MLB's slotting system and the A's farm
by Faust on Aug 7, 2007 8:19 AM PDT
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PrintIn the commentary following grover's recent "Phase 2" diary, a discussion arose as to the MLB draft bonus "slotting" system and how it affected the A's (for example, is signing draft choices such as Gary Brown simply a matter of reallocating money within the budget, or are there other constraints on the A's course of action?). Kevin Goldstein at Baseball Prospectus recently wrote a terrific piece explaining how the slotting system works. I'm going to quote it below and offer a couple comments, so you can read those before hitting the link if you choose, but for anyone who has any interest in the draft and in the A's farm system, the article itself is an absolute must-read. And (thank you, BP!) it's one of the few BP offerings that is available to be viewed in full by non-subscribers. Goldstein's article was mentioned in the comments to grovers current recommended diary on August prospects, but it wasn't linked and I think the whole topic is poorly understood and deserves a stand-alone diary.
The system is built around two key structural realities: (1) MLB has no ultimate control of the outcome, in that MLB can't require teams to follow the slotting guidelines; and (2) MLB does have control of the process, in that it can require teams to report back to MLB at several stages of the draftee-signing process. The result is that, each and every time a team indicates a desire to sign a draftee to a bonus over the recommended slot value, MLB will go over the head of the scouting director and GM and pressure the owner directly to try to quash the deal. Given the BFF, old-school-chum relationship between Selig and Wolff, this isn't a good thing for A's fans.
Here's one interesteng quote from the article about which teams are going over slot:
There seems to be two types of organizations that are consistently going over slot: Smart ones, and rich ones, not that the two are mutually exclusive. Four teams that immediately come to mind are the Tigers, the Angels, the Red Sox and the Yankees. Go look at the standings, and then go look and the amount of elite-level young talent in each system. It’s not a coincidence.
I note that Goldstein mentions the exact same four teams I singled out in my comment in grover's diary. I also note two other things about those four teams: they're all in the AL, and they may well be the AL's four playoff teams this year. They are the A's direct competition for scarce playoff spots (including the wild card), they are already all richer than the A's (three of them enormously richer), and the A's can ill afford to spot them any additional competitive advantages.
One final point: The A's aren't being "cheap" here. Mind you, I think the failure or inability or unwillingness to pay a bit extra to sign draft picks is a HUGE organizational shortcoming and a major obstacle to future success, but "cheapness" isn't the correct characterization of this fault. Beane, Forst, Zaidi et al are certainly smart, and there is no way on this earth that they are unaware of the studies (or they may have made their own studies) showing draft choices to be one of the best investments around. And specifically with regard to over-slot signings, Goldstein refers to a study by Jim Callis that "showed an overwhelming success rate for players who received well-above-slot bonuses." Using the Moneyball theme, draftees are just about the best undervalued assets available anywhere (largely because the draft itself and the slotting system artificially depress the cost of draftees relative to what their true market price would be), and you can bet that Beane knows it. Wolff himself is obviously familiar with the concept of investing money to make more money, and over-slot signings are money-makers, by all accounts. If the A's don't engage in the practice, it won't be because of cheapness but because of relationships and decisions at the ownership level. That still sucks for A's fans, and it certainly counts as an important organizational defect that stands in the way of future success, but "cheapness" is not the name of that defect.
Here's hoping the A's decide to address this problem - effectively, and soon.
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Thanks for the read
Quick question -- why would the union be so opposed to a real slot system?
That's a good question
I don't know the answer. On the one hand, Goldstein quotes someone saying that "there’s a finite amount of money being spent, and the union knows that money saved in the draft is going to be redistributed to a union member, so they’re fine with it." On the other hand, he also states that "While everyone agrees that a real slot system would solve the problem of talent dropping, everyone also understands that even discussing the concept is moot, as the player’s union would never concede to it." Those statements at least appear to be in conflict. Maybe the union just doesn't want to agree to any formal system that could be viewed as a slippery slope to a salary scale for its own members. But really, I don't know.
Exactly
It's the same reason the union will never agree to a salary floor for MLB teams, although that would obviously benefit them. The union takes a hardline free market stance because they don't want to have a salary cap like every other major sport. Fehr has gone on the record many times that the union is opposed to any restriction on the free market.
by BlameChannel53 on Aug 7, 2007 10:31 AM PDT up reply actions
the agents presumably would be the ones
to hate it the most as a player could sign a slot bonus with a lawyer for a set amount of money ($5000/10000) instead of a percentage of the money ($50,000) at five percet of a million. IF the teams would be willing to give up something else in negotiations (an extra AA minor league team for all teams?)mabey the players union would go for it.
