I continue my discussion of hot stove myths by focusing on the competence of general managers. Today, I explain why selling high and buying low are not reliable strategies.
GMs can buy low and sell high — So, let me get this straight: you think you know when a player is playing above or below his true ability—usually due to a small sample or by using a SGT-approved metric instead of a mainstream statistic—but guys who make a living in baseball completely miss it. For this to work, the GM on the other team has to be a colossal moron. GMs have made mistakes in the past and will make mistakes again, but they’re not dumb enough to act on a meaningless hot/cold streak. You can’t sell high or buy low and profit financially because all GMs understand these things. You don’t have to wait for a guy to get hot to sell him, nor dump him before he gets cold. In addition, the key knowledge of when the peak or trough is doesn’t exist, except in the mind of message board posters. Fluctuations in performance create uncertainty, which affect the price that GMs are willing to pay.
Several responses include historical examples of bad decisions by general managers as evidence that this is not a myth. My contention is not that GMs are infallible, just that we should not expect them predictably to make mistakes that are obvious to everyone but one sucker GM. Suckers are born every minute, and some GMs are better than others; but, sucker GMs are rare. Several years ago, I asked Oakland A’s Director of Baseball Operations Farhan Zaidi his thoughts on the issue.
Are there any GMs on other teams that are just plain suckers?
Absolutely not. Working in baseball has given me a newfound respect for GM’s in baseball. It takes a lot to rise through the ranks of the industry to one of those 30 positions. Fans and media like to deride some GM’s as being clueless, but from what I’ve seen, being a clueless GM is an oxymoron of the highest order.
Zaidi is no lifetime insider. I conducted this interview a few months after the A’s hired him out of Cal’s economics doctoral program, and his advisor was a world-renowned behavioral economist (Matthew Rabin). In the interview, he did acknowledge that GMs were subject to some types of biases that affect all humans, but that’s not the type of mistake we’re talking about here. Remember, message board posters are getting this right, while GMs make mistakes.
The type of statement I’m rebutting can be seen right now among Braves fans discussing Kelly Johnson. Before last season, Johnson had put up respectable numbers and looked to be growing into an above-average second basemen. His 2009 was awful, and Martin Prado rose to the occasion and took his starting job. Now the Braves are in search of an outfield bat, and trading Johnson as part of a package to get one is being discussed. This is when I see a statement like the following, “We can’t trade Johnson now, that would be selling low. He’s a better player than last year, the Braves should hold onto him and move him when his numbers rebound.” Or, “We should move Prado instead. There’s no way he’s an .800 OPS players. Dump him now while his value is high and get more in return than we could for Kelly.”
The assumption that underlies these statements is that the commenter can see the true Johnson and Prado, but a GM and his many close advisors can’t. I don’t care how much you liked Moneyball (I liked it, too), but no GM is this stupid. When scouting departments project players, they understand that performance is volitile. They see Johnson’s batting average was well below his historical norm, and understand that on-base percentage and power are more stable than average—in fact, I’m probably being too simplistic here. This will allow the Braves to get more for him than the typical hitter coming off a sub-.700 OPS season. There is no need to play him to get his value up.
Still, his value will be affected by his poor performance, because it raised some uncertainty about what Johnson is. The Braves might know more than other GMs because of their access to inside information about work habits and injuries; however, that he might not be that good is an uncertainty that the Braves face as well. What if they gamble on him getting better and it turns out that he’s just lost it (see Marcus Giles)?
Humans make mistakes, and general managers are human; therefore, general managers make mistakes. But, I don’t think such obvious mistakes can be so easily exploited. Teams are constantly looking for errors and do take advantage of them when they find them; however, selling/buying high/low isn’t one of those areas where inefficiencies persist unless GMs are colossal morons. I don’t think they are, and I think the proper incentives are in place from allowing incompetent individuals to rise to the GM position and stay there.
This doesn’t mean that GMs are above criticism, either. GMs can and should be criticized when we see bad moves, but I think they should always be given then benefit of the doubt.