Valuing Prospects

This started out as a comment to a couple of posts at CamdenDepot regarding organizational farm system valuation and how it relates to the Major League free agent market. It got quite long though, and so I thought I’d just make it a post. Perhaps others would care to weigh in. (And I don’t mean this to come off as saying Crawdaddy is just flat-out wrong. He and Stotle do great work, and having these discussions can often elevate everyone’s understanding):

The general point was that since free agent pitchers cost more to sign than free agent hitters, pitching prospects might be more valuable than implied by Victor Wang’s research.

Crawdday looked at players signed after the 2006 season, and found that pitchers have been paid about $10.7 M per WAR contributed since then, while position players have been paid about $5.5 M per WAR.

I’d say that at this point the cost efficiency disparity isn’t nearly that great*, and I do think the numbers would change around a fair deal with larger sample sizes. I will concede that there’s a fair chance that pitchers do get paid more, though I’d base a bit of that on the relief pitcher market just being messed up (apparently – though maybe not; check out this post on the issue from the very good Braves’ blog Capital Avenue Club).

* From a recent article at FanGraphs:

“Looking back on it, the winter of 2006 might go down as the worst offseason of all time concerning free agent pitchers.”

Sample issues can certainly mess up research, and I was doubtful of the massive difference to begin with. Doing large amounts of data analysis can be time intensive though, and I’m not going to really fault Craw for not doing more – especially considering I didn’t do any.

I actually had a discussion recently with Dave Cameron (of FanGraphs and USSMariner) about that reliever issue, in which I noted that they get paid more than it seems they should and if that doesn’t actually make them more valuable. I wasn’t making a strong argument; just throwing some thoughts around. The general sentiment seemed to be that the pitcher isn’t actually worth any more, but there is just a market inefficiency to exploit. A win’s a win; it doesn’t matter where you add it. (And I agree with that.) Just because relievers get paid more per win doesn’t mean that having a really well stocked cheap bullpen is extra valuable. You just spend less on the bullpen and more on other areas that are more worthwhile.

Therefore to value the pitching prospects more than their expected contributions would warrant would cause you to run the team less efficiently. That’s the real story of Moneyball, no? If fielding is undervalued currently (as it appears it still is to a degree), then that’s where you invest in the free agent market (as the Mariners and Red Sox have done). If pitchers are more “overpriced” (and this offseason only a couple of reliever’s contracts have looked especially egregious), then invest in position players. Throw a Joe-Schmo rotation out there and back them up with guys who can both hit and field well.

Example: If catchers were, for some reason, paid $50 M per WAR on the free agent market, you wouldn’t start valuing your back-up catcher like he’s Albert Pujols. You just don’t buy catchers on the market, and go with a replacement level catcher if need be (still worth the league minimum).

Regarding: “If this is true, it casts doubt on how many try to use the Wang methodology to determine organizational worth. Wang’s work appears to be best suited in comparing absolute worth of two different players outside of the pressures of the free market talent available to teams.”

I think the general conception of “organizational worth” as it’s used with this methodology refers to the sum contributions of the prospects as opposed to how much the system as a whole helps the team in a relative sense. Giving extra credit to the pitchers doesn’t make one’s farm system actually any more valuable; it just changes the way a team has to go about using those assets. If there’s a general agreement that system #1 provides 50 WAR in expected value from the top 20 players and system #2 provides 30 WAR in expected value from the top 20 players, I don’t know how you can say both can be equally valuable depending on the mix of types of players.

For example, if you had 5 grade A- prospects but they were all third-basemen, the Wang system would grade your farm out very, very well. Just because you can’t play all 5 guys at third doesn’t mean the asset is really worth any less in an absolute sense – you swap it out for other assets (like pitchers who are graded out higher). Using adjusted dollar figures may tell you something but I don’t think it can be applied in this manner.

I guess walking it through might help. Say you have a grade A position prospect. That would be worth around $32.5 M according to the prospect valuation model. Now if you had a grade A pitching prospect being worth twice his $14.2 M (so ~$28 M), then that would seem like a pretty even one-for-one trade. Dustin Ackley (A-) for Neftali Feliz (A). Mike Stanton (A-) for Wade Davis (A-). And so on. I would take the position player in each deal and not think twice, but those “should” be fair deals.

And yet, you’re giving up some production. Say the position player provides 2 WAR/year and the pitcher 1 WAR/year (due to injury risk, etc – I don’t think this part is actually up for that much debate). Both are making the league minimum (first three years of team control). So the position player provides about twice the surplus value to the team as the pitcher (as in the model). So if you wanted to get to 3 total WAR between the two roster spots in any case, and pitchers were twice as expensive on the free agent market as hitters, then everything would come out even. On the one hand, you’d pay (say) $10 M to get a 1 WAR pitcher, so you’d have 3 WAR (2 from own hitter, 1 from FA pitchers) for about $10 M. On the other hand, you’d pay $10 M to get a 2 WAR hitter, so you’d have 3 WAR (2 from FA hitter, 1 from own pitcher).

Or, you could not sign that 1 WAR pitcher in the first case, and pay that $10 M to get another 2 WAR hitter for a different position. Then you have 4 WAR (2 from FA hitter, 2 from own hitter) for $10 M. You maximize the wins your team is expected to provide; you don’t find the cheapest way to build a specific kind of club.

So yeah, I find the argument that Crawdaddy presented interesting – and it’s one that I was thinking about myself recently as well – but the “In no way is this a conclusive piece of research” clause towards the end is probably good*.

* Again, not to disparage the work. I just don’t agree with the inputs or the implications.