The resource curse

IN 1892, A STRUGGLING gold prospector named Edward Doheny watched a cart roll past on strangely black-stained wheels. He backtracked the cart's path to a spot about two miles from the future site of Dodger Stadium. With the sharpened end of a eucalyptus tree, he drilled. Five years later, there were 500 wells in the area, and Doheny had set off the Southern California oil boom.

More than a century later, two LA baseball teams have struck a different kind of rich: multibillion-dollar TV deals that allowed the Dodgers to more than double their payroll to well past $200 million, and the Angels to commit half a billion dollars to free agents. Midway through May, however, the Dodgers were in last place, and the Angels were on pace to lose 100 games.

There have been injuries. There have been unexpectedly bad individual performances. There have, as always, been bad bounces. But to understand just how hard it is these days to buy a winner in baseball in one or two winters, it helps to go back to oil and what happens to the nations that discover vast reserves of it. "Countries that depend on oil for their livelihood," Stanford professor Terry L. Karl writes, "eventually become among the most economically troubled, the most authoritarian and the most conflict-ridden in the world." Economists call that the Resource Curse, and it is at its height of applicability in MLB. And no two teams exemplify just how cursed this curse has become better than the Dodgers and Angels.

Once the Dodgers' eager new owners took over last spring, the team traded for Adrian Gonzalez, Carl Crawford and Josh Beckett, then signed marquee free agent Zack Greinke this winter. Across town, having missed the playoffs in consecutive years, the Angels used their TV riches to grab three of the biggest free agents on the market over two offseasons: Albert Pujols, C.J. Wilson and Josh Hamilton. Each team bought into the thinking that the next available veteran was the most necessary addition, and as part of that thinking they either traded pitching prospects or sacrificed future draft picks.

This was not, in itself, stupid. Money has never guaranteed success in baseball, but it has strongly suggested it. "Yankees Ensure 2003 Pennant by Signing Every Player in Baseball," The Onion wrote a decade ago, and if that was exaggerated for comic effect, it also contained some truth: That year's Yankees won 101 games and reached the World Series for the sixth time in eight seasons. In fact, from 1993 until 2011, a team in the top half of payroll won, on average, 85 games per season; a team in the lower half won only 77.

But right now baseball is trending in the opposite direction. Small-market, midmarket and, heck, many major-market clubs are keeping their young stars under team control for longer, and the few teams that still make headlines and rosters by going on epic free agent spending sprees are left bidding against each other for increasingly flawed veterans. If you don't believe just how pervasive this trend is, consider this: The correlation between money and wins is now lower than at any point in the past 20 years. In 2012 teams in the top half of payroll averaged 81.4 wins, and teams in the lower half, 80.6.

THOSE WITH A historical bent will recall where and when this trend began: in Cleveland back in the mid-1990s. The Indians were a small-market team. They were riding a wave of success powered by homegrown stars Carlos Baerga, Kenny Lofton and Jim Thome. Indians general manager John Hart knew he couldn't afford these guys once they hit the open market. So Hart dared to extend them and others to long contracts -- years before he had to but also years before those players had the leverage and financial security to hold out for eight-figure contracts.

The Rays in the 2000s took the strategy further. They started signing players in their first three years, before they had even reached arbitration. They locked up Evan Longoria to a nine-year deal during his first week in the big leagues. The Rays and other clubs realized they were able to absorb the risk that players -- regular guys with one shot to get rich -- couldn't. Soon Kansas City, Colorado and Milwaukee were offering their players long extensions on their contracts.

Radical strategies (think Moneyball) that incubate and work in smaller markets are eventually absorbed by bigger ones. Now the Cubs, Giants, White Sox and Cardinals are all in on the secret. Since the start of 2012, nearly 50 pre-free agency players, including such superstars as Buster Posey, Joey Votto and Andrew McCutchen, have signed extensions that will delay their first free agencies, often until after the players have passed their primes.

