in order to assess their relative wisdom. Sabermetricians have done an excellent job in establishing a basic set of ground rules for winning baseball, and while it's not 100% reliable (what is?), it's still a very strong guide to setting about creating a winning baseball team, both on the field and off.
The nature of statistics, though, is to deal in generalities. Predicting the future is based on odds, just like any Las Vegas casino. A statistician will tell you that there's a 75% chance that's a certain decision was the wrong one. They would then conclude that it was a bad decision. But we cannot ignore the other 25%, nor can we ignore the circumstances that might make an otherwise huge risk a worthwhile one.
Simply put: statistics has given us a great general understanding of right and wrong, but little help in informing decisions and choices made in a much more real and complex environment. Is it possible, and even quite likely, that the "wrong" decision, statistically, is the right one to make under certain circumstances?
I think yes, absolutely. A more realistic approach to analysis, one gaining favor in sabermetric circles, is a "risk analysis" or "cost/benefit" analysis. It's a more comprehensive look at the situation, in that it can give you the relative probability of a certain result. It's one thing to say that the Mets' trade for Shawn Green is essentially useless. It's much more informative, and worthwhile, however, to state that there's a 5% chance that Green will increase the Mets' chances of winning the World Series, followed by a 20-30% chance that his skills will decline in 2006. Considering that Green stands to lose as much as 10% from his raw numbers in moving from hitter-friendly Chase Field to Shea Stadium -- and considering that the Mets will owe Green about $2 million this year and $9.5 million next year (not including the $2 million it cost to buy out his 2008 option), and you have a player whose cost is far, far greater than any potential reward.
But is it possible that, although this decision might seem bad in and of itself, that it's a good decision for the Mets right now? This is one of the points I'm trying to make. But the point is ill-made with Green; the Mets have (according to Baseball Prospectus) a %99.9 chance of making the postseason, so the addition of Green is superfluous in that regard. Green is no longer an impact offensive player (283/348/429 hitting line in hitter-friendly Arizona), especially for a corner outfielder with diminishing peripheral skills (baserunning, defense) as he gets older. Is the addition of Green (replacing prospect Lastings Milledge) an improvement for the postseason, where the Mets' odds are obviously less than %99? If so, it's by such a small margin that it doesn't begin to justify the expenditure.
Besides that, is it so important that the Mets win in October that they take a flier on a marginal replacement at an exorbitant cost? The simple fact that the Mets will make the postseason is great news for the franchise and all of Queens. While it would be nice to win in the postseason, the Mets are under no untoward pressure to do so. Granted, the Mets are always under untoward pressure in New York, but even winning the World Series won't shut talk radio up. If the Mets were an older team fading away, but with one last shot at the title, it would be a more defensible move to trade for Green. But as the Mets are assured to make the postseason and enjoy some success there, appear to be set for the next few years as the divisional powerhouse, and have no gaping hole for Green to fill, it makes their move to trade for him still indefensible, even under the circumstances.
Which brings me to the Win Nexus. The Win Nexus is the point at which a team's wins become more valuable than ever. Most analysis I've come across places the Win Nexus between 87-92 wins. This, then, is a critical gap in wins, the difference between them being more consequential than any other 5-win "nexus" in the game.
Let me explain. For a team that loses (or wins) more than 100 games, a difference of 5 wins is relatively small. If you win 100 or 105 games, you are almost certainly going to make the postseason (the last 10o-win team to miss the postseason was the 103-win 1993 Giants; the very next year, the MLB expanded to the 3-round postseason format). If you're racking up more than 100 or even 90 losses, what the hell difference is 5 games? From a baseball standpoint, an economic standpoint, and a business standpoint, 93 and 98 losses might as well be interchangeable.
So the question is, which wins in baseball make the most difference? That is to say, which wins are more valuable than any other a team can get? I don't mean from game-to-game, I mean in overall win totals. I think it's safe to say that the biggest difference in wins and losses is the difference between making the postseason and missing it. In baseball nowadays, regular season performance is becoming more and more irrelevant. Teams simply want to make it to the postseason, where even the underdogs and lesser lights have a chance to win ('87 Twins, '03 Marlins, a few others). Teams want to make the postseason, which will bring in more revenue, ever-increasing as they advance up the ladder to the World Series. So that's why I say that the most important "win nexus" in baseball is the 87-92 win threshhold. Teams that win 87 games rarely make the postseason. Teams that win 92 games very often do. If a team is wavering between the 87-92 win threshhold, it is more important than ever for them to take advantage of the opportunity to improve their team. Contracts and trades which would be awful for an 80-win team may be perfectly appropriate for an 89-win team. The 80-win team has very little to gain; the 89-win team has a shot at the World Series to gain, and everything to lose.
How does this manifest itself on a practical level? Teams in the Win Nexus can overspend on free agents, make risky trades, and work even more aggressively toward improving the team over the short term. It's a rare team that can count on remaining dominant for the next few years; most teams in the Win Nexus may not get another chance, and so can be excused for acting aggressively, and even recklessly, in pushing their team ahead of the 92-win plateau.
Of course, no one knows in advance how many games their team will win. Many teams may not even know on which side of the nexus they stand. That's why it's imperative to a) have a very good idea of your team's inner level of ability, and act accordingly: if you're below the win nexus, act conservatively and plan for the future. If you're above the win nexus (and how many teams can count on that?), try not to screw up what you've got. And if you find yourself in the middle, then there's a lot at stake. If you think your team is an 87-win talent, it's time to go for it, man.
