Fan Mail Friday, August 21th

After a trip to the west coast which featured no internet in the hotel and then an extra inning game Friday night before a 5am (PT) flight Saturday morning before a 7pm (CT) game followed by a Double Header Sunday, this was tough to get out on time.  Sorry for the wait.  I have been asked this question a number of times in person, and got it in my fan mail, so I decided to answer it.  I went a bit long on it, so this was the only question I got to this week.  Keep the questions coming to fanmail@discohayes.com and I’ll keep on answering.

What do you think about the deal that Stephen Strasburg got without having pitched to a Major League hitter?  Do you think anyone is worth that kind of money coming out of college?
Chris H., Glendale, AZ

Chris, you ask a good question, but unfortunately you have put me in an awkward position a few times over.  First, as an “insider” and someone invested in being paid to play baseball, this question is a bit tough to answer honestly.  More importantly though, with a name like Chris H., you are undoubtedly going to raise questions about whether or not you are real or if I just made you up [1]
.  Which makes it that much more awkward were I to make up a question which put me in an awkward position to answer.  Perhaps that’s awkward enough people will realize I would never do that to myself.

As background, I’ll lay out all the facts I know on the subject: this guy has never thrown in a Major League game and he just got paid $15,100,000 [2].  That’s it.  I haven’t seen Strasburg throw, so keep that in mind as I answer this.  I don’t know his stats all that well either.  And at the time of writing this, I currently don’t have Internet access at the hotel, thanks La Keentah [3], so I am unable to do a whole lot of research on him.  Or is it Him?  Either way, I will do what I can to answer honestly.  I will mostly think out loud and hope my thoughts will be of interest and perhaps lead to new insights on your part.

Now that I’m done with my disclaimers, I will go on to answer your question.

What do you think about the deal?

I think it’s insane.  Before you start nodding your head and think, “There, see!  Even the players think it’s ridiculous…” keep reading.

I do think it’s insane, I do think it’s way too much money upfront for someone coming out of college.  I also am, of course, insanely jealous, but that’s beside the point.  I know first-hand how difficult it is to make it to the big leagues and how difficult the grind of a daily professional baseball schedule is.  The difficulties reach well beyond the batter 60-feet 6-inches away.  Both on and off the field, being a successful professional is more than velocity and pitch location.  I think back to my team in 2006 which was full of recent draftees and only a select few of us are still in the game.  The attrition in this profession is worse than Freshman Organic Chemistry.  As I said before, I don’t know much about Strasburg, but there are a lot of variables to him being a success.

What I do know about him is he has incredible “stuff”.  I have heard he throws ridiculously hard and locates and has great off speed pitches.  He isn’t just a hard thrower who an organization could plan on teaching how to pitch.  He already knows how to pitch and does so as well, now, as many major league pitchers.  He is polished and a can’t miss prospect.  He’s potentially a major league caliber pitcher right now.  A “no brainer”.

Well, there have been “no brainers” and can’t-miss guys before, and in the past some of them have missed (maybe because they had no brains).  I don’t want to put out a list of biggest busts because that doesn’t seem fun and I’m sure other people have done it plenty of times over in the past, but suffice it to say, there have been a lot of highly touted players ready to “step in to the majors right now” that haven’t panned out.  One of the most prevalent indicators of how cool a game baseball is is that it’s so hard to evaluate which players will have success.  It shows baseball is more than a game of talent or ability.  In the NFL there are seven rounds of the draft.  And realistically, the difference makers are all taken within the first few rounds.  Yeah, Tom Brady this, Tom Brady that, but dimples aside, let me make my point.  The NHL has seven rounds as well.  In the NBA there are two rounds.  Two rounds.  How can baseball have 50 rounds and the other major sports have so few?  Is it that much harder to evaluate talent in baseball?  No.  But in baseball the correlation between talent and success is not nearly as certain as other sports.  It is not at all uncommon to know a basketball player is going to be an NBA star when he is 17 years old.  In baseball, it happens (thanks A-Rod for weakening my argument), but extremely rarely.

From what I’ve heard Strasburg’s talent is undeniable.  The Nationals evaluated this, but paid him a seemingly ridiculous sum banking on his success.  For their sake let’s hope the talent correlation with success holds more like it did for LeBron than it did for Matt Bush or Brien Taylor or Steve Chilcott (the notable #1’s who didn’t even make the Majors).


Do you think anyone is worth that kind of money coming out of college?

Yes, I do.

Wait, you just said all this stuff about how it was insane to give him that much money and how he could be a terrible investment.  How can you turn around and answer “Yes” to this second question?

