Archive for Moneyball
I continue to be amazed by the over-valuing of closers in the baseball labor market. Yesterday, the New York Mets and Francisco Rodriguez agreed to a 3-year, $37 million contract. The deal also includes an option for a fourth year for $13-$14 million based on easily-attainable criteria. What an absolute waste of money. I have K-Rod valued at $6 million per season over the next three years.
I’ve been saying for a while that closers are overpaid. Rodriguez has been a very good closer, but the problem is that closers don’t pitch much. Over the past three seasons, K-Rod has faced 4.7% of the team’s opposing batters; a decent starter will face three times as many batters. While we see K-Rod pitch at the end of games, often when games are on the line, he’s not pitching much. The Met’s would have been better off spending that kind of money on a good starter who would prevent run scoring over many more batters. A few more million a year could have brought in A.J. Burnett or Derek Lowe whose superior pitching would prevent situations that closers can rectify.
Addendum: I received a question about the role of leverage—the difference in the importance of when a pitcher typically appears within a game—in determining values. I’ve been asked it before, and my answers have been scattered over several different locations. So, here is my e-mail reply explaining why I value all innings pitched the same.
I have considered the impact of leverage, but I don’t think leverage can explain the vast differences in my estimates and what is happening in the market. Leverage is a product of outside factors when a pitcher faces the same rules during all times of the game. The quality of his pitching is the same in the 5th inning as it is in the 9th. (There is the argument about pressure, but I don’t buy this explanation at this level of competition.) Now, the fact that he is good enough to pitch in a high-leverage situation is worth something; however, I don’t believe the value is twice the average. And the fact that a pitcher has pitched in high or low leverage situations doesn’t mean he ought to get all the credit for it.
For example, take Scott Linebrink and Francisco Cordero. Last year, both pitchers signed four-year deals for $19 million and $46 million. I estimated that Cordero was worth about $2 million more than Linebrink, yet he was paid more than twice what Linebrink got. The only difference in their pitching histories is that one is considered to be a middle reliever and the other considered a closer. It’s the performance that matters and ought to determine their salaries, not when they pitch. If Cordero is worth $46 million because he pitches in high-leverage situations, then Linbrink should have received a similar salary to reflect his opportunity cost—he could have pitched in high-leverage situations, but he didn’t. I think the market is putting too much value on the “Closer” label.
Another factor is that better pitchers in earlier innings affect the leverage in later innings. So, a good starter preventing runs as an impact on reducing leverage later in the game by creating bigger leads. I’m not sure exactly how to value that. So, I believe that the proper method is to treat all pitcher innings the same, while acknowledging that some elite relievers have some extra value in that they could be used in more valuable spots. But this value doesn’t necessarily come from when they pitched in the past.
I’m also a believer in patchwork bullpens. Take a bunch of bad castoff starters, platoon them, and tell them to pitch as hard as they can.
Here is a list of the top-25 most valuable pitchers in baseball over the past three seasons. Estimated values are the sum from 2006–2008 in 2007 dollars.
Rank Player Estimated Value 1 Brandon Webb $49.65 2 C.C. Sabathia $48.62 3 Roy Halladay $46.33 4 Johan Santana $42.32 5 Danny Haren $41.50 6 Roy Oswalt $40.15 7 Javier Vazquez $38.81 8 Aaron Harang $38.27 9 Derek Lowe $37.95 10 John Lackey $37.85 11 Josh Beckett $37.40 12 Andy Pettitte $36.68 13 Jake Peavy $36.05 14 Mike Mussina $34.87 15 Bronson Arroyo $34.70 16 Joe Blanton $34.60 17 Aaron Cook $34.06 18 Greg Maddux $33.76 19 Matt Cain $33.70 20 Mark Buehrle $33.43 21 Gil Meche $33.36 22 Ervin Santana $33.04 23 Jon Garland $33.02 24 Tim Hudson $32.64 25 Felix Hernandez $32.45
A morning meeting prevented me from posting this earlier, but I heard two interesting interviews with Braves General Manager Frank Wren this morning on 680 The Fan and 790 The Zone (audio link). Here are some highlights. The quotes are paraphrased from my memory.
— On Javier Vazquez, Wren stated that using “sabermetric” methods—“taking into account park factors, defense, and other factors”—Vazquez should have won 16 games and had a sub-4 ERA last season. He repeated this in the second interview, both times using the term “saber”. So, I nearly crashed twice on my way to the office.
— On left field, Wren stated that there just aren’t many options on the free agent market. He stated that they want guys who can not only hit home runs but can play good defense. My translation: Adam Dunn and Pat Burrell are off the table. He also stated that Kelly Johnson would not be moving to the outfield.
