The Herald Sun recently published an extract from Andrew Leigh’s book, The Economics of Just About Everything.
Leigh is an economist and the Federal MP for Fraser and shared his findings from research conducted over the performance of AFL teams from 2008 through to 2012.
In this time, Sports Wizard(R) – whose models have been described as qualitative Moneyball – was working with Geelong, helping the Club to its most successful period, where it won three AFL Premierships.
Leigh’s research shows Geelong’s success aligns with the true story portrayed in the Hollywood film, Moneyball, which tells the true story of how Oakland A’s General Manager Billy Beane put together a great baseball team on a shoestring budget.
See the full story below.
MONEYBALL tells the true story of how Oakland A’s general manager Billy Beane (played by Brad Pitt) put together a great baseball team on a shoestring budget.
The movie has two messages: first, money helps win games; second, some sports teams spend their money more wisely than others.
But how does Moneyball apply to the AFL? Money allows teams to buy better players (up to the salary cap), to hire better coaches and to buy experts like physiotherapists, masseurs and even statisticians. But do some AFL teams spend their cash more wisely than others?
To see the effect of money on team outcomes, I added up the total amount each AFL club spent on its football programs (player salaries and other team expenses). Then, I looked at the amount teams spent over the five-year period 2008-12 and then at how that compared with the number of games the team won over the same period (I excluded Gold Coast and the GWS Giants since they were not part of the competition for the full five years).
The first thing you notice is that there is generally a positive relationship between spending and wins. In the period 2008-12, there were seven teams that spent less than $90 million: Western Bulldogs, North Melbourne, Richmond, Port Adelaide, Melbourne, Adelaide and Brisbane. All of them won fewer than 60 games in the five-year period, an average of fewer than 12 games in a 22-game season.
At the other end of the spectrum, the biggest-spending team was Collingwood, whose $103 million spend saw them win a total of 80 AFL games. On average, teams win one more game for every additional $1.1 million they spend.
But the second thing you notice is that while some teams — like Sydney and Carlton — get about as many wins as their spending would predict, others win a whole lot more or fewer. Money accounts for about one-fifth of the variation between teams, but that leaves four-fifths to be explained by other factors. Geelong and Fremantle both spent about $62 million, but Geelong won 90 matches, while Fremantle won 47. St Kilda and Essendon both spent about $90 million, but St Kilda won 71 games, while Essendon won only 47.
Relative to their spending, the AFL teams that did best were Geelong (which won 28 more games than its expenditure would predict), St Kilda and the Western Bulldogs (both with 16 more games than their spending would predict). Those who underperformed their expenditure were Fremantle (which won 16 fewer games than its spending would predict), West Coast (18 fewer) and Melbourne (23 fewer).
Economists like to talk about “productivity”, meaning how much you get out for what you put in. If you can sew on 20 shirt buttons each hour, and I can sew only 10, we’d say you’re twice as productive as I am.
In those terms, the AFL’s most productive team is Geelong (which also happened to pick up two premierships in this period) and the least productive team is Melbourne (which won the wooden spoon twice in this period).
ONE possible reason for Geelong’s success is the skill of its statistics-loving recruiter, Stephen Wells, who has identified talent in unusual places, such as Mark Blicavs (an 800m runner with little background in the game when he was drafted in 2012) and James Podsiadly (drafted as a mature-aged rookie in 2010).
In Moneyball terms, Geelong is the Oakland A of the AFL.
But what about if we look across the globe? One way to do that is to see how well a country’s national income predicts the number of medals they won at the 2012 Olympics. The top two countries on the medal tally are the world’s two biggest economies: the United States (104 medals) and China (88 medals). At the other end, there are 190-odd nations with a national income below $US1.5 trillion. All of them won fewer than 40 Olympic medals.
The effect of money on Olympic outcomes is significant. For every additional $125 billion in GDP, a country wins, on average, one more medal. To put that into perspective, $125 billion is about the value of the economic growth that Australia experienced between the global financial crisis and the 2012 Games. During that period, Britain’s economy failed to grow. If Australia’s had also been stagnant, we could have expected one fewer medal in the 2012 games.
But growth or no growth, it’s clear that Australia does significantly better at the Olympics than our economy would predict.
For example, a nation with our size economy would have been predicted to garner 16 medals, less than half the 35 we actually won.
In the case of AFL, I was looking at actual sport spending figures by clubs.
Here, the comparison is national income, so it omits the differences in how large a slice of the pie goes to sports. Yet, while the AFL analysis managed to explain only one-fifth of the variation in results, the Olympic analysis succeeds in explaining more than two-thirds of the variation in medal counts. That’s partly because richer nations are larger (and therefore have a bigger talent pool to choose their team from), but also because — unlike AFL — there’s no attempt at equalisation in the Olympics.
This is an edited extract from The Economics of Just About Everything. Andrew Leigh is an economist and the Federal MP for Fraser
This story first appeared in the Herald Sun titled ‘Cool Cats are the Moneyball champions‘, on 6 August, 2014.