Also its about time that teams that sign high priced japan talent get penalized somehow (lose a first round draft pick)so that the teams that don't (90% of all teams) are not at an even worse disadvantage than they already are.
by Anarch on Aug 8, 2007 5:24 PM PDT up reply actions
Doesn't it suck
when you know what the solution is, you know your team knows what the solution is, and you know that it doesn't matter one iota?
Well, I already despise sports ownership in general. This is just grist for the mill.
If anyone subscribed to BA ...
wouldn't mind sending the Callis article to devinl (at) chccnet (dot) org I would be quite grateful ...
And I'd appreciate being cc'd on that
pfaustin@travelers.com
so what's the fix?
Slotting virtually guarantees that certain players will not get drafted. We wouldn't ever have the Smoak issue, but what's the fix?
Also, what's the fix for international players? Is this just going to turn into the rich getting richer as organizations like the Yanks and Red Sox recognize that trading the farm for veterans isn't the only solution? It might get uglier before it gets prettier many clubs!
Assuming the value is really there ...
teams either adjust -- bonuses soar as draftees realize their strength and a real slotting system is instituted -- or avoid the guys who are demanding over slot bonuses and give rich teams an advantage (unlikely).
Smoak would still get drafted, just a little bit later -- just in case.
The best solution for international players would be to develop a single, league-wide academy system in each of the relevant countries and them submit them to the draft as well
Good points on Wolff's other agendas
That was one thing I meant to get into in my comments in grover's dairy, but it was late and I didn't. There is definitely a possibility that the A's are toeing the line to curry favor with MLB. If this is true, the A's are obviously more interested in building stadiums than winning baseball games. If I was Wolffish, I would probably do the same thing; the stadium and its surrounding project is going to make hundreds of millions for Wolffish. However, for A's fans the result is the same whether its cheapness or a desire to pursue other agendas that is the root cause of the A's decisions; the A's are not going to pursue strategies that give them the highest probability of winning ballgames. As Paul Thomas said, it sucks when your team is not doing what it can to win ballgames.
That's just ridiculous ...
The A's have won as many games as any team in recent years -- one rough season and they aren't committed to winning -- come on.
The A's ownership hasn't been committed for years
Hoffman and Schott let Beane do what he wanted as long as they got to profit take, and they were very successful at that. They made millions when they sold the franchise, winning was nice for them but they really wated the money. After observing the Wolffish regime, I really don't believe Wolffish is committed to winning either; they want to build a huge development project in Fremont and are using the ballpark as a lynchpin to make it happen. As I've already laid out in the other diary, the A's can't or won't compete in acquiring talent in expensive areas, and also won't use the draft to acquire talent despite a large increase in revenues. Whether that is because they don't want to spend the extra millions or because they want to curry favor with MLB to ensure the success of their development project, the A's are not pursuing strategies that maximize their probability of winning. It is ridiculous, but not in the way you suggest.
I am not basing my opinion on "one rough season." I'm not offended that the A's had a rough year, and I feel lucky to be a fan of a team that has been as successful as it's been over the last decade or so. My concern is that the A's have now missed the playoffs three out of the last four years and have a farm system that is not good, and without a good farm system the A's have a very small probability of success in the next couple of years. Do the A's want to win? Of course, every team wants to win, because winning teams have more fans and generate more revenue. However, not every team wants to win as much as others, and I think the A's have other agendas that trump winning.
by BlameChannel53 on Aug 7, 2007 11:31 AM PDT up reply actions
There's no question ...
that Wolffish's top priority is land development. But there's no direct conflict between those priorities and winning.
In terms of baseball operations, Wolffish's involvement is basically the same as Schoffman's -- saying, 'here's your budget, stay under it'. That budget, both absolutely and relative to the league as a whole has increased under Wolffish.
There is a direct conflict
by BlameChannel53 on Aug 7, 2007 12:56 PM PDT up reply actions
isnt building a new stadium a back door to having
more revenue which could lead to have a better team? GASP! the A's might be a team in the top third of spending if they had a stadium that produced more revenue. Sounds like a good long term plan to a better team to me
by Anarch on Aug 8, 2007 5:30 PM PDT up reply actions
Depends
Will the increased revenue from the new stadium benefit the A's, or will the new stadium be financed in such a way that the shopping and housing side of the business take away the profits while the A's are left with higher revenues but higher debt, ending up essentially with the same amount of money to spend? I am in favor of the new stadium, but it is way too early to know whether the A's as a baseball team will see any actual benefit from it. The A's as a business are going to get very wealthy off of the stadium project. We'll see how it all plays out.
by BlameChannel53 on Aug 8, 2007 5:36 PM PDT up reply actions
best possible senerio
Without it we will probably NEVER be anything other than what we are now. A small market small revenue team that can never compete for even above avegage free agents and most likley loose most of our best home grown talent after 6 years or so.