— On the Jake Peavy negotiations, he made some curious comments. One interviewer asked him if having many GM-types in the Padres front office complicated the deal. He responded, “I’ll let you say that.” Another interviewer stated that it must have been difficult to discuss a deal with the San Diego front office leaking offers to the press. Wren’s response, “Thank you!” Though, he did qualify his remarks by saying he did not think the leaks came from the front office, but that the leaks were frustrating. He also said that he has a good working relationship with Padres GM Kevin Towers.
— On Mike Hampton leaving for the Astros, he said that he was not surprised. He said that he was aware of Hampton’s desire to move elsewhere for family reasons in September, and he feels no betrayal. This runs counter to some sentiments expressed by the local media.
He commented on a few other things, but these are the highlights. They were informative and candid interviews. I commend Wren’s willingness to speak directly to local fans.
…just like everyone else. Six years for $40.5 million: what’s not to like? You lock up a young Dustin Predroia whose net worth is tied to a single undiversifiable asset—the ability to play baseball well—for a price well below what the team expects to pay out in a series of one-year contracts. I stated the logic in my analysis of the Evan Longoria deal.
Individuals tend to be risk averse, meaning that they are willing to sacrifice income to reduce risk. Just ask Marcus Giles about what it’s like to go from an All-Star to waiver wire fodder before he even finished his arbitration years. Thus, it’s not surprising to see a player trade away higher probabilistic income for lower guaranteed income.
But don’t the Rays face the same risks? What if he never lives up to his potential and is out of baseball in three years? Then the Rays are on the hook for a player whom they could have waived for free. This is true. But, unlike individuals, firms tend to be risk neutral, and price assets equal to their expected value. Baseball teams are firms that invest in many assets, many of which are players. Teams can diversify risk to minimize losses in a way that players cannot by investing in a bundle of assets. If a player stinks, he stinks; and there is not much he can do about it. Teams have many players. Some players signed to long-run contracts will exceed expectations while others will fail. On average, the successes and failures ought to average out.
By taking advantage of players’ risk aversion, teams can sign several players for less than their expected value and come out ahead in the long run. For example, assume we have two players who are expected to be worth $10 million/year for five years (total salaries of $100 million). Let’s say that one player ends up being worth $5 million/year, while the other is worth $15 million/year, the team still ends up getting $100 million in value. However, this is not where the big savings come in. Had the team gone year-to-year with the players, paying each of them their exact annual worth, the team does not save any money. Because players are willing to trade income for financial security, teams can sign players for less than their expected value. Therefore, the team in our example ought to be able to sign the players for less than $10 million per year each.
The Red Sox will pay Pedroia a signing bonus of $1.5 million with annual salaries of $1.5 million, $3.5 million, $5.5 million, $8 million, $10 million, and $10 million from 2009 to 2014. In addition, the club holds an $11 million option for 2015. In 2009, the Red Sox could unilaterally renew his contract close to the league minimum. In 2010–2012, his salary would have been subject to arbitration. After that, he would have been a free agent.
The Sox might have been able to get him cheaper in his unilateral renewal and arbitration years, but the team gets an absolute bargain during free agency. Given his past performance, aging, and the historical trends in revenue and salary growth, I estimate that Pedroia will be worth three times his salary in the free agent years. Unless he just tanks, he’s going to be worth more than $11 million in 2015. In addition, I’m not sure that Pedroia wouldn’t have earned much more in arbitration than the typical player. Pedroia’s 2008 MVP gives him a strong argument that he should be compared to the best players in the game—many who have signed lucrative free agent contracts—as opposed to his service-time cohort. Arbitrators felt Ryan Howard’s MVP was sufficient to trigger the “special accomplishment” clause that allows players to be compared to higher-salaried players. Thus, the Red Sox may be getting a break on during his arbitration years as well.
But, let’s add one more wrinkle. Let’s say Pedroia’s MVP 2009 is just the beginning of a series of excellent performances. He’ll be so valuable to the Red Sox, that his presence on the field will be a large determinant of the team’s success; thus, he might threaten a hold-out for a bigger contract. If he’s a $30 million player in 2014, he can say “I’m not going to play until you give me a new deal.” The Red Sox can stand firm on the old contract as much as they want, but they may be in a position that they know they’d suffer tremendously without him. He’ll have a lot of bargaining power, and don’t think his agent doesn’t know this.
First thought: I like the deal.
According to the AJC the Braves have acquired Javier Vazquez and Boone Logan from the White Sox for Brent Lillibridge, Tyler Flowers, Jon Gilmore, and Santos Rodriguez. The Braves get a good starter under a reasonable contract for the next two seasons in return for three prospects of decent quality.
