The Price of Winning

  1. You have chosen to ignore posts from thirtysomething. Show thirtysomething's posts

    The Price of Winning

    In professional baseball, like any business, you cannot wholly separate the game from the dollars. This is especially important when deciding whether to pull the trigger on a deadline deal, since the quantities being traded (cheap young talent vs. proven veteran production) are so different in character. With that in mind, I would like to toss out some numbers -- they are estimates and approximations, of course, though I'll happily elaborate on any of them if asked.

    • Value of a solid MLB starting player = $10M/year. This is the "replacement cost" via free agency, valued at $4M/WAR -- and while that may seem high, many free agent contracts end up being much more expensive than that. Scutaro, Drew, Ortiz, and VMart all rated out at 2.5 WAR to 2.8 WAR last year. (VMart would have been higher if not for the injury.)
    • Value of a quality prospect, ready to step in as a solid MLB starting player = $50M. Such a player might typically produce $10M/year of value for six years, while collecting around $15M of salary. Credit the additional $5M to the option value, the compensation picks when the player leaves via free agency, and/or rounding error.
    • Value of developing the next Pedroia = $100M++. Pedroia's contract runs through 2015, his ninth season, and thus far he has been averaging 5.0 WAR or $20M/year of production. That comes to $180M of production for which the Red Sox will pay him $55M-$60M. Even the richest teams depend on developing star prospects for the core of their talent -- they otherwise could not afford to compete.
    • Value of free agent compensation picks = $15M. Relate this line to the two figures above. Those two first-round picks don't always produce major league talent, but hitting on even a quarter of them is enough. This figure would be higher, except for the draft bonuses, development costs, and the fact that any payback is at least five years down the road. Still, deep-pocket teams probably get a better return on their picks ($20M-$25M?) than your average club. Ellsbury, Buchholz, and Bard were all taken with compensation picks.
    • Several years back, the economic value of making the playoffs was estimated at $30M. That is surely higher for big-market teams, but conversely the Red Sox don't have as many empty seats to sell as mid-market clubs. Call it $50M for Boston? (This is where I wish I had access to the Red Sox internal numbers.) Oddly, while fans are typically focused on winning the World Series, the economic value appears to be more closely tied to making the playoffs. (Though once again, that calculation may be different for the Red Sox and Yankees?)
    Toss these together, along with player evaluations, and you get a quick-and-dirty way to evaluate the cost of a trade. For example, let's say that we believe Reddick is 80% likely to be a solidly average major league starter over the next six years. The Scutaro of right field. If the Red Sox were to trade Reddick for Beltran, they would be giving away ~$40M of future value (80% of $50M). Is it likely that Beltran would return $40M of value to the team over the remainder of the season? If he were the difference between certainly making the playoffs and certainly missing the playoffs, then you would absolutely pull the trigger on that deal. If he were the difference between certainly winning the World Series and certainly losing in the playoffs, then again you would have a very strong case. But "certainty" is hard to come by, and position players don't have the same kind of impact in the playoffs that an ace pitcher might.

    Two final points to add:
    • Old-time baseball fans are certain to argue that this isn't the way teams think. I beg to differ -- while they didn't think this way in past decades, most GMs are far more cost/value conscious than they used to be. The Red Sox especially are known to think along these lines (whether you like it or not).
    • Complicating the picture is the question of "opportunity cost". If the Red Sox had a quality 2B prospect, he might be "worth" $50M to another team, but he would be blocked on the Red Sox. This is the grey area in which deals typically happen. If you total up the prospect package the Red Sox traded for Gonzalez, it might come to as much as $100M of talent (depending on how you value Kelly, Rizzo, and Fuentes) on top of the new contract that they gave Adrian. But none of the three are certain stars, all are potentially replaceable. It can make sense to overpay for a premier talent, as long as you have sufficient depth (or monetary resources) to fill the holes created thereby.
     
  2. You have chosen to ignore posts from fenwayoz. Show fenwayoz's posts

    Re: The Price of Winning

    Brillant 30
     
  3. You have chosen to ignore posts from rickerd2. Show rickerd2's posts

    Re: The Price of Winning

    Methinks you put some thought into this.  Thanks for the detailed post.  Interesting way of looking at EVERY guy on a roster or in the system.

     
  4. You have chosen to ignore posts from tom-uk. Show tom-uk's posts

    Re: The Price of Winning

    Value of a quality prospect, ready to step in as a solid MLB starting player = $50M. Such a player might typically produce $10M/year of value for six years, while collecting around $15M of salary. Credit the additional $5M to the option value, the compensation picks when the player leaves via free agency, and/or rounding error

    Dave Cameron just finished his annual trade value top 50, I thought this bit on injuries/prospects was interesting.  As is often stated prospects are just prospects and Chipper, Albert, ....getting it done year after year is rare.