Mabey with the new stadium we are still that, but there's at least a 50/50 shot we could be more than that.
by Anarch on Aug 9, 2007 8:48 PM PDT up reply actions
Theres an important distinction here
Devo touched on this in one of his comments in the other diary. There are really two different types of players who might ask for above-slot money, and they shouldn't be lumped together:
- The truly elite players (often represented by Scott Boras) who ask for exorbitant signing bonuses. Generally these are among the top few players in the draft, but as some teams will routinely pass them up due to signability concerns they sometimes drop to the middle of the first round, where their demands are even more over "slot."
- Lesser players who ask for more than they are generally considered to be worth, and hence get passed up repeatedly by all 30 teams before someone finally grabs them in a later round. Their demands may be so high either because they simply overestimate their own value or because they've committed to a college and will only go pro for an "offer they can't refuse."
Most of the players Goldstein mentions as success stories are in the first category: Chamberlain, Kennedy, Verlander, Miller, Maybin, and Porcello all went in the first or supplemental rounds of the draft. Ironically, the last time the A's took a player like this was Todd Van Poppel, who was a tremendous bust, but overall I think there is a clear case for paying the price for this elite talent. Even if you have a 50% chance of ending up with Verlander, and 50% of ending up with Van Poppel, a couple million extra is a good bargain.
Smoak and Gary Brown, on the other hand, are in the second category. It may turn out that signing these players is also a smart move, but the case for that is a lot less clear to me.
This is a good point
I'm guessing that the Callis study deals with the first category.
On the other hand, the second category is trickier to make blanket statements about. There's little doubt the draft achieves one of the things it's designed to achieve: It decreases draftees' negotiating leverage and creates a gap between the price paid and the true market value (you'd get something like market value with the international free agents, but the two are hard to compare directly since that class of player usually signs so much younger, among other differences). Given that gap, it's entirely possible that guys like Smoak or Brown could ask for something over slot (more than what teams are generally willing to pony up except for elite talents) but still be a bargain with respect to their real value. My impression is that the guys who truly overestimate their value, to the extent that they want more than their rationally projectable value, are probably considerably in the minority.
From the team's prespective, if you have a choice between one guy who's a good talent and likely to be an easy sign, and another who is a slightly better talent but who is likely to demand significantly more, presents a real risk of not signing at all, and who is likely to fight you for every dollar all through his arb years (in the case of Boras clients), you're probably right to choose the first player. The key there is that the second player is only a slightly better talent, not a substantially better talent, which would change the math. And the difference between 'slightly" and "substantially" is probably the difference between the two categories you cite.
Anyway, whatever the nuances, it seems clear that for the teams willing to deal with the internal MLB politics, there's a lot of extra value to be mined by working the system as it now exists. I wish our team was one of those willing & able to do this, because we're getting screwed by the teams that are.
With guys like Smoak and Brown ...
the prospect is worth much more than other guys you would draft at that position, but they also demand much more than they are worth.
From what I've read, both guys were more or less considered 3rd round talents. The average third round pick reaches the majors in any capacity (a single AB will qualify) about 1/3 of them time and averages 4 WARP over their first fifteen years.
Both, however want(ed) low first round money. A low first rounder makes the bigs about 60% of the time and accumulates a bit under 10 WARP.
Is that worth overspending for? I don't know ... it's an interesting question ... it certainly would not be a sustainable practice, though.
Isn't 4 WARP worth like $6 million?
Spending under a million to get a guy who is going to average $6 million in value is a huge deal. Granted, most of these guys will be lost investments, but the expectations are so heavy in your favor that you're bound to eventually recoup your investment many times over.
4 warp in a SEASON
is worth something like $6m.
The numbers I'm citing are effectively 4 warp in a career, which is not worth much of anything.
Why?
As someone pointed out elsewhere, wins are not really inflationary. A win now isn't much (if at all) better than a win later.
Apart from which, what we're really looking at here is not (say) 25 players each producing 4 WARP over their careers, it's 20 players not producing any, three guys producing 10, one producing 20 and one producing 40.