Second thought: I still like the deal
Vazquez is scheduled to earn $11.5 million a season for the next two years. I have him valued at around $14 million year over this period, which means he’s generating $5 million in surplus. Logan
is arbitration-eligible for the next three seasons isn’t arbitration-eligible until 2010. He’s a soon-to-be 24-year-old lefty reliever with major-league experience. His surplus value is harder to project, but it is similar to Vazquez’s (possibly higher).
The prospects the Braves forgo are just that: prospects. Lillibridge was horrible in 2008, and nothing special in 2007. Scouts like him, and hitting the majors at 24 is a good sign. Flowers is certainly a hot prospect. He had a good season in Myrtle Beach and in the Arizona Fall League. But, he’s a long way off. He may turn out to be a star or never play a game in the big leagues. He’s just not that close. The two lesser prospects are too far off for me to evaluate.
Final analysis: good deal.
The Braves fill big holes in the rotation and the bullpen without having to give up major-league talent. This is exactly the type of move that the win-now Braves need to be making. White Sox fans don’t need to fret as the team gets some good prospects. Seems like mutually beneficial exchange…imagine that.
Time is more scarce than usual these days. I want to comment on the arbitration offers and non-offers that were decided yesterday. Thanks to MLB Trade Rumors, I’ve got a quick list to go on.
Below, I list the players, their expected marginal revenue products (MRP) for 2009 (which ought to approximate their value on a one-year contract), and a brief comment. I define a deal as good/bad, if the expected MRP differs from what I expect the player will earn in arbitration based on recent salary. In theory, one-year arbitration awards ought to approximate MRP, but rules that limit significant salary cuts may prevent a player’s salary from falling far enough to make a signing worthwhile.
Offers Player Expected MRP Comment Type A (15 players) A.J. Burnett $11.5 Push* Orlando Cabrera $15.5 Good Juan Cruz $3.75 Good Brian Fuentes $3.75 Bad Orlando Hudson $16.8 Good Raul Ibanez $12.5 Good Derek Lowe $12.5 Good Darren Oliver $3.75 Good Oliver Perez $8.25 Good Manny Ramirez $18.2 Good Francisco Rodriguez $4.75 Bad** C.C. Sabathia $19 Good Ben Sheets $10 Bad Mark Teixeira $17.5 Good Jason Varitek $11 Push Type B (9 players) Casey Blake $13.5 Good Milton Bradley $13 Good Paul Byrd $10 Good Jon Garland $11 Bad Mark Grudzielanek $10 Good Brandon Lyon $4.25 Good Dennys Reyes $2 Good Brian Shouse $2.5 Good David Weathers $4.5 Good Declines Player Expected MRP Comment Bobby Abreu $14 Good Joe Beimel $3.5 Push Pat Burrell $14 Push Adam Dunn $14.5 Push Braden Looper $8.3 Bad Jamie Moyer $9.5 Bad Randy Wolf $11 Bad Kerry Wood $3 Good
*Burnett is going to go. There is no reason not to offer arbitration. I believe he’s overvalued by the market, but it appears my assessment deviates from the market assessment.
**Rodriguez will likely get more than I value him, so it probably wasn’t a bad move to offer arbitration.
I’d like to comment further, but I am on my way out the door.
I like Derek Lowe as a baseball player. He’s quietly been an excellent pitcher for several seasons without much notoriety. Still, I think Scott Boras is a bit optimistic in his contract expectations for Lowe.
Boras, according to executives with two different teams interested in Derek Lowe, is telling clubs he wants “a Zito-type contract” for the free-agent right-hander.
That’s Zito, as in Barry Zito, as in seven years, $126 million.
Derek Lowe is a better pitcher than Barry Zito, but in June he’s going to be 36 years old—a year older than the age Zito will be when his contract ends. I expect that Lowe will pitch well for a few more seasons, and I think he deserves a hefty payday; but, $18 million a seasons for seven years is a bit much to expect.
For a seven-year deal, I have Lowe looking at around $14 million season. Given that my predictions appear to be undershooting the pitching market this year—I’m used to overshooting—$18 million a year may not be to far of a stretch. However, no team should give a player this old—he’s the same age I am (gasp!)—a contract of this length. I’d go no longer than four years, and that’s pushing it. Some guys have pitched well into their forties, but it’s not a good gamble. And not to be too hard on Boras, this is all part of the negotiating process.
And though I’m a market efficiency guy, I think the pitching market is a bit out of whack right now. If I had an ace pitcher and didn’t plan to contend soon—see the Padres—I’d be selling right now.
Aside: I was looking back at an old post where I estimated Zito was worth about $17 million a season. This was one of the first estimates I ever did, and I have revised my method significantly. That estimate doesn’t fit with the numbers I have now. I just wanted to acknowledge this in case someone stumbles across the old numbers.
