Spreading the risk vs. Paying for Stars

Today, I had intended to move away from Valuation. However, Herb asked the following question yesterday in the comments section of the blog:

When you go through and try to zero out the money and have 40 or so dollars left at the end, do you spread this among the top guys or do you make the relievers/back up hitters the higher end of their value, ie 3-5 dollars vs. leave them at 1-2 dollars? I have tended to do the former on the theory that we are all guessing on these players and you have a better idea as to the production you can reasonably expect from the top guys.

When Herb says "zero out the money", he's talking about doing what I recommended yesterday, which is making your bids equal the amount of money there is to spend in your league.

I tend to add money to the top players rather than the players at the bottom. I do this for the same reason Herb suggests above. Generally speaking, there is less variability at the top of the player pool than there is amongst the $1 scrubs. More importantly, the rate of return on the best players in baseball is almost always excellent.

Top 10 Alex Patton Predicted Hitters 2006

Rank	Hitter	Bid	$	+/-
1	Albert Pujols	$45	$44	-1
2	Alex Rodriguez	$44	$33	-11
3	Vladimir Guerrero	$40	$39	-1
4	Ichiro Suzuki	$37	$37	0
5	Carl Crawford	$37	$44	+7
6	Miguel Cabrera	$35	$36	+1
7	Todd Helton	$33	$20	-13
8	Manny Ramirez	$33	$28	-5
9	Mark Teixeira	$33	$24	-9
10	Jason Bay	$32	$31	-1
	Average	$37	$34	-3

The big winners here were Carl Crawford owners, but anyone who bought Pujols, Vlad, Ichiro, Cabrera or Bay can't be complaining. Of course there are your disappointments, but no hitter learns less than $20 in this group. In other words, the washouts aren't total washouts.

Top 10 Alex Patton Predicted Pitchers 2006

Rank	Pitcher	Bid	$	+/-
1	Johan Santana	$41	$46	+5
2	Mariano Rivera	$37	$39	+2
3	Pedro Martinez	$32	$14	-18
4	Roy Halladay	$31	$34	+3
5	Jake Peavy	$31	$17	-14
6	Joe Nathan	$30	$45	+15
7	Billy Wagner	$30	$38	+8
8	Chris Carpenter	$29	$37	+8
9	Roy Oswalt	$29	$33	+4
10	Chad Cordero	$27	$32	+5
	Average	$32	$34	+2

The top 10 predicted pitchers turn a profit. This would be big news, except for the fact that Alex has noticed this happening for the last few years.

To be sure, Pedro and Peavy are cautionary tales as to why you shouldn't up your bid limits too much on any pitchers, even the best ones. But this is a powerful list. Eight of the top ten expected best pitchers exceeded even Alex's typically liberal expectations.

What about the other side of this coin?

Last year, Alex had 48 hitters and 58 pitchers with a $1 bid. I'm not going to go through each and every one of these players. But I will look at how they did as a group:

In 2006, 6 hitters whose bid price was $1 earned $10 or more.
11 earned between $5-9.
12 earned between $2-4
5 earned $1
14 earned $0 or less.

In 2006, 3 pitchers whose bid price was $1 earned $20 or more
8 earned between $10-19
8 earned between $5-9
5 earned between $2-4
5 earned $1
29 earned $0 or less.

This is a failure-oriented sort. And I cheated, by using an earlier version of the software so that Justin Verlander could make the $20+ group. Akinori Otsuka and J.J. Putz were the other $1 bid pitchers who earned over $20.

Another way to look at Herb's question is, "Is it worth upping bids on $1 players to find the next Putz or Otsuka?"

In general, I would argue no. Specifically, Otsuka and Putz probably both should have been $2-3 players since they were the next logical candidates to close in Texas and Seattle, respectively.

But if you simply take the list of $1 bid pitchers and throw a dart at a board, you have a 50% chance of losing money. This is a poorer track record than the Top 10 pitchers, where you had an 80% chance of turning a profit. $1 bid hitters aren't much better; last year, using Patton's bids, left you with a 39.5% chance of breaking even or losing money.

Looking at it another way, your $1 bid got you a $20+ pitcher one throw in 20, while your $1 hitting bid gets you a $10+ hitter once every 8 times.

So this is why the scrubs keep getting minimum wage. It isn't because some of them won't turn a profit. Many of them do and, once in a while, you'll hit the jackpot with an Otsuka or a Putz. The problem is that upping the bid to $2 or $3 doesn't increase your odds of hitting that jackpot. Go to any publication or expert's software program and scan through the $1 players. Can you tell me who the next Putz or Otsuka will be?