They are, to some extent
for a couple of reasons:
First, BPro's replacement level is set too low (this has been extensively analyzed and discussed elsewhere). If the error is (e.g.) 1 win per year, than a player who accumulates 1 WARP per year for 4 years is actually replacement level, and hence doesn't have much value, while a player who accumulates 4 WARP in a single year is worth 3 wins over true replacement level, which is quite valuable.
Second, roster spots and playing time are limited, and the talent pool thins out at the higher end, so there is an opportunity cost associated with having too many mediocre players. For example, if you start the year with one true star (worth 8 WARP) and 3 replacement-level scrubs, there will be a large pool of potential upgrades available, either internally or through a relatively cheap trade, whereas if you have players worth 2 WARP at all four replacements you'll have a harder time improving your team.
In your hypothetical example, you're basically getting a 1/25 chance of getting a very good player, another 1/25 chance of getting a decent regular, and the rest of the time getting either a utility player or nothing at all. Is that worth $1 million. Maybe, but I don't think it's a slam dunk. And even if it is, like any gambler making a high-risk bet, you have to be prepared to pay out many times before you hit the jackpot.
before you hit the jackpot, or ...
... before you hit the jackcust.
(And, yes, I know, that was more an example of taking a pull on the nickle slot.)
Actually kind of an ironic statement
given that Cust was actually a first-round pick out of high school.
Andeux: Unfortunately, given that the original article used one level of replacement value, squaring it up with a different model is difficult to do. I mean, what if some other model says that picks from a certain round actually average negative value relative to replacement? Does that mean you decline those picks? Basically, the math changes drastically depending on what the average return in terms of wins is.
As for the high-risk nature of it, IF the returns on investment are as high as they seem (and this is, again, dependant on the math you use), there should be some way even for hopelessly risk-averse teams to sell off the risk and "settle" for a less risky, but certain, payment. If a player costs $750,000 to sign, but makes you an average of $6 million in 10-years-down-the-road dollars, then the profit will be roughly $4.5 million in 10-years-down-the-road dollars (I'm assuming a return on investment of 7% annually) per player on average. Couldn't you take out an insurance policy which guaranteed you, I don't know, half of this?
But besides this, these are long-run operations in any event. Teams have plenty of time to wait for the probabilities to inevitably turn them a profit. It's such a small amount of money relative to the overall value of the organization (0.2% of total financial assets or thereabouts) that teams would be absolute fools not to take a bet with those kinds of odds in their favor.
very few players will put up a negative WARP
over any extended period of time. Most players that are not good enough to put up at least replacement level numbers never make the bigs or stay for a very brief time. WARP is a counting stat, so if you're only up a few days, it's hard to get very far from 0.
Regardless, if I remember correctly, Rany counted all negative WARP players as 0.
How are you figuring the odds are in the org's favor?
I'm just going off that 4 WARP, $6 million thing
As I said, if the numbers change, the situation changes. What I'm saying is that IF those numbers (or even anything like them) hold, teams would be fools not to take gambles even though most of the gambles aren't going to pay off. In the event that a team is so cash-strapped that the investment inspires financial worries, it should be able to negotiate some kind of insurance policy which guarantees it a steady cash flow. I'm sure Lloyd's of London could work one out.
Summary: While I can't really say what the odds are, I CAN say that the worry about "paying out many times before hitting the jackpot" is not one which should be affecting baseball teams.
I don't know about the insurance ...
there's nothing wrong with gambling ... everything is a gamble ... the question is whether the odds of payout beat the projected cost ...
When you overpay people, you hurt that equation.
So what do you think the A's should offer Brown?
12th round money obviously won't cut it and would be too low for his acknowledged talent level.
3rd round money, more or less making the offer as if he had been drafted where some sort of "consensus" placed him, in which case you're offering the slot money he would have qualified for if people thought he'd have signed for it?
2nd round money, acknowledging that the actual value of draft choices is actually somewhat greater than what they're paid so that you can go a bit over the norm and still come out with value?
Low 1st-round money - I take it that at about this point you think the player's demand exceeds his actual projected value, not just their slot-discounted value, so that signing him is an overspend in any sense of the word (likely to wind up a money loser). Something that, in general, shouldn't be done.
I don't want to advocate signing true overspends, where money spent exceeds projected value received. I do want to find a way to get around obstacles that keep you from signing guys for prices that would be reasonable, if you were "allowed" to pay them.
It's true that studies I've seen (like Jazayerli's) show that ROI is greatly skewed to the very elite (high first round) talents. And I suppose if in one case you can sign a guy who projects a big-time margin of value over what you pay for him, and in the other case a guy who projects a more modest value, but you're going to get ownership in a shouting match with MLB in either case, maybe it makes sense to bite on the first and pass on the second.