There are a few approaches I could take here, and in my opinion (which is the only opinion expressed [4] on my blog), they all point to the answer “Yes”.  As crazy as it sounds, I think Strasburg very well may be worth that kind of money.

If you are a baseball stat geek and in your mind “WAR” first and foremost means “Wins above Replacement”, this section of my answer is for you.  Sort of.  If you really want to get that in-depth with it, read stuff that’s more interesting and much better thought-out other places like Rany Jazayerli did for Baseball Prospectus or this from hardballtimes.com.  If you want the Disco spin, I will give it quickly and hope even you non-stat-geeks can enjoy.  Wins Above Replacement (WAR) is a stat that indicates how many wins a player is worth above a Triple-A replacement at his position.  For example, it would attempt to answer the question how many extra games would the Yankees have won if A-Rod were healthy and in the lineup to start this year?  Granted it’s a tough question to answer, but trust me, there is a ton that goes into these calculations.  And if you look on fangraphs.com at a sorted list of which pitchers this year have the highest WAR, it’s a who’s who of sorts, which should give credence to the calculations.  At the time of writing this, Lincecum is currently the top pitcher on the list with a WAR of 7.2  In other words, the Giants have won 7.2 more games this year than they would have if Lincecum hadn’t started a game and a Triple-A pitcher was filling in for him instead.  I won’t go into the math behind it here, but I will use the results in a quick, completely dumbed-down manner for even the non-statistician.

But first, I will throw another number out there for you.  The value of winning one game is worth approximately $4.5 million on the open market to a major league franchise (if you visited that fangraphs link, you’ll see they’ve used approx. $4.5 million on the WAR table to come up with a dollar value).  Again, you ask me how that is calculated and I will tell you to dig around online to find it (I’ll give you a hint, it’s not as simple as Revenue / Wins), but it takes into account added ticket sales and concession sales and merchandise sales and TV revenue to spit out a number for how muc
h a win is worth to a franchise.  Granted, getting a win on the last day of the season to finish 63-99 instead of 62-100 is not as valuable as the difference in finishing 90-72 vs 89-73 which may mean the difference in a playoff birth.  But again, people much smarter than me (yes there are a select few, and if they aren’t, they disguise it behind hours of free time spent crunching numbers) created this value so lets use it.

Alright, now we are ready to go.  The Nationals will have made a made a good deal if, over the four years of his contract, Strasburg is 3.36 wins better than a replacement pitcher (at $4.5 million, 3.36 wins is worth $15.12 million).  That comes to .839 wins per year for four years.  Right now, the Nationals have 4 starting pitchers who have surpassed the .839 WAR threshold already this season: Jordan Zimmerman (1.9), John Lannan (1.2), Craig Stammen (0.9), and Ross Detwiler (0.9).  And there’s still a quarter of the year to go.  If, in response to this question, I asked you if Strasburg had the chance to be the next Craig Stammen, would you have said yes?  You probably would have asked who Craig Stammen was and then said yes.

For the people who didn’t run to their junior high math class with their binder already out of their backpack in excitement, here’s some more down-to-earth reasoning.

I can think of two paths of reasoning from here.

Reasoning A:

You asked if anyone is worth it.  All signs point to Him being better than anyone ever at baseball, but lets just assume he isn’t.  Is there anyone in the majors right now who played in college and is now worth more than $3.775 million per year?  That’s a ton of money, yes.  But the market would certainly indicate there are plenty of guys in the majors right now who are worth more than $3.775 million per year.  So, if there’s anyone who played in college and then has gone on to be worth over $3.775 million per year in the Majors, the answer to your question–it could be argued–is “yes”.  Now, the Nationals have Strasburg for the next four years, not four years in his prime, so maybe that changes things.  But names like Longoria, Lincecum, Verlander, Price, et al could quickly help this case.  Even if he is worth nothing his first two years and then $5 million the third year and $10 the fourth, it was a good signing for the Nats.  I’m not prophesying he will be, that’s not my job.  All I’m saying is:  it’s possible.  Other, seemingly lesser mortals have been worth it.  Will Tim Lincecum be worth $15 million over his first four years to the Giants?  If you’re struggling to answer this one, I’ll give you a nudge.  Fangraphs says he’s worth $32.5 million through the first of THIS YEAR so far (no, this doesn’t discount anything Fangraphs has to say as being bloated, it’s just he’s that good).  Oh, and did I mention Lincecum came out of college?  It is entirely possible Strasburg won’t be worth $15 million, but it’s entirely possible he will (plus or minus that pesky “point one”).

