When Frankie Frisch, Hall of Fame infielder and manager, became a broadcaster, he became known for bemoaning walks. “Oh, those bases on balls,” he would cry whenever a pitcher put his team in a tough spot by throwing four out of the strike zone. If he was around today, he might be saying, “Oh, those compensatory draft picks.”

When the Lords of Baseball built that poison pill into the free-agent system, it wasn’t immediately understood by general managers just how deadly it was. In fact, it took years for them to realize the punishment they were inflicting on their own farm systems. To supply just a couple of egregious examples, in January 1982, the Montreal Expos signed a 29-year-old, switch-hitting catcher named Tim Blackwell. To that point in his career, which had but 29 games and 61 plate appearances left to run, Blackwell had hit .230/.332/.306 in 397 games. He had done a little bit better than that with the Cubs in 1980 and 1981 because Wrigley Field had been kind to him. The Expos weren’t desperate for a catcher; Gary Carter was the starter and he rarely took a day off. Yet the Expos signed Blackwell, and the Cubs received their first-round pick in that year’s draft, the 17th overall.

The Cubs didn’t do anything with the pick, but the point is not that they received it but that the Expos lost it for little gain and it is impossible to know what they would have done with it. For the record, in a draft in which Shawon Dunston went first overall and Dwight Gooden went fifth, the Cubs picked college shortstop Tony Woods, just after the Red Sox drafted Sam Horn, himself a compensation pick (for the loss of Frank Tanana to the Rangers), and watched him fail to hit over the next seven seasons.

The Orioles gave a more egregious example of self-inflicted wounds to one’s farm in the mid- 1980s. For two straight years, 1985 and 1986, they lacked first-round picks, in the former year giving away all their picks in the first three rounds. That turned out to be a particularly painful choice, because the 1985 draft class was one of the best ever, stocked with fine players already bloodied in the 1984 Olympics. The first round included, in order of selection, B.J. Surhoff, Will Clark, Bobby Witt, Barry Larkin, Barry Bonds, Pete Incaviglia, Walt Weiss, Brian McRae, Joe Magrane, Gregg Jefferies, Rafael Palmeiro, and Joey Cora, as well as Cameron Drew, who put up outstanding numbers in the minors until a knee injury ended his career at 24, while the second round held Bruce Ruffin, Mike Schooler, and Randy Johnson (John Smoltz was hiding down in round 22). Of 54 picks in the first two rounds, 31 made the majors.

The Orioles couldn’t draft in the first round because they had signed 33-year-old center fielder Fred Lynn. Lynn was an excellent player and had some good baseball left to play for the Orioles, so the decision wasn’t without its rewards, though they weren’t equal to a first-round pick in that particular draft. The Angels, who received the compensatory pick, the 19th, aimed a dart at this forest and missed all the trees, taking right-hander Mike Cook  from the University of South Carolina. Cook did make the majors, but briefly and unimpressively (5.55 career ERA). Jefferies went to the Mets with the next pick, and the Cubs took Palmeiro (a compensation pick from the Padres for losing very tall reliever Tim Stoddard) at 22nd overall.

The Orioles weren’t done not drafting, because they had also lost their second-round choice for signing 37-year-old outfielder Lee Lacy away from the Pirates. Lacy had played very well for the Pirates over the previous six years, hitting .304/.357/.438 in 638 games. Arguing against putting too much faith in those numbers were his age and the type of player he was, a Randy Winn-style hitter who was going to lose most of his offensive value as soon as he lost a few points off his batting average, which he did, consecutively, over the next three seasons. Like the Angels, the Pirates missed with their compensatory pick, taking a high school catcher, Damon Hansel, who didn’t hit and never rose higher than the low-A Sally League. The pick fell neatly between two future major leaguers, future Cardinals utilityman Tim Jones and sometime starting catcher Scott Servais. Earlier, Lacy had moved as a free agent from the Dodgers to the Pirates, costing the Buccos the 16th pick in the first round of the 1979 draft. The Dodgers used that pick to land Steve Howe, the 1980 NL Rookie of the Year and an outstanding pitcher when not sidelined by his personal demons.

The Orioles still weren’t done saying “You can’t take it with you” and giving it all away. They had signed another Angel, frequently-injured reliever Don Aase, to serve as their closer. Aase proved to be a shaky endgame option while maintaining his prior fragility. There was not a lot of great future major-league talent in the third round—Tino Martinez was the best player taken (Red Sox), but did not sign—though eight players made it to the top. The Angels took Chris Collins, a college right-hander, and saw him stall out at Double-A with a career 6.01 ERA.

The Orioles and their free agents went 83-78 in 1985, dropping two games from the year before. Undaunted, they went back to the free-agent well and picked on the Angels once more, taking everyday utilityman (which in this case is a nice way of saying “positionless”) Juan Beniquez, 36. Beniquez was a batting average guy who had hit .293/.342/.397 over five seasons in Anaheim. As an older player whose value was entirely concentrated in his batting average, he presented the same risks as Lacy. In any event, Beniquez actually performed well for the Orioles, or as well as a player without any defensive value can, hitting .300/.372/.397. This performance, too, cost the Birds a first-round draft pick, this time the 16th overall of the 1986 draft.

This draft wasn’t quite as special as that of the previous year, but it’s hard to top the first six picks: Jeff King, Greg Swindell, Matt Williams, Kevin Brown, Kent Mercker, and Gary Sheffield. Bo Jackson, who had been drafted twice previously, including by the Angels, who took a 20th-round flier on him in 1985, lasted until the Royals’ pick in the fourth round. The Angels actually scored with their comp pick, though he never pitched for them, selecting future 1,000-game reliever Roberto Hernandez. Three years later, with Hernandez struggling to stick at Double-A, they packaged him with minor-league outfielder Mark Doran and sent him to the White Sox for middling outfield prospect Mark Davis.

