For 17 years now, the Pittsburgh Pirates have lost more games per season than they won. That’s currently the worst record in the MLB.
As the MLB is organized in franchises, so the teams are in theory primarily a business, not a sports team. So their prime objective should be earning money, not winning games. It’s a common assumption that the teams that are very successful in winning games earn a lot of money while those that are losing a lot are not earning a lot of money. However, earlier this week, The Associates Press leaked a document that showed that the Pirates earned around $15 million in 2007 and 2008, which represents approximately 10% of their total income.
Nearly half of that income is revenue sharing coming in from the MLB. The other half is revenue generated by the Pirates. The Pirates have an extremely cheap player roster, their payroll is the lowest in the game. As a result, many complain that they were robbing money from the league as they would not even try to win more.
The Pirates organization denied that assumption and it’s not my job to judge on whether it’s true or not. However, it is not the Pirates fault that the rules of MLB allow teams to act as the Pirates do. And even as the sports fan in me strongly dislikes what he sees, I like the creative approach the Pirates take towards the league rules.
There are two major takeaways for me:
1) Rules are not there for allowing things, but for disallowing.
As long as something is not disallowed, it is allowed. I’ve seen a lot of people that were reading rules and assuming that other things that went into the same direction as those listed in the rules as not allowed would be forbidden as well. This kind of over-obedience may take away great opportunities from you.
2) Selling less is not always bad.
We all learned about the experience curve and economies of scale which say that unit cost are lowered when the output volume is augmented, leading to higher profit. The result of this concept is that everybody tries to sell more all the time. What is often ignored is the fact that this theory was based on the traditional model of industrial production. Most of us are not facing this classical setup anymore, but a lot more complex markets and revenue structures. In integrated markets with a high transparency of information, lowering revenue may well be overcompensated by lower cost.
We tend to think in linear models, but we are not in linear markets anymore. Trying things that are unexpected and non-linear may give you a leap in the market place, as it differentiates you from your competition. And guess what: The word “Pirate” is based on the Greek word for trying things in an aggressive way. Seems like they just went back to their roots in Pittsburgh…