Reasoning B:

It always is important to look at things in perspective, and a number like $15.1 million is easy to take out of perspective, because, after all, it’s insane.  I now make $1,050 per paycheck (before taxes) for ten paychecks a year.  That’s $10,500 for the entire year (and it was much lower when I was in the lower levels).  How can I put $15.1 million into perspective?  How can–god forbid this is actually happening on my blog–Joe the Plumber put it into perspective?  It seems outrageous.  And at a glance it is.  But think about it a little more.

The price of things can be difficult to fairly assess.  Lets say you are debating buying something.  If its price is less than the value of the inconvenience of not purchasing the item, you should buy it.  I’ll give you an example a friend of mine shared with me.  He had been mailed a contract to play baseball in France and had to sign it and mail it back to France.  He went to the post office worrying it would cost an arm and a leg.  After mailing it from the post office, he called me and asked how much I thought it cost.  I think I guessed $60 with a chuckle.  It was $1.89.  A dollar eighty nine!

Without the $1.89 option, my friend could have hopped on a plane or boat and deliver the contract himself.  Which, despite Southwest’s “no hidden fees” policy, I doubt he could have done for less than $1.89.  Of course mailing it was more than cost-effective.  If the Nationals didn’t sign Strasburg but instead wanted to sign a replacement pitcher, odds are they would have had to pay more than $3.775 million per year.  To get a number one starter in the major leagues can cost you easily over $10 million a year.  If you don’t believe me, go here to check out some of the names you know and see what they make.

   This may be true, but Strasburg isn’t ace caliber, he hasn’t proved it yet.

OK, maybe they wanted a guy who throws 100mph with plus off-speed pitches.  Well that’s gonna cost you, too.  Who else does that?  Verlander, maybe?  $3.675 million (and that’s through arbitration, not free agency…and I’m willing to bet Justin has a pretty nice raise coming here shortly).

    Yeah but you said so yourself, it’s not stuff, it’s how effective a pitcher is.

Perhaps, but the Nationals are running a business and, though ideally winning is a large part of it, we are talking dollars and cents here (mostly dollars) and whether or not Strasburg is worth it.  If he doesn’t add to wins and losses (though earlier arguments show he doesn’t need to add to wins by that much to be worth it), he is a big name now and I’m sure the Nationals are hoping people will pay to come see him pitch.  A household-name starting pitcher in the majors will, again, easily run you over $10 million per year, which, again, is way more than $3.775.

When I told you about my friend having to “decide” between flying to France or mailing the contract for $1.89, it was a “no brainer”, right?  He was saving thousands of dollars.  Using the same reasoning, the Nationals may be saving millions by going with Strasburg for $3.775 million per year.  That’s a no brainer a thousand times over, right?

Another way to look at the value of mailing the contract to France would be from the postal carrier’s perspective.  If it marginally cost them less than $1.89 to mail the envelope, then they are making a good deal by charging $1.89.  Assuming a long-standing company would not be in business if they consistently lost money, they must have a positive marginal revenue from charging $1.89.

Will the Nationals make money off Strasburg if they pay him $15.1 million?  Well, this isn’t as easy a call as the $1.89 the postal carrier charged, but you’d have to assume there has been some thought that went into it.

Again, it has to be in perspective.  Does it make sense the Nationals will benefit on spending $15.1 million on a guy who’s never faced a Major League hitter?  No.  For all the reasons listed above, there’s a chance this will be a bust.  But does it make sense a hot dog and a beverage costs $12 at a major league park?  No.  Does it make sense tickets cost $50?  How about parking for $35?  What about 1].



[1] I swear I did not make this person up. [back]
[2] I wrote it out fully so as to not neglect the “point one”.  I make less than point one of “point one” per year, so I become ornery when people say “He got signed for fifteen million, can you imagine that?”  I can’t imagine being signed for “point one” let alone 150 times that! [back]
[3] I have changed the name of the hotel to protect the innocent. [back]
[4] On days that don’t start with Wednesda. [back]

7 Comments

disco,

1. you make an excellent argument. it really boils down to IPO mentality (http://www.efmoody.com/investments/ipo's.html) — spendspendspend up front in the hope you hit a microsoft or google launch instead of neomagic or vonage. as you note, if, IF s.s. wins the games, then everything works out fine for the nationals, who, after finally getting an owner and beginning to chuck the bowden cincy reject mafia, stand a reasonable chance of turning things around.

however, there’s always a joel zumaya out there. or oliver perez. or (gulp!) mark wohlers. a lot of kids who throw this hard shred their elbows. nolan ryan was a freak of nature. clemens may have been a freak of nature but we’ll never know for sure now what was his and what was hop.

either way, boras makes out like his usual bandit. i don’t begrudge him the money — he’s extraordinarily good at what he does. besides, he had to make up for a-rod firing him. baby needs new shoes.

