Wednesday, September 19, 2012

Where Should You Spend Your Money?

There are several paths to the second division. Short of absolute neglect, one of the fastest ways to get there is to mistakenly identify a one-year fluke as the beginning of a rock-solid trend.

At the close of action last night, five of the 10 most expensive hitters in the American League and four of the 10 most expensive hitters in the National League are poised to also be one of the 10 biggest busts in their respective leagues. So the lesson is clear: avoid the big ticket items. Right?

2009-2012 10 Most Expensive Hitters AND 10 Biggest Busts
2011 Carl Crawford, Alex Rodriguez, Evan Longoria
2010 Jacoby Ellsbury, Alex Rodriguez

2009 Carlos Beltran, Jose Reyes, David Wright

Not necessarily. There are good reasons to avoid the top hitters, but the fact that they are always big busts isn't one of them. This year is the exception, not the rule. You're extremely likely to lose money on the most expensive hitters in any given year, but historically there is only a 20-30% chance that you're going to land one of the biggest busts.

Ten Most Expensive Hitters Cost vs. Value 2009-2012
2009 A.L. Earned $24. Cost $36 (67%)
2010 A.L. $25/$35 (71%)
2011 A.L. $24/$36 (67%)
2012 A.L. $23/$35 (66%)
2009 N.L. $31/$40 (78%)
2010 N.L. $28/$39 (72%)
2011 N.L. $33/$38 (87%)
2012 N.L. $28/$37 (76%)

This is a quick and dirty look at the earnings versus the cost of the 10 most expensive hitters in the American League and the National League since 2009. The percentage is the rate of return on these hitters. With the exception of 2011 in the National League, this looks pretty lousy, doesn't it?

Next Ten Most Expensive Hitters (11-20) Cost vs. Value 2009-2012
2009 A.L. $24/$30 (80%)
2010 A.L. $19/$28 (68%)
2011 A.L. $24/$29 (83%)
2012 A.L. $19/$28 (68%)
2009 N.L. $23/$31 (74%)
2010 N.L. $23/$30 (72%)
2011 N.L. $26/$29 (90%)
2012 N.L. $24/$28 (86%)

The ROI on the top hitters is poor compared to this group, but not as poor as you might think. This next best group of hitters does lose money. Still, you'd rather have one of these hitters (on average) in any given year than one of the top hitters. Part of this rationale is that while you might be earning less money per hitter, you're leaving yourself with more to spend later in the auction. For example, in 2011 in the American League a $29 investment on one of the 11th to 20th most expensive hitters brought back the same actual return...and left you with an extra $7 to spend elsewhere. Unless you bought a $0 hitter, you did better simply by purchasing even a marginal player.

All of this makes sense in the abstract. In the concrete world of auction strategy, though, you don't want to simply say no to any hitter at or over a certain price just because those hitters as a group lose money. The usual common sense rules apply. You're more likely to find a bargain at the top of the heap if you:
  • Pay less than what the player earned the previous season
  • Buy players that offer power and speed and not just one or the other
  • Avoid one year wonders and pay for consistency
As I've documented several times in this blog, all of this depends on your auction climate as well. If your average salaries on the top players are lower than $35 per player, this typically means that the ROI on the next group of hitters will be higher...or that there will be higher salaries somewhere down the line. You want bargains, but you don't want to pinch your pennies to the point where you're spending $15 on the dregs of the auction in the middle or late rounds.

These earnings results surprised me, to say the least (though that's why I still do this after all these years). My assumption was that the ROI on the top hitters as a percentage of the price paid was better. It turns out that this isn't so. Owners that pay top dollar at auction are more likely to get burned than by owners who sit back for at least a little bit and wait for the next group of hitters.


T.J. said...

I'm in a 6x6 (R, OPS, K, QS) H2H Yahoo! league, with 9 hitters, 9 pitchers, and 5 benchies. Here are all the players over $15 I came out of the draft with:

Cliff Lee, $32 (freeze)
Ellsbury, $34 (freeze)
J-Up, $33 (freeze)
Posey, $27
Darvish, $26
Ubaldo, $17
Werth, $16
Marcum, $16

Other miscellaneous players included Gaby S., Cuddyer, Luebke, and Asdrubal.

I traded a $2 Kuroda for a $60(!) Miggy mid-season. Somehow, I finished over .500 for the season and first in my division. I'm in the semifinals this week. I have no idea how this happened.

T.J. said...

Oh, and yes, if this were Twitter, I'd have ended that post with #humblebrag. :) But I really don't know how I succeeded with that godawful draft.