These maneuvers had a definite impact on the collapse of the Orioles, which reached its nadir with a 54-107 record in 1988. Two regulars on that team were infielder/outfielder Pete Stanicek and pitcher Jeff Ballard, the only two players from their 1985 draft to make any contribution to the club. Of course, giving away picks doesn’t necessarily lead to the quick collapse of a club if you’re choosing the right players. The Yankees went without a first-round pick every year from 1979-90 with the exception of 1984, and they missed with that pick (they did have a first-round supplemental pick in 1985; that pick also missed). During that period, the Yankees signed Tommy John, Rudy May, Dave Winfield, Don Baylor (the Angels used the compensation pick to draft Wally Joyner), Jack Clark, John Candelaria, and Steve Sax. They also had signings that ranged from indifferent to catastrophic, including Bob Watson, Dave Collins, Steve Kemp, Bob Shirley, Ed Whitson (thereby closing themselves out of the first round of the great ’85 class; Cora went in their spot), Al Holland, Gary Ward, Rick Cerone, and Jose Cruz.

The Yankees didn’t draft until the fourth round in 1980, 1983, and 1988. Despite this, they won more games in the 1980s than any other team, though they didn’t appear in the postseason after 1981 and didn’t actually win any championships due to an inability to cement their roster of imported stars with solid second-line talent, the kind that could have come out of the draft had they made any picks or been more successful with those that they did have. Finally, aided by collusion, they ran out of quality players to sign, the farm system became a vast wasteland, and the club collapsed at the end of the decade. 

Some of today’s best players have entered the professional phase of their career as compensation picks. Nick Swisher was selected by the Athletics with the pick received from the Red Sox for Johnny Damon. Adam Wainwright became property of the Braves after the Diamondbacks signed Russ Springer. In the 2001 draft, the Mets used the Rockies’ pick, which they had due to the defection of Mike Hampton, and spent it on Aaron Heilman. That was no big deal, but they also received a supplemental pick and used it to snag David Wright.

As with most draft picks, many of the compensation picks were used on players who either failed to develop or became fringe types at best. However, draft picks have a wonderful possibility about them that free agents do not. If you’re going to sign a Reggie Jackson or Alex Rodriguez in the prime of his career, chances are the upside will exceed anything you might have received in the draft. To lose a pick to sign Russ Springer is to effectively foreclose any number of brighter futures. 

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Is it worth it to offer arbitration to any Type A or Type B free agent, taking a chance that they won't accept it, in exchange for the draft picks you get when he signs with another team? For example, the Blue Jays offered Scutaro and Barajas arbitration, and received draft picks when they signed elsewhere. Houston did not offer Tejada compensation... and got nothing. Even if Tejada had accepted, they could have traded him and received something in return. I assume they decided the potential arbitration cost was too high (and in his case it may have been). Or others? Is the gamble worth it? Even if they release the player in spring training... What's the dividing line between the value of a draft pick and cost of keeping a player who accepts arbitration even when you don't want him to? When is it worth it?
The Braves offered Rafael Soriano arbitration this off-season only to have him accept. They were forced to trade him for Jesse Chavez, a back-of-the-bullpen pitcher who has managed to make close games not-so-close with alarming consistency this year.

All in all, that didn't work out too well for Atlanta. Still, in general concept there doesn't seem to be much downside assuming you can move the player at whatever 1-year salary they get.
As I recall, a player can only have his salary cut by 20% in arbitration. According to baseball-reference, Tejada's salary this year is barely more than a third of what he made last year. Considering he signed a 1-year deal prior to spring training, I think he knew (or had some idea) of his market vaule (as opposed to someone like Jermaine Dye who held off on signing a contract presumably because he thought his services were worth more than what he was being offered), so he'd surely have accepted arbitration knowing it was in his best financial interest. Consequently, Houston would be paying abut $12 million for a guy whose market value is half that.
This might be the textbook case of when to NOT offer arbitration.

The 20% rule only applies to pre-free agency arbitration players.
Then my point is moot.
But we all learned something, which is a valuable use of time.
Are you sure about that? I believe it may also apply to post free-agency arbitration players who don't yet have the additional set of five years' service time that makes them fully free-agent eligible again.

One post-FA player I know who was coming off a three-year deal a couple winters ago was in a dilemma because he didn't know whether the 20% maximum arbitration pay cut was calculated according to the Year 3 salary standing alone or according to the average annual value of the entire three-year deal. He and his agent were told it was the latter and declined arbitration accordingly.
O's fans now refer to those years as the good old days.
Your brief mention of Bo Jackson got me wondering if anyone has taken a look back at Bo Jackson's baseball career? I've personally never had the ability to separate the modern-day legend from what kind of player he was or could have been. Have you or someone else written something to this effect?
The Orioles free agent signings seems to show that the underlying issue with free agent compensation is how Type A and Type B players are determined. There has to be a better method.
I could be wrong about this--I don't have the figures in front of me--but I'd think that the financial difference between a second-line free agent and a mid- to late-first-round draft pick was smaller then than it is now. When the choice is between signing a utility infielder for $4 million and having a potential superstar's rights for years for the same money, it's a no brainer. I'm guessing the costs were more closely aligned then.
Doesn't this kind of overlook the main benefit teams get from this system, which is to deflate FA salaries? Deflating FA salaries benefits every team. This also creates a lot of free rider benefits for the teams as they all benefit directly and indirectly from reduced player salaries. So the real question is, do the reduced salaries make up for the loss of draft picks?

Any chance the owners drop compensation for FAs in the upcoming collective bargaining negotiations?