A great example of this would be the 2005-6 Chicago White Sox. Despite winning 99 games and appearing to be on the safe side of the Win Nexus, GM Kenny Williams saw differently. First of all, the White Sox out-performed their Pythagorean record (91-71) by a large amount. This could be luck, or it could not. Williams was smart enough not to count on good luck (or whatever) to stay with the team the next season. Williams pursued free agent first baseman Paul Konerko and signed him to a free agent deal. Under other circumstances, the Konerko contract would be a bad one; an overrated hitter playing in a park that makes him look good entering the decline phase of his career isn't such a great investment. But Williams saw that Konerko was a high-impact bat in a free agent market nearly bereft of them. Williams made the canny decision that it was worth it to overpay Konerko, because he was worth more than usual to the White Sox -- not only would he help push them through the Win Nexus, he was an all-around offensive threat on a team that didn't have anybody else who could replace his offense. Williams may have also felt that his starting rotation simply couldn't be as amazing as they were in 2005; or at least, one or two of them were going to decline. So Williams exchanged 5th starters, losing Orlando Hernandez and gaining Javier Vazquez, a move which looked (at the time) like a fine insurance policy. Williams also committed a fair amount of money to Jim Thome in acquiring him from the Phillies, also losing his starting center fielder in the process. Not only was Thome an expensive risk, he was also coming off a major injury. But Williams felt that it was imperative that the Sox improve offensively, and that it was worth the risk if Thome could come back at even 80% of his former self.
The result has been a strong one for the Sox: Konerko has hit well, Thome has hit better than even Williams could have dreamed, and while adding Vazquez didn't improve the quality of the pitching staff (which took a very strong turn for the worse), it was probably the right move at the time.
The urgency of Williams' actions fits in with what I said before; he didn't see the White Sox as a dominant, 100-win team. He saw them as a team in the low-90s, right in the middle of the "do-or-die" win nexus. It must be said, too, that in the American League, the Win Nexus should probably be adjusted upward, as it looks like one or two teams will win at least 92 games and miss the playoffs. If Williams were in the NL Central, he could have sat back, let his team win 88-90 games, and still make the postseason. But Williams cannily realized the singular status of his team, a status that demands more action than a team at either end of the spectrum. The difference between a team that makes the postseason and a team that almost does may look like just one or two wins, but is much more than that in both the baseball sense, and more importantly in the economic sense. That explains the concept behind the Win Nexus.
On the other hand, we have the Kansas City Royals. The Royals spent a fair amount of money in the offseason on free agents such as Doug Mientkiewicz, Mark Grudzielanek, Reggie Sanders, Joe Mays, and trade acquisition Mark Redman. Now, if the Royals were within the Win Nexus, some of these moves might be justifiable. Any reasonable analysis would conclude that these players are all overpaid; but, if the Royals were right on the cusp of making the postseason, it might make sense to overpay for role players in the short run, if it might mean the difference in making the postseason or not.
However, the Royals aren't even in remotely the same situation as the White Sox. The Royals were, going into this season, a 60-win team (56-106 last year) that did not look to be getting any better. The Royals, then, spent a lot of money overpaying the above players, which action would elevate them to about 65 wins.
Big f***ing deal.
The difference between 60 and 65 wins is academic; you suck, either way. When you're a team that has a base level of talent worth 60 wins, you do not need to be overpaying a group of role players just to elevate your team by 5 wins. You should just conserve money and resign yourself to the next couple years of awfuldom, while committing all that money (and your other resources) towards the future, namely the farm system. That the Royals made this bone-headed mistake shows either: a) a complete ignorance of their inner level of talent, b) an even greater ignorance of the level of competition in the American League, particularly the AL Central, c) a complete disregard for anything but making positive headlines and merely keeping the team afloat, or d) genetic mutation as the result of severe inbreeding.
But anyway . . .
Going back to the Green trade, applying the Win Nexus theory makes it even more puzzling. The Mets are on pace to win 99 games -- safely above the top end of the Nexus. Not only that, but the rest of the division is below .500, meaning that the Mets would likely still make the playoffs even if they did fall below the 87-win plateau, which they are in no danger of doing. The Green trade doesn't prepare for the future; the Mets are so far ahead of the rest of the NL East for the next couple years that it's not worth making trifling adjustments, especially those that cost in the tens of millions. And the National League as a whole is struggling; the Win Nexus needs to be adjusted downward for the NL.
It could be argued that because the Mets haven't won a World Series in 20 years, that they should act more aggressively than a team like the Yankees, a team for which making the postseason is a relatively small victory compared to other baseball teams. Would we allow Cubs GM Jim Hendry more leeway in his efforts to aggressively build a postseason contender than we would Yankees GM Brian Cashman or Red Sox GM Theo Epstein?
I think so, yes. The Nexus Theory is based on the importance of making a postseason to a team, particularly to their finances. So we have to be realistic and say that it's more important (and potentially lucrative) for some teams to make the postseason as opposed to others. Teams of historic futility deserve a wider hand; look at what winning the World Series did for the Red Sox, and you can understand the Cubs' aggressiveness on the free agent market. The Tigers of this year are another example; a franchise that hasn't won a World Series in 22 years or even made the postseason in 19. They have much more at stake in making the postseason than perennial contenders like the Yankees, Red Sox, Twins, and A's, and so should be allowed to act more aggressively in this sense. For some teams, a win is much, much more than just another win.
While I don't advocate complacency for high-winning teams nor laziness for the losers, understanding the Win Nexus makes us see the singular situation these GMs find themselves in. It's something that sabermetricians should take into account when analyzing the bigger picture behind player performance, contracts and payroll. The interesting thing will be seeing which teams are in the nexus/on the cusp in the 2006-7 offseason: first, if they correctly identify themselves as such; second, if they act accordingly; and third, if the result reinforces the Nexus theory itself. Other than the fact that we need to adopt two separate nexuses (nexes? nexi?) for each league, I think the theory is a sound one. It's also an example of a very important non-statistical principle that is essential to understanding and evaluating the modern game, especially on a business level.