From a 2007 Future Shock report on a team’s top prospect:

Year In Review: He is a high-ceiling outfielder, and was holding his own as an 18-year-old in Double-A before finally getting shut down with a hand contusion that was bothering him all year.
The Good: To hit .271 in Double-A when you are as old as most high school seniors is an impressive feat. He has outstanding bat speed and tremendous power potential to go with a rapidly improving approach, and could develop into a middle-of-the-order force if everything falls right. He's a good athlete with average speed and a solid arm.
The Bad: He is far more about what can be at this point. He puts on a show in batting practice, but he's yet to bring his power into game situations. The team has rushed him up through the minors, but injuries have limited him to just 139 games over the two years of his career. While he's playing center field now, his range and instincts are well short of what is needed to play the position at the big league level, and he'll move to a corner—likely before he gets to the big leagues.
Perfect World Projection: Scouts have varied opinions on him, but there are a good number out there who see him as an impact player when he can stay healthy and develop.

In 2007, he was ranked as high as the 22nd best prospect in baseball. In 2008, he was bumped up to 20th, but by 2009 he slid to 30th, then to 77th, and now Fernando Martinez has been released by the Mets and claimed by the Astros. A player that was once considered one of the 20 best prospects in baseball owns just 131 at bats in the major leagues with a .183/.250/.290 slash line at the age of 23.

Rookies in fantasy baseball are like junk bonds because of their high default risk. After all, is there any other classification of player in fantasy baseball that has a cool yet unfortunate acronym like TINSTAPP attached to it? Yet, those junk bonds can also, at times, yield some amazing returns. Those times can sometimes be few and far between, but that is what is so enticing about rostering rookies in March drafts. Here is a list of failed prospects that received at least one ranking in the top 10 from Baseball America from 1990 to 2007; how many of them did you own at one point or another?

I will admit to owning at least four of those players at one point myself, and Wood as recently as this past AL Tout Wars. Wood is a great example of how people can get too tied up in potential and overvalue a prospect. In my local league, the same guy owned Brandon Wood each of the past six seasons. There is not a guy in our league that did not try to trade for Wood when his status was high, but we could never meet that owner’s asking price. We have a limited number of keeper spots each season, and yet Wood still managed to hang onto one of those spots for the last six seasons. 

If you look back into your own fantasy baseball history, I am certain each of you has that type of player in your own closet as you have fallen victim to hanging on to the dream for too long. My own white whale was Ian Stewart, who I rostered at $2 the year before he broke out in Asheville, turning down more trades than I care to remember in the years since. I eventually traded him in 2007 as part of a deal to acquire Luke Scott, passing him on to someone who believed in Stewart more than I did.

Even if these rookies do get to the majors in the season in which we draft them, the playing time becomes a factor. Picking a random year, say 1972 (my birth year) as a starting point, we find that from 1972 to 2011, just 169 hitters saw at least 400 plate appearances in their rookie season. If we go back to just 1990, we find that only 99 hitters have seen that much playing time in a single season. For AL- or NL-only players, that is not as bad as it is for mixed league players where harvesting massive amounts of plate appearances is a big part of the game.  On the pitching side of the ledger, 173 rookies have made as many as 20 starts in their rookie season, and if you are looking for 20 saves in a rookie season, forget about it. Nine pitchers have saved as many as 20 games in their rookie season with Javy Guerra and Craig Kimbrel most recently pulling off the feat.

The junk bonds are appealing, but the research into the risk one is taking by targeting or clinging to rookies too strongly is very strong. Scott McKinney of Royals Review did a fantastic piece early last year on the success and failure rates of top prospects.  For his work, he used the Top 100 lists from Baseball America from 1990 to 2003 and set a benchmark of 2.5 career average WARP for labeling a prospect “good.” He found that just 22 percent of positional prospects qualified while just ten percent of pitchers made that list. In the same piece, a career average WARP below 1.5 earned a bust label, and that applied to 63 percent of the positional prospects and 77 percent of the pitching prospects.

He also found that while nearly 70 percent of prospects fail, positional prospects ranked in the top 20 have a 66 percent better chance of becoming better prospects than their pitching counterparts.  I highly recommend reading the entire piece as you decide how to construct your reserve and dynasty draft strategies, as it will help you get a better feel for the risk associated with certain types of players.

