In real life a $150M payroll is not considered high, but within the economics of 4040 Baseball it is. And its practical and psychological effects amount to a curse worth avoiding.
There are two major practical effects when your payroll reaches $150M:
- Your team has announced to all players, current and future, that you are willing to spend a lot of money. Those players will respond by demanding more money from you than they would elsewhere. This goes for extensions, and for free-agents.
- Your team will lose money. Most teams can turn a profit with a payroll below $135M. But once luxury taxes eat another $7.5M+ on top of your $150M+ payroll, even a deep post-season run won’t be able to keep your season in the black. More about the Luxury Tax.
- Additionally... don’t forget about those free-agent bids. Along the journey to $150M your payroll will have passed $135M, at which point you began losing out on free agent bids to teams with right-sized payrolls. More about Out-sized vs Right-sized Payrolls.
Reaching a $150M+ payroll usually indicates you’ve overpaid some players. And that has implications of its own.
- Top-Dollar Feedback Loop: Once your roster is chock full of guys earning $5M+, it can be difficult to find trade partners (no one wants to pay $5M for a backup player or prospect). The same is true for long contracts that run far beyond prime years. If you have a need, but no one wants your overpriced cast-aways, you’re stuck going back to free-agency, where players will happily take an elevated salary for their services.
- Always Trading At A Loss: It’s also likely you are paying top dollar for some very good players who aren’t being used. You usually won’t get equal trade value in return for those players. You can either trade at a loss, or hold onto a high salary you aren’t putting to use.
- Subsidizing Salaries: If you are able to trade an expensive player, it is very likely you will be required to subsidize some part of their salary for the life of their remaining contract. Even at $2M apiece, four player subsidies adds up to the salary of an elite player. Plus, subsidies continue to count against your luxury tax tier.
- An Unfocused Roster: The more top-dollar players you accrue, the more likely you will compromise on important aspects of the game to make them fit. This is especially true if you are unable to trade them. Defense, contact, on-base, etc, can make it difficult to establish a successful offensive or pitching strategy. And what appears to be a stacked team may actually be inefficient at generating runs or securing wins.
- Difficult Prospect Decisions: A team filled with top-dollar salaries leaves little room for prospects. You can either eat a top-dollar contract by moving it to the minors, leave the prospect unplayed, or release someone.
- Can’t Even Give Them Away: Placing top-dollar players you no longer want on waivers, or leaving them unprotected from the End of Year Draft, may not work if they are overpaid, or past their prime. You may be forced to carry bad contracts long beyond a player’s usefulness to you.
- Struggling With Trading At A Loss: Revisiting the practical implications of trading at a loss, we also know it can be difficult and frustrating not to find a trade match we feel is of sufficient value. And this can cause us to hold onto a guy we really shouldn’t be paying for.
- Confirmation Bias: Overpaying for a player, or loading up on too many high-end players can lock us into believing each of those players is indispensable. And then when we have a need, we can’t convince ourselves to flip any of those top-dollar players, leaving us to add another seemingly indispensable piece we can’t afford, after futily trying to trade poor quality players for good ones.
- Echo-Chambering / Keeping the Band Together: A roster filled with top-dollar players can skew your perception of what makes a good team. The more you double-down on that roster strategy, by continually extending players for higher and higher amounts, and past their prime, the harder it becomes to pivot to a different approach.