The Angels know all too well just how anemic the free agent market has become. They entered the most recent offseason desperate to sign a big name to rival the one they'd inked in 2011 (Pujols), someone with a reputation that could make them the AL West favorites again. In an alternate reality, the Angels might have had their choice of elite talent: pitchers Cole Hamels, James Shields and Jon Lester; everyday stars Matt Kemp, Troy Tulowitzki and Dustin Pedroia. All completed their sixth full season in 2012, the last season that baseball's rules tie a player to his team before he can become a free agent. But in this new universe, all those players had been locked up, and general manager Jerry Dipoto could pursue only Hamilton and Greinke -- and the Angels whiffed on Greinke.

Never mind that Hamilton was an imperfect fit for the Angels, who had already let Torii Hunter leave because the club had three (young, cheap) outfielders under team control. Never mind that Hamilton had a lengthy injury log, including the five games he missed last September due to blurred vision caused by too much caffeine. Never mind that after a hot start, Hamilton had slumped for months at a time, blaming tobacco withdrawal. Never mind that Hamilton was an extreme free swinger, the type of hitter that, Baseball Prospectus noted, had an outsize chance of collapse. For all those flaws, he appeared to be the closest thing to an impact signing, and the Angels grabbed him. Then the Resource Curse struck: Hamilton, the highest-paid Angel this year, hit .204 with two home runs in the season's first month.

Meanwhile, the Dodgers acquired the other big free agent, Greinke, for a mammoth $147 million. This season, entering late May, Greinke had been hurt and, on the days he was in the lineup, inconsistent. And Gonzalez, Crawford and Beckett -- the Dodgers' big trade pickups who will collectively earn nearly 
$60 million this year -- had combined to produce just one win above replacement into late May, production that normally costs about $5 million on the open market. Even if the Dodgers can afford to pay those players -- and they can -- there's almost always a cost, in young talent, for acquiring expensive veterans: The Dodgers gave top pitching prospects Allen Webster and Rubby De La Rosa to Boston in the swap. Without prospects graduating to big league roles, rich teams that fall into the Resource Curse are inevitably left looking for more free agents, more expensive veterans.

All the while, the rest of the league is in a youth movement. Ten years ago, players age 27 or younger accounted for 39 percent of all wins above replacement. This year, the same age group is responsible for 51 percent of leaguewide WAR. Because those players generally haven't reached free agency, they're paid far less than their older teammates. Since 2003, according to Baseball Prospectus, teams have paid $1.1 million per win from players 27 and younger. They've paid $4.4 million per win for players older than that. In fact, in 2012 that figure shot past $6 million per win from older players. For the Cardinals or Rangers, both of whom have developed elite farm systems, it's easy to let Pujols or Hamilton walk away when cost and commitment become dangerous and when decline is inevitable.

Often, the key to richer teams' beating the Resource Curse is finding ways to behave with the long-term approach of a small-market club, just with more money. The Angels have tried, by signing four position players and ace Jered Weaver to team-friendly extensions, and by refusing to trade young, cost-controlled hitters Mark Trumbo and Peter Bourjos. "This group is very stable and very talented, and it should stay together for a long time," Dipoto says. "That allows us to get healthy on the minor league level."

The Dodgers also know the dangers of being the league's wildest spender. So they hired 10 new international scouts and added Bob Engle -- "the finest international scout there has ever been," says Dodgers president Stan Kasten -- to be their vice president of international scouting. They signed 21-year-old Cuban Yasiel Puig for so much more than expected that the move was largely derided, but general manager Ned Colletti insists it was a calculated step to get back into the Latin American market. Before that deal, the Dodgers couldn't persuade top Latin talent even to work out for them because the Dodgers weren't considered a credible suitor. The $42 million they spent got them Puig, but even more, the interests of the next Latin prospects.

"Every baseball team that has had not just success but sustained success has done it on a foundation of scouting and player development," says Kasten. "That is how you build a franchise. The Yankees and the Red Sox are as good as they are because they're both smart and rich. We're going to be a rich team. Now it's up to us to do smart things."

The alternative is nothing less than civil war, dictatorship, societal breakdown -- or at least the most disappointing stretch of seasons in Southern California baseball history.

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