Prospects have a high failure rate, and those that do make it fight like salmon swimming upstream to get consistent playing time. Every once in awhile, you can land that big fish that makes the pick worthwhile, but there is a reason why I have adopted two fantasy credos:

  1. Never, ever, let a prospect hold up a trade for a major league player
  2. When in doubt on draft day, go with experience over upside
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That is no fun at ALL. NOW how am I going to feel smarter than everyone else? (bear in mind that if folks can't see I'm smarter than everyone else, it makes it much less fun)
Sounds like good advice for real GMs, too
Indeed it is....and that has been addressed in the past by Victor Wang. A good chart of his work to value prospects can be found here
Nice article, Jason. I suspect Victor Wang's analysis may need a refresh given the new CBA, no? While the market for free agents may not have changed dramatically, the cost of acquiring prospects via the draft has.
FWIW, this is more or less the 'Brian Sabean' mantra which has driven Giants fans and stats geeks crazy for years, although the part the really drives people crazy is that Sabean tends to over value experience and under value actual performance leading to big contracts for players that can't be reasonably expected to earn them.
The 70% failing rate is startling and should give all of use reason to pause. thanks
Reading this, I kept picturing Brian Matusz, who I had in Scoresheet last year (AL-only). In spite of it all, I am somehow still considering holding on to him. Oy.
In essence, it is simply a math problem. When we understand that, the idea that there could possibly be 100 “top” prospects is silly. One needs to take into account that the are only 30 teams, which at most have only about 17 players with a regular job. The other eight spots (or more)come and go between backups, hopefuls, and fringers. That means there are only 500 or so regular players in all of baseball. Of course, not all regulars are good, let alone All-Stars. Even still, we get a new list of 100 “top” prospects every year. But there is just no way that anywhere close to 20% of the regulars will lose their jobs to make room for these 100 rookies. Publications have to create these “top” prospect lists in order to justify their existence and sell copies or gain subscribers.
I'd like to see the same list over the same period, but made up of players who were top 5 or top 3 players. Or what about a list of players who were drafted 1st or 2nd overall... At some point it pays to take a risk and if you have done your homework then you limit your risk. If your team is a keeper team and it's terrible, you might never get a change to upgrade your team as much as when you take a chance on an unproven player. And if you want to win your league you better have at least a couple of Stars.
Here's an example of what I'm talking about. Here are the top 20 ranked prospects for 2010. Now limit your selection to the top 10 or top 5 of this list... (also keep in mind that even veteran players suffer injuries and have down years) 1. Stephen Strasburg, RHP, Nationals 2. Jason Heyward, OF, Braves 3. Neftali Feliz, RHP, Rangers 4. Jesus Montero, C, Yankees 5. Mike Stanton, OF, Marlins 6. Pedro Alvarez, 3B, Pirates 7. Desmond Jennings, OF, Rays 8. Carlos Santana, C, Indians 9. Buster Posey, C, Giants 10. Aroldis Chapman, LHP, Reds 11. Chris Carter, 1B, Athletics 12. Dustin Ackley, OF/2B, Mariners 13. Jeremy Hellickson, RHP, Rays 14. Ryan Westmoreland, OF, Red Sox 15. Martin Perez, LHP, Rangers 16. Kyle Drabek, RHP, Blue Jays 17. Justin Smoak, 1B, Rangers 18. Brian Matusz, LHP, Orioles 19. Alcides Escobar, SS, Brewers 20. Michael Taylor, OF, Athletics If you look at the 2011 list it's pretty much the same in terms of the difference between 1-5; 1-10; and 1-20.
Yes, don't overvalue rookies. Don't bid $15 on Aroldis Chapman. However, if you're smart, you can leave a pitcher spot empty for the end of the draft, when no other team has an open pitcher spot and can't outbid you. Then you can grab a rookie pitcher for a buck and wait until his June call-up. Or do the same with Starlin Castro. I've picked up Castro, Hanson, Votto, Bruce all a few months early in very deep leagues this way. You may lose an active roster spot for the first week of the season, but you've got excellent prospects ripening on the vine.
I believed, and still do, in this philosophy. I am compelled, however, to admit rostering a $4 Geoff Blum as my final player in a 2001 roto draft instead of an up and coming rookie that I honestly did not know that much about and decided not to trust. I wasn't alone, as that player went undrafted in a 12-team league. That player was Albert Pujols.