I don’t have much to say here except that I can’t believe all the talk I’m reading about Ryan Dempster. Sure, he’s a valuable major-league pitcher who had a good season in 2008. Are teams really thinking this guy is a legitimate front-of-the-rotation starter worth $13 million a season for the next four years?
I won’t attempt to value Dempster, because he spent 2006 and 2007 as a reliever—a reliever who couldn’t keep his K/BB > 2—so it’s difficult to predict his future from the recent past. He’ll be 32 in May, so it’s not like he’s finally getting his act together. 2008 screams “fluke!” While I believe he may be more valuable as a starter than as a reliever, I wouldn’t recommend devoting more than $10 million/year—if that—to a player with his track record. And before someone mentions “the supply of pitchers,” teams should not be willing to pay a player more than his marginal revenue product. They might pay him less, but not more.
I didn’t mean for that to rhyme. Anyway, I’m heading to Washington, DC for a conference later this week, and I’m looking for restaurant suggestions. I feel odd asking for advice about a city where I used to live, but it’s been so long and the city is so big. I’d appreciate any suggestions. I’m staying near the MCI Center and looking for breakfast, lunch, and dinner recommendations. I don’t mind catching the Metro to find a good place.
Preparing for the conference is one of the things that has been slowing me down. But, let me analyze a recent trade and signing.
— Yesterday, the Giants signed Jeremy Affeldt to a two-year $8 million deal. Based on his performance over the past two years—I normally go back three, but two seems more appropriate here—I have him projecting a value of about $4.5 million/year. I normally don’t like big-dollar reliever contracts, but this one seems spot on.
— Last week, the Marlins traded Kevin Gregg to the Cubs for minor-league pitcher Jose Ceda. I have Gregg valued similar to Affeldt, and Ceda had good numbers in High-A and Double-A last year. The problem for the Cubs is that Affeldt is only under their control for one more season, during which he’ll earn $1-2 million less than his value. Valuing Ceda is difficult, but I have been working on a method for valuing prospects, and the expected value for players similar to Ceda is around $2 million. If he has a significant major-league career, he’ll be worth much more, but there is a high probability that he will wash out. So, this seems like a decent deal for both teams, and it makes sense given the team’s operating strategies. The cost-conscious Marlins are willing to take a risk on a potential high long-term payout, and the Cubs want a certain payout now.
In the comments of the previous thread, a commenter asked that I analyze the trade of Nick Swisher and Kanekoa Texeira from the White Sox to the Yankees for Wilson Betemit, Jeff Marquez, and Jhonny Nunez. Good idea.
Swisher’s a little more known than most players of his caliber, thanks to his role in Moneyball. He’s a good player signed at a below-market contract through his age-31 season—guaranteed $22 million for the next three seasons with a $10.25 option for 2012. He had a down year last year, which is part of the reason the Yankees believe that they were able to acquire him.
“The fact of the matter is he had his worst major league season as an everyday player,” Yankees General Manager Brian Cashman said. “Because of that, that’s probably part of the reason he was in play for an acquisition. We did our due diligence and we’re hoping ’06 and ’07 are more representative of Nick Swisher. That was a risk we were willing to take on.”
To analyze the trade, we first need to analyze whether or not 2008 was a fluke. In 2006 and 2007 he posted batting lines of .254/.372/.493 and .262/.381 /.455, which were well above his .219/.332/.410 in 2008. The biggest hit was to his batting average, the most variable of the big-3 hitting metrics. His ability to walk and hit for power remained somewhat stable—a good sign. PrOPS expected an OPS of .876 compared to his actual .743, indicating more evidence of a fluke season. Also, he’s just entering typical peak years, so it’s a bit early to be expecting aging to be playing a significant negative factor. I agree with Cashman that Swisher should play more like 2006 and 2007 than 2008.
I have Swisher valued as a $19 million/year player over the next four years—well below what he will be paid. Even if he only ends up being a league-average hitter for the rest of his contract, he’ll be worth his wage.
Betemit is a player who always seems like he should be better than he is. Maybe he’ll finally live up to his high expectations—he’ll be just 27 next season despite being around forever—but I’m not optimistic. He’s between a $6–$8 million players and should get between $3–$4 million/year for the next two seasons. I see nothing special in the pitching prospects going to the the Sox, but they do have value as potential cheap major-league talent. Still, it’s not enough to compensate for the lost value from Swisher and Kanekoa Texeira.
In conclusion, this is a bad trade for the Sox, possibly motivated by an impulse to dump an asset that was poorly performing in the short run. I really don’t like when my values differ from the market; but, in this case, I think Swisher would just about have to be a complete disaster for this trade to come out in the Sox’s favor.