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November 24, 2010

Checking the Numbers

On Investment Value and Outfielders

by Eric Seidman

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 With the hot stove about to heat up and the offseason in full bloom, we are entering the time of the year where the majority of baseball articles written attempt to assess the value of a trade or a free-agent acquisition. Those articles dominate the web because the actual game of baseball is in its hibernation state and, frankly, little is more exciting than following which players are signing where, or who might be traded to whom. When conducting these evaluations it has become common practice to compare the production of the player, measured in dollars produced for the team, to the actual salary he was paid. As long as the revenue estimator is sound in logic and development, this is a fine way to begin an evaluation of a transaction, though the method is frequently used as the be-all, end-all in determining whether or not to make fun of a general manager.

A key component of these analyses that is all too often left by the wayside is the concept that talent does not always equal value. It can, and many times it will, but the two can be mutually exclusive. Alex Rodriguez has plenty of talent, but with that hefty contract his actual value to the team decreases, at least from a relative standpoint. As in, he provides value, but that value costs a great deal, taking away from the overall result. On the flipside, Chase Headley isn’t the most talented infielder in the game, but he made just $427,700 last season, providing plenty of value to the Padres in the process. This idea is why focusing on developing young talent on the farm—players who will be under team control for up to six full years—has become so prevalent: the ideal player is one that costs little but plays extremely well, theoretically increasing team revenue while not subtracting much from the bottom line. Similarly, this is what Moneyball was all about—exploiting market inefficiencies in order to get the most bang for the buck.

A major issue here is that numbers can be deceiving. A player might produce a better or worse number that, without any context, leads to inaccurate conclusions of both his talent and value. Take the difference between the leagues as an example: if AL starters generally end up with ERAs a half of a run higher than their senior circuit counterparts, and someone switching from the National League to the junior circuit sees his mark rise by three-tenths of a run, did he actually get worse? In actuality, we might consider him to have performed better because the decline in his ERA was less than what was expected given the differences in league-wide talent. Unfortunately, comments on a player meeting these specs often suggest that his performance was not up to par.

Most likely the answer is some combination of the two, but this is just one illustration of how difficult it can be to accurately gauge talent and value, before even discussing the impact certain moves can have in fantasy leagues. In fantasy leagues, Roy Halladay sees his ERA improve, and there isn’t much thought as to whether or not his value changed. In reality, his 2010 season may have added more value than his last year with the Blue Jays in 2009, but we cannot make that determination without more information about the averages in the respective leagues in those years. Metrics like WARP are designed to level the field of play in this regard, but even the all-encompassing stats carry innate flaws such as imprecise components—cough, fielding stats, cough—comprising a hefty percentage of the stew.

All of which brings me to the idea of investment value and how it will loom large with the crop of outfielders who are either on the free-agent market or are available via trades. Investment value is simply the value of an item or an entity to a specific investor. In business valuation circles it is often thought of as the auction value, as one man’s trash may be another man’s treasure. The game Paperboy for Nintendo might only be worth a dime to my neighbor, but hey, I would gladly cough up $5 to add it to my collection. I am a big nerd and, therefore, will gravitate towards nerdy items. These items will hold much greater value to me than to non-nerds. Perhaps a team believes they can put a specific player to his best use—or in a role most suitable to his set of skills—and therefore increase his value to their collective setup.

I began thinking about the conflation of value and talent when Jeff Francoeur’s name kept popping up as a potential target of the Phillies. By all accounts, Frenchy is not a good major-league player. He looks as though he should be a star, but his body type and “good face” belie poor hitting ability. To be blunt, he does one thing well—throw the ball from the outfield—which is not even a huge aspect of a player profile. He has never posted an OBP north of .338 and has a career mark of .310. Additionally, his career TAv of .258 is below average, and he is by no means a wunderkind in right field to add a decent amount of value on the defensive side of the ledger.

However, his value is not married to his talent. I am not saying Francoeur is a good player. I obviously believe the exact opposite, but in the right role and if put to the best use by a team, he could prove quite valuable. The Phillies will be going with Domonic Brown in right field to face right-handed pitchers, who account for approximately 75 percent of the innings thrown in a season. For the other 25 or so percent they will likely sit Brown in favor of a lefty-crusher. Matt Diaz, who may be non-tendered, is an option, as is Francoeur. Though his career slash line of .268/.310/.425 leaves much to be desired, Francoeur has hit .299/.343/.481 against lefties.

No, that is not Pujols-ian, and it isn’t even guaranteed to be repeated given that the numbers were produced in a smaller sample—under 1,000 plate appearances—but he might be the poster child for how value and talent are two very different animals contingent upon the specific role on a team and how the player is best utilized. He is not a very talented player, but if severely limited to a role that allows him to face strictly southpaw pitchers, doesn’t it stand to reason that his numbers will improve? A team putting him to use in this capacity could extract the strengths without being forced to live with the weaknesses. Rick Ankiel and Andruw Jones are two more examples of players whose overall performance is not too sexy but who could add value in a specific role to a team, thereby making it OK—and not necessarily worthy of making fun of a GM—to pursue them.

Certain names have popped up in talks lately that are of another variety. Justin Upton, for instance, has the potential to be insanely valuable, as he has proven he can produce at a high level at a very young age, and is signed to a very reasonable contract. His value to interested parties really depends on where they are in the win-now or rebuild spectrum, as he will cost a great deal in terms of mortgaging the farm. Then there are players in the middle, like Josh Willingham, who will not be overly expensive in terms of pure salary, but who might not be considered valuable enough for a team to trade a few prospects and then pay him a pretty decent salary.

It will be very interesting to monitor who goes where and what transpires over the next couple of months, but hopefully this will serve as a disclaimer of sorts for digesting the articles that attempt to quantify value from transactions. Past performance helps shape our perception of both talent and value but without discussing the investment value we will leave ourselves open to the possibility of severely missing the boat. Certain players might not be talented, but if put to their best possible use, they can provide an ample supply of value to their new employers.

Eric Seidman is an author of Baseball Prospectus. 
Click here to see Eric's other articles. You can contact Eric by clicking here

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