How should we evaluate star-for-prospect trades?
I’ve been thinking about this lately, since it is all the rage this offseason. In fact, it’s become standard operating procedure ever since free agency came into existence and service time became crucially important. So-called “challenge trades,” where teams exchange players of similar perceived value, are now extremely rare. Why give up existing value when you could just as easily sign a free agent, or, at worst, trade future value (i.e. prospects)?
And thus leads us to the modern day trade market, where futures are often packaged in exchange for more mature commodities. But how can we actually assess these deals? One popular way is to estimate the WARP and salaries of each of the players, and pronounce the winner and loser based on which team gets the most value per dollar spent.
But this method isn’t very sensible. If the Tigers win the World Series next year behind Miguel Cabrera and Dontrelle Willis, the deal will have already generated enormous benefits for the team, even if both players flop afterwards.
The best way to look at these scenarios may be to estimate the number of playoff appearances it will help generate for each side, relative to the money it spends. Needless to say, this isn’t a simple task, and, to be honest, is not something I would have the patience to formulate. But as a general paradigm, this works.
Let’s use the Cabrera deal as an example. The Tigers’ will likely see a payroll boost of about $20 million in 2008 due to the trade, and are upgrading their talent-base by at least five wins (being relatively conservative). For a team that won 88 games last year, this is a very significant move in the short term. If the Tigers sign Cabrera to a long-term deal before he hits free agency, the deal only looks that much better from Detroit’s perspective.
From the Marlins’ perspective, it is less clear. Could they have signed Cabrera? We’ll never really know. And how do Cameron Maybin, Andrew Miller, et al affect their postseason chances in 2010 or 2011? Would they have been better off keeping Cabrera and Willis and possibly shooting to make a run in 2009? It’s tough to say.
And what about Johan Santana? Aside from the inherent risks of signing a pitcher long-term, is it really worth it for the Yankees to even give up Phil Hughes? Ready-now prospects are no longer futures; they represent real short term value. Santana may be better than Phil Hughes over the next six years, but $20+ million better? Doubtful.
There are other issues, however. If the Red Sox get Santana, this hurts the Yankees’ chances of making the playoffs. And this is also one of the few cases where it could be argued that a single player could make a substantial difference in the postseason (although I’m not buying that argument). The best scenario for the Yankees could be to hold on to Hughes, and hope Santana ends up in the National League.
With some research, this model could work very well. It explains a number of things, such as why trading for Matt Morris when your team is far out of contention makes no sense. I would love to see all of this expanded on.
Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com
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