15 August 2011

Napkin Scratch: To Overslot or Spend on International Free Agents

After Zach Davies signed today, I asked myself a question.  I have always been a proponent of overslotting several players in drafts and I have also been heavily supportive of dedicating money to sign international free agents.  So, this question was simply...what is a more efficient use of funds: spending more than 500k for players after the tenth round or 500k for an international free agent.

1) Reed MacPhail wrote a solid piece on the value of overslotting players later in the draft.  His basic conclusion was that it costs about 400k to sign a third round talent in the third round.  To sign the same quality player after the tenth round, it costs about 600k.  Quality of player is defined by Wang's work using prospect rankings and resulting performances in the Majors.

2) Various sources have looked into how much the draft depresses the amount of money a player can earn if he was able to sell his services in the free market.  Jim Callis suggested that the draft reduces a player's value by a factor of four to five.

3) When I looked at the differences between IFAs and Rule 4 Draftees, I came up with with a 400k draft talent as costing 570k internationally.

Based on these pieces we have a couple things we are sure of: it is cheaper to get third round talent in the third round and that overslotting players past the third round is not more expensive than signing international free agent talent.  What becomes a bit more confusing is to what degree are overslots a good deal?  If you go by Callis a third round talent may be worth up to 2 MM.  My calculations placed that IFAs and overslots were basically equivalent.  This may mean that if you believe in your scouting, feel free to go crazy with overslots because these domestic players are just as valuable as IFAs.

It also makes it look more reasonable to hand Josh Bell a 6MM deal.  He would cost that much if he was Dominican or Venezuelan.  Does it really matter that he is an American?  Value is value and hard slotting is likely around the corner.


Go To War Miss Agnes said...

Agree with the concepts here. The one thing I would point out is that the whole third round $400k vs $600k later is partly a self-selection bias. The reason those guys go later is because they've made it known that they will play hardball and require more to sign than other guys who are of similar talent.

I don't really know why so many players simply settle for slot deals when playing hardball clearly gets you paid. Trevor Bauer's decision to sign early cost him about $3 million. That sucks. That's not worth an extra month of player development. When I see Josh Bell gets $5 million, the question is not, "What are the Pirates thinking?" As you mentioned, he'd get that amount in the free market. They overpaid by draft standards, but they paid a reasonable price for the talent they got. The real question is, "What are the other guys considered top 15-20 prospects thinking?" Obviously high school guys have more leverage than college guys, but still. The amount of money that these kids are giving up simply because they decide to play nice and settle for less is kind of amazing.

But the biggest concept is that you're right of course: it comes down to scouting. The O's supposed analysis of IFA value vs draft value is so asinine and useless because it totally discounts scouting. It's looking big picture at averages. In order to credit that approach, you'd have to assume that there is no advantage to be gained by having better scouts than the other guys, which seems dubious. Invest the money in talent evaluators, and you'll be gaining an edge on your competition. You won't be getting the average return on player X, you'll be getting more. If you trust your personnel so little as to assume that they will return only average results, then the solution is not to abandon pursuit; it's to change personnel.

Sigh. Yesterday was a good day at least.

Anonymous said...

Shouldn't the only real question being asked about the Orioles be why no one in the media is talking about how the only constant in their decade and a half of losing is Peter Angelos?

Jon Shepherd said...

Really...how many times can someone write about that? It seems kind of pointless to me.