I think the logic you laid out makes sense ...
Exactly where he would fall, I don't know ... someone would have to be paying me to get into that much depth.
Van Poppel had the talent but he got a major
league contract guaranteed as part of his deal... thus when injured he was still on timeclock for getting to the big leagues. Time ran out and he still was not ready. Still had to be on big league roster as had no options remaining and another team would claim him going through waivers trying to be sent down.
That's one of the problems with drafting
guys like that ... some of them demand MLB contracts.
Any diary with such excellent linked sources
deserves a Recommendation.
Second that
especially since I let my BP subscription lapse due to some minor financial concerns. It is sad really. Glad this was posted.
I'm not totally convinced it is a "problem", though. The A's have X amount of money to spend annually and I work under the assumption that every dollar not spent on signing draftees is spent on free agents, medical staff (snicker) or whatever else. If this is the case, then I also assume that the front office staff works to optimize each marginal dollar spent. Obviously there is a point where you can spend "too" much on signing draftees and maybe Billy spends up to that amount, but no more.
This all assumes a lot and I'm not sold on it either way. No GM is infallable. Billy may be making a mistake, I don't really know enough to say one way or the other.
It is also worth pointing out that, all else equal, the team with the most money will be the better team. I don't think it is too much of a stretch to say that the gap between the A's front office and the front office of those teams you mentioned isn't nearly as great as some people may think. If that is the case then the money advantage they have more than makes up for the front office advantage we have (assuming we have one).
by Brian Durack on Aug 8, 2007 11:15 AM PDT up reply actions
Umm... Brian
I wasn't exactly referring to the BP article as an example of the "excellent" linked source.
In that case..
...I present the new Grover-inspired AN shirt.
Bill James once noted
that it is in rich teams' best interests to overpay for talent because it helps drive inflation. If the Yankees overpay a player, they drive up the prices for all players in that class (and, presumably, players everywhere), forcing their competitors to also pay more for players. Poorer teams won't be able to keep up as much as richer teams, thus giving the richer teams a competitive advantage.
It is for this reason that rich teams are precisely the ones who should pay more than "slot" money and why poor teams (by circumstance or by choice) should resist the temptation.
FSU once noted
that it is in rich fans' interest to overpay for stadium seats.
Outstanding Dialogue
Today for HardballTimes I have an article about fixing the Pirates, and one of the ideas I wrote about is the importance of them not shying away from the best talent in the draft, because it's their only means to get it.
It would mean a lot if everyone who's contributed to this thread read it; I like having you guys' feedback. Devin, I emailed you part of it to you a while back I believe.
The Goldstein article was very enlightening. I wish I had seen it before going to press on mine - it had a lot insights into the "recommended" slotting practice.
by notsellingjeans on Aug 8, 2007 12:38 PM PDT reply actions
and a link ...
for the lazier among us ...
http://www.hardballtimes.com/main/ar...
want us to delete your GNGG threads ...
Don't bother
If they can find that stuff they can crack my e-mail as well.
Come on, why worry, it's the PIRATES
Good work
Still, simple, direct, not unrealistic, and you argued a position-- something which a lot of writers are afraid to do these days. Good stuff.
I'm not sure I agree about the Gil Meche thing, though. I interpret that as the Royals really, genuinely overpaying to obtain him, and then getting lucky afterwards. Precisely because of the closing of the information gap, I think terms like "#1 starter" are going to be increasingly irrelevant to the process of pricing talent.
Some other thoughts inspired by the article: My morose side tells me that at some point, the competitive imbalance issue is going to have to be addressed. The A's made a good run for a while, but the times they are a-changin'. Breaking the slotting system for draft picks, once it's done by a poor team, might stave off the inevitable by another 5-10 years, but not more than that.
As cool as it is to see David beat Goliath, the constant unfairness of the situation is simply grinding. Of course, owners like the Pirates and Marlins are only making this harder to achieve, as they sock away millions in ill-gotten gains from revenue sharing while repeatedly failing to put a competitive product on the field.
A salary cap needs to be put in place, and it won't happen until the fans of the lousy teams vote with their feet.
Yeah, but there will never be salary cap
MLBPA is one of the best powerful unions in the United States.
I meant to spend more time on draft slot/budget, etc. in the article....I tried to imply the idea how important the draft is, at any rate.
If I do a follow-up on the micro level discussing individual decisions more in-depth, I'll re-address it.
by notsellingjeans on Aug 8, 2007 3:19 PM PDT up reply actions
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