2.) please please please tell mlb.com that their html preview below doesn’t jive with the spacing upon e-publication. it doesn’t seem to have rhyme or reason — one time one html space will do what two should, and vice versa. i’m counting on you — you’re a tech guy.

3.) did you really run to math class with joie d’vivre? do you freehand-graph functions with aplomb? would you tutor me in finite math and calculus this fall so i can get into med school? i haven’t had math in ten years, i had numbers anxiety then and i’ll confess, i’m petrified. if i promise to specialize in orthopaedic surgery and sports medicine and give you free bone scans, MRIs and ligament replacements for life, will you tutor me? i would so owe you. i do have the creative writing master’s, too, though, so if you need a free editor for the book (which sounds like a terrific pitch, btw), i will barter for numeric nollidge (which i found out, in iowa, they say the big “n” near nebraska’s football stadium stands for).

4.) seeing you pitch 3 2/3 innings (!) and getting a signed “discoball” was the highlight of my trip out west. i’ll download game pics tonight and get them to you. my dad and my buddy were amazed at how cool you were — i, of course, am a true believer and never had any doubt. i wasn’t b.s.’ing about talking your blog up at the game — people were asking me why i was going so crazy with the “go disco” when you came into the game and i was obliged to tell them all what the disco moniker was all about and why i had chosen to come all the way from cincy to a minor league game in omaha. i left out the part about omaha kinda sorta being on the way back from denver — lent more gravitas to the story. i’ve never been anybody’s RABID fan before and driven 752 miles out of my way to a minor league game, though, so you should take that into account when you get a major league contract and have to blow through cincinnati sometime — i’ll throw a party and you can just unexpectedly show up and make me look way cooler than i am in front of all my friends and business contacts. i don’t golf — i need to find some sort of competitive networking advantage that doesn’t involve me whacking little white balls in open fields.

6.) (see, i can’t count) — the use of capital H for s.s. is great. as you can no doubt see, i chose my capital usage carefully, mostly because i am a cricket and have to hop on the keys individually as i type. thank you, e.e. cummings. i wonder, when strasburg gives interviews, if the washington papers will print His comments in red ink?

7.) lemme tell you what is a long drive: i-80 across iowa. good Strasburg almighty. thank Stephen you’re outta the bus leagues.

f(x) = Pi / i.) dude, they have mexican food in the AAA clubhouse? i thought they’d just feed you guys cornhusks and alpo. maybe that’s just in the carolina league. do public relations and marketing types get free burritos, too? i would go to omaha for that.

threeve.) i think aaron was being serious about the freelance writing. he could probably make that happen. would keep mrs. disco in nikes in the long, lean winter months.

here’s hoping to a september call-up . . .

jonathan g.
cincinnati, ohio

“Assuming a long-standing company would not be in business if they consistently lost money, they must have a positive marginal revenue from charging $1.89.”

You would think so, but I hear the post office is really struggling. Government.

Umm..after reading Jonathan G.’s comments, I forgot what I was going to say…I think I need a nap. :-)

Julia
http://werbiefitz.mlblogs.com/

I hate to admit it, but I am that kid that runs down the hall with his math binder trying to get to class in a hurry. And you have completely altered my thoughts on these high salaries. But I have two questions- one, why is everything in baseball worth so much, and b, how did you get those footnotes in there? I love them!

Tim

http://theoddblog.mlblogs.com/

had time to kill at lunch, what can i say?

jonathan g.

Disco, it’s JPW from SLC here. Nice analysis on the economics of baseball contracts; not quite donut analysis caliber, but close. I’m meeting with my financial advisor this afternoon and I’d be interested in what investment opportunity you had in mind that would yield Strasburg $500K a year on his current contract. Factoring in taxes and the cost of living in the DC area, I’m thinking that at the end of the contract, Stephen will, with conservative financial planning, have AT MOST $5 million to invest. Where are you going to get a consistent 10% return these days? Seriously, I want to know, because if I could find that, maybe I’ll retire right now, throw the family in an RV, and follow the Omaha Royals like jonathan g.

Just a quick note on an old post, since I only just found your blog thanks to ESPN, but $4.5M is not what a win is worth, it’s what one costs. (It’s literally the sum of the salaries free agents made that year divided by their WAR averaged over the past few seasons.) If the owners as a group are actually making money by owning baseball teams then the average win must actually be more valuable than that, although we would expect the values of specific wins to follow a gaussian distribution for the reason you mentioned. The costs of all those wins is basically the same, since you wouldn’t expect Sabathia to take a discount to pitch for the Nats just because their wins don’t return as much to the owners. (If anything the later ones might be cheaper as players take a small discount to play on a team they perceive as being more likely to get them a ring.)

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