    10. Chase Utley, 2B, Philadelphia
    9. Josh Johnson, SP, Florida
    8. Joey Votto, 1B, Cincinnati
    7. Jon Lester, SP, Boston
    6. Ryan Zimmerman, 3B, Washington
    5. Dustin Pedroia, 2B, Boston
    4. Hanley Ramirez, SS, Florida
    3. Stephen Strasburg, SP, Washington
    2. Jason Heyward, OF, Atlanta
    1. Evan Longoria, 3B, Tampa Bay

    My initial reaction is amazement at just how much can change in a year. Regardless of whether you agreed with their exact position on the list or not, it was pretty much a consensus that Heyward, Strasburg, Ramirez, Zimmerman, Johnson, and Utley were absolutely premium trade pieces who their franchises just wouldn’t trade. Now, they’ve all dealt with injuries (and in Ramirez’s case, decreased performance that may or may not be related to the injury) that somewhat cloud their current trade value, and it’s likely that most of them won’t be quite as high on this year’s list as they were a year ago. And these guys were all in the top 10.

    I don’t think I picked the wrong guys to put at the top of the list last year, but I do think these changes help illustrate just how volatile any one individual player is. It’s easy to look at guys like Pujols, Jeter, or Chipper and talk about how valuable having a true franchise player is, but those guys are the survivors — most guys who look like franchise players end up becoming something less than what they could have been had something not gone wrong. There are a lot of potential franchise players, but few actually go on to have that kind of career.

    In looking back over last year’s list (and previous versions), I believe this reality is exposed. We can talk about aging curves and probability all we want, but there are a lot of guys who have ranked very highly in previous versions of this list based on their future potential and have never become the kind of player who would justify that lofty ranking. So, while I’m certainly still going to factor potential and long-term value into the ranking, I do believe that the evidence suggests that these factors have been overvalued in previous incarnations, and I’m going to give a bit more weight to present value than I have previously.

    That doesn’t mean this year’s list is going to be all veterans and guys with expensive contracts — there is still huge value in having a quality young player under team control for many years at a below-market rate, and that kind of advantage will still be a significant factor in the rankings. It just shouldn’t be the only factor, and I’d like the list to better reflect the fact that there are quite a few teams in baseball who will give up a lot of future value for a chance to win in the present.

     
  5. You have chosen to ignore posts from phxvlsoxfan. Show phxvlsoxfan's posts

    Re: The Price of Winning

    Very interesting way to look at it.  So how would a Reyes for Iggy, Reddick and 2 or 3 prospects pan out, assuming Reyes would be resigned for another 4 years after his current contract expires.  My gut says its not a win for the Sox.
     
  6. You have chosen to ignore posts from thirtysomething. Show thirtysomething's posts

    Re: The Price of Winning

    Let's keep it simple, phxvl, Reyes for Iggy and Reddick.

    Very hard to project Iglesias with any certainty. He might hit well enough to merit a starting job, or he might be a career backup. Seems unlikely that he'll ever be a star (or even average) offensively. I'll call it a 25% chance that he has a 2+ WAR/year career. Might be worth $10M in option value? But there is a good chance that he'll end up worthless.

    Reddick, I believe, has turned the corner from "failed prospect" to "solid major league player". Somebody compared him to the young Paul O'Neill (Cinci version, not the stud who later played for the Yankees). I'll be conservative (in my view) and suggest that there is a 75% chance that he does that over the next six years -- again, roughly a 2 WAR/year player. Factor in an outside (10%?) chance that he grows beyond that, and we're looking at $40M-$50M in option value.

    Both Iglesias and Reddick fill holes on the Red Sox major league roster, so neither of them is exactly blocked. That said, some fans here insist that Kalish has a brighter future than Reddick. If so, then the Red Sox will ultimately need to trade Reddick to get value from him.

    No matter how you look at it, the Red Sox would be giving up $40M-$50M of future payroll savings in that deal. Not a big deal (unless one of them surprises us and develops into a star). But it does have significant value.

    In return, the Red Sox would get Reyes' services throughout the remainder of the year and the playoffs, and would get valuable draft compensation if he leaves as a free agent. (If he signs as a free agent, then the Red Sox get his services without conceding additional draft picks.) Reyes fills a more pressing need, in my opinion, than Beltran. I am somewhat concerned about Scutaro's throwing shoulder, and do not want to go into the playoffs without a quality defensive alternative. Of course Reyes would leave the club with an unresolved hole in RF, which would likely need to be addressed with an additional (costly) trade.

    In conclusion, I would trade Igelsias and Reddick for Reyes *if* all of the conditions were met:
    (1) The Red Sox can make payroll space to give Reyes his $20M/year without letting go of players they would otherwise want to keep. At the very least, this would mean expanding the payroll to $180M from the $170M that I've been using as a working hypothesis.

    (2) They believe that Kalish will recover fully and will step into the RF job next year without problem. (Personally I think both halves of that are speculative.)

    (3) The Red Sox like Reyes enough to sign him to the market-value contract (six years, not four) that he will surely demand. Since I'm measuring value against free agent pricing, such a signing theoretically equals "zero value added". Yet a good free agent signing successfully converts money into production, a key component of building a competitive team in a big market.

    I'd like this deal much better if Kalish in the deal instead of Reddick. Solves the RF problem for this year (Reddick is fine, in my opinion) and reduces the uncertainty surrounding Kalish' injury. Of course the Sox would also need to include another quality lower-minors prospect or two.

     
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