Why inflation isn't linear...and other musings

Mike Fenger is one of the reasons I started this blog.

No, Mike and I don't go way back. Nor did he write me an e-mail and dare me to start a blog. Nor did he...well, you get the idea.

But people like Mike Fenger are the reason I started the blog. I was hoping to get a dialogue going with some of the smartest minds that are out there in Roto. And Mike qualifies. He's been writing about Rotisserie longer than I have, and produces the 5x5 projections for Alex Patton's web site. He's added intelligence, wit and razor-sharp insights to the Roto community for as long as I can remember.

Mike posted the following comment about my Sunday post. It's such a great comment that I'm going to address it in two separate posts. Today will be Part One.

It's always seemed to me that inflation on the top guys is less than the absolute percentage, but certain to be applied -- as you go down in price, there's a wider range (i.e., a higher percentage, but that is less certain to be applied). Dollar players can go for $5, or guys you have at $5 can end up undrafted. And, the guys you have for $10 - $15 can really get bid up if they're the "last best player" in the auction.

So, my advice would be to give some of the money to the top guys, it certainly won't be wasted there. The rest, give to the lesser-priced guys that you have a good feeling about.

There is more than one idea at work here, so I'll try to tackle each idea separately:

It's always seemed to me that inflation on the top guys is less than the absolute percentage, but certain to be applied...

This is true, and it took me a long time to figure out why it's true.

Top 10 LABR A.L. Hitter Prices 2006

Rank	Hitter	LABR	'06$	+/-
1	Alex Rodriguez	$42	$30	-12
2	Carl Crawford	$38	$38	0
3	Vladimir Guerrero	$37	$34	-3
3	Mark Teixeira	$37	$22	-15
5	Chone Figgins	$35	$28	-7
5	Manny Ramirez	$35	$25	-10
7	Ichiro Suzuki	$34	$35	+1
8	Michael Young	$32	$24	-8
9	David Ortiz	$31	$30	-1
10	Grady Sizemore	$29	$29	0
10	Miguel Tejada	$29	$29	0
	Average	$34	$29	-5

Top 10 A.L. Hitter Earnings 2006

Rank	Hitter	'06$	LABR	+/-
1	Derek Jeter	$39	$30	+9
2	Carl Crawford	$38	$38	0
3	Ichiro Suzuki	$35	$34	+1
4	Vladimir Guerrero	$34	$37	-3
5	Jermaine Dye	$32	$20	+12
6	Alex Rodriguez	$30	$42	-12
7	Justin Morneau	$30	$16	+14
8	David Ortiz	$30	$31	-1
9	Vernon Wells	$29	$23	+6
10	Grady Sizemore	$29	$29	0
	Average	$33	$33	-0

Those of you with eagle-eyes will notice the earnings I've posted here are different than what I posted recently. That's because LABR is 5x5; I typically use 4x4. Also, I deliberately flipped the dollar columns in each chart.

Take a look at the first chart. This should be a "failure-oriented" sort, meaning that the players we pay the most for should take a loss. And they do. But how unhappy are the owners who bought these players?

If you had told me before the season started that I'd get an 85% rate of return on the 10 most expensive players, I'd tell you to sign me up. Getting a guaranteed $29 on a $34 investment isn't a bad thing.

However, the reason we don't chase these players forever and ever and pay $50 or $60 for them is illustrated in the second chart.

Derek Jeter had an awesome year last year, yet he "only" earned $39. And 2006 isn't an anomaly, either. A-Rod topped the charts in 2005, yet he "only" earned $41.

In a start-over league like LABR, it doesn't matter if you overpay by a couple of bucks for a stud. As the first chart shows, getting a $29 return on your $34 investment is solid. Yes, you're not happy if you paid $37 for Teixeira, but you also aren't getting totally slammed; you are getting something back.

Inflation, though, changes all this. In a league with 30% inflation, A-Rod pushed up by 30% inflation goes to a $55 par price. Suddenly, you're not taking a $12 bath, you're taking a $25 dousing.

And, more importantly, there's no way you'll even break even on a player like this. Historically speaking, barring a once-in-a-decade type year, you will lose at least $10-15 on A-Rod.

And that's why inflation isn't linear. As much as we love the expensive players, the market knows when to stop. It knows that a $16 player (like Morneau) or a $20 player (like Dye) might turn a big profit. It also knows that a $42 player like A-Rod almost definitely won't.

Dollar players can go for $5, or guys you have at $5 can end up undrafted.

I found this precept was truer years ago, before every publication under the sun had dollar values, and before Rotoworld and Rototimes, when every piece of news wasn't simply on display on the Internet for free for every Tom, Dick and Harry to see.

I haven't had a year in the last three where there was a hitter left on my sheet whose bid price wasn't more than $2. There is a little more variability amongst the pitchers. Once in a while, the odd $3 pitcher has been available. In my league, the variability in the final bids is limited. If I want a hitter in the endgame, I'd better put $3 on my sheet.

That's isn't to say that Mike's experience isn't valid for his league (or most leagues, for that matter). This is where I say know your leagues. If you find that what Mike is saying is true in your experience, then spend, spend, spend on the top guys. You'll find some $1 gold at the bottom of your list. In my experience, though, I've been stuck with the worst of the worst.

And, the guys you have for $10 - $15 can really get bid up if they're the "last best player" in the auction.

Again, this happens less in my leagues the last few years than it used to. Yes, there are exceptions, and these exceptions are typically due to positional scarcity. A $23 Orlando Cabrera. A $16 Angel Berroa. A $10 John Buck. But these exceptions are so notable because they are exceptions.

And, if you do find that Mike's experience is your experience, then adjust accordingly.

So, my advice would be to give some of the money to the top guys, it certainly won't be wasted there. The rest, give to the lesser-priced guys that you have a good feeling about.

This is as good a segue as any into Part II of this post tomorrow. Adjusting your bids upward for the top players isn't a bad idea. Just don't push them up too far in a freeze league. If you have a $42 bid on Carl Crawford, he's a $50 player with 20% inflation and a $55 player at 30%. Pushing him up to $45 increases those amounts to $54 and $59, respectively. If you're really committed to Crawford, that's great, but if you're not going to spend $54 or $55 in a million years, leave his price where it is.

I'll talk about adjustments on the "lesser-priced" guys tomorrow.