Baseball GMs: Deal or No Deal?

Any observer who doesn’t immerse himself in the intricacies of baseball’s free agency and player development structures should flip on his TV to quickly get up to speed.  There’s a well-known expert on the choices that GMs face, and he can be seen daily if you know where to look.  While MLB Network frequently has knowledgeable contributors from Baseball Prospectus, and even ESPN can trot out a great mind here or there, the fastest way is to find Howie Mandel prodding hapless Joe and Jane Game Show Contestant to throw away their guaranteed returns in hopes of hitting it big.

The current state of the free agent market, especially with regard to mid-tier, mid-career or older starting pitchers, presents largely the same choice a Deal or No Deal contestant would face.  If you’re excited by the idea of securing the decline years of a never-was-great hurler for the annual price of what the Rays will pay David Price this year, you are probably a local radio show caller or an out-of-work GM.  Barring that, you are understandably intrigued by the possibility of the unknown riches which lay in the cases that have yet to be opened during today’s episode of the hot stove game show.

That brings us to where the market stands today, specifically when it comes to the continued unemployment of Ubaldo Jimenez and Ervin Santana.  Like the 11 other players who received 1-year/$14 million qualifying offers this offseason, both declined and opted to test the open market, and both have found that market not so open, at least with regard to offering them lucrative multi-year deals.

At this juncture, it’s obvious that the added cost of giving up a first rounder (and almost as crucially, the bonus pool money that’s attached to it) is scaring teams off.  It’s no accident that Matt Garza found work before either Jimenez or Santana, as his being traded during the 2013 season precluded him from being tied to compensation.  Getting dealt last season was certainly a stroke of luck for Garza, one which Buster Olney explores in his well-reasoned piece regarding players in the compensation “dead zone” (here’s the non-Insider video).

Is it so clear, however, that teams should pass on the largely-known quantity that these pitchers provide and take a look in the mystery case that is the draft?  This question is at least worth an exercise in how we think about finding talent via the draft as opposed to picking it up in free agency.  What level of production, exactly, is likely to be hidden behind the curtain of the draft’s first round?

Let’s lay a couple of ground rules for this thought exercise, so as to narrow our focus and make it clear that this isn’t being written under a pseudonym by Brian Sabean:[i]

  1. It’s established that the most sustainable method for building a contending team is through a strong farm system.  This exercise is situational and simply illustrates the choice to be made for teams (think teams on the brink of contention that don’t have a solid number 3 or 4 starter or stronger ones who have issues with rotation depth) need to make in weighing likely short-term benefit over a lottery ticket future.
  2. In order to puts some constraints on the thinking, the data is only indicative of pitchers taken in the first round from 2003-2007.  Yes, the draft picks that teams are losing as compensation could be used for a player at any position, so this comparison isn’t quite apples to apples, but it should make this more illustrative of the likely costs vs. returns of picking up free agent pitching as opposed to finding it in the draft.  I will link to the full, much more in-depth data set once I’m finished constructing it.

The Steamer projection system projects Santana to post 2.7 WAR, while expecting 2.5 for Jimenez (which I believe is too conservative).  The question then, is what can a team interested in adding, at a moderate price, a likely 2.7 WAR for this season (and over the course of four years, at a half win per season decline, 8.7 total WAR for the life of the deal) if it chooses instead to try finding pitching on the cheap via the draft?

Over the course of the 2003-2007 sample window, several pitchers were taken in the first round who have gone on to post gaudy WAR numbers in the majors.  They include Cy Young winners David Price, Tim Lincecum, Justin Verlander, Jered Weaver and current best pitcher alive Clayton Kershaw.

They, however, are the exception.  Remember, most of the cases on Deal or No Deal contain amounts you’d expect to inherit from your great-aunt, not win by hitting the lottery.  The mean career WAR for all starting pitchers taken in the first 30 picks between 2003 and 2007 was a pretty unremarkable 4.79 (Only the six years of team control are included in these numbers.  Anything after that would presumably be at a market cost much higher than what Jimenez or Santana will command), while the median was a shockingly low .35 WAR.  That means over half of the 76 first round picks used on pitchers during our time frame posted accounted for less than a single win in terms of value.  For every stud hurler selected, a handful of duds turned up.  16 selections never reached the majors on the mound at all (former Rice University star Wade Townsend is counted twice, since both the Orioles and Mets wasted selections on him, and Brian Bogusevic has managed 3 WAR during his career as an outfielder, but has only pitched one major league inning of mop up duty).

The idea of the first round pick carries a huge mystique, especially in today’s draft and prospect hoarding front offices.  There is a large drop off in consistency of major league production after the top 10 selections, which happen to be the ones that are protected for teams wishing to sign our free agent pitchers in question.  Teams picking 11th-30th face much greater uncertainty with their prospects.  Of the 48 pitchers selected in that range during the study years, 27 percent never reached the major leagues.  The average career WAR is only 2.9, while the median is ZERO.  It is essentially a coin flip as to whether a pitcher drafted in that range made any major league contribution at all.  Perhaps most tellingly, only six pitchers selected in this range have posted even one season of 2.7 WAR (Santana’s 2014 projection) or greater, which is only one out of every eight selected.  None of the aforementioned stars were picked in this window; Max Scherzer is undoubtedly the most accomplished, drafted 11th in 2006.

Make no mistake, the draft is the single best place to find value for a franchise.  Players come with several years of low cost and are generally with the team that selected them through their peak.  It is, though, a crapshoot.  It should not be ruled out that some teams will find themselves in situations where forking over the money for a free agent hurler will just make sense, despite having to give up the lottery ticket the draft pick represents.

Both Santana and Jimenez will find contracts and both will be richer men when they do.  Chances are they will both receive deals in the neighborhood just below the 4 years/$50 million that Garza received from Milwaukee.  An Average Annual Value of $10-12 million at 4 years, or a higher AAV for 3 years seems likely.  But the fact that it has taken so long represents what may be a case of teams being unsatisfied with what is a nice return that’s readily available, hoping instead telling Howie’s banker, “No Deal.”

[i] In what may be the most anti-Moneyball move ever, Brian Sabean intentionally gave away the Giants’ first round pick in 2004.  The Royals had made clear they would not offer a Michael Tucker arbitration after the 2003 season, making them ineligible to receive a compensatory draft pick.  Sabean announced a deal with Tucker the day before the arbitration deadline, meaning the Royals could offer Tucker arbitration without any fear that he would accept, gaining what was essentially a free draft pick.


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