Home > MLB > When Does it Make Sense to Overpay Later for Immediate-Impact Talent?

When Does it Make Sense to Overpay Later for Immediate-Impact Talent?

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One of the main things I have found with regards to contract values, especially in football, is that the teams who write the contracts prefer to value players with long term upside…even if they are trying to fill an immediate term need.  As the thought process goes, you may not be able to predict what your organizational strategy will be four years down the road, but if you pay a premium for a younger player with upside, you’re less likely to be stuck with dead-weight on the back end.

This is probably fallacious.  If you are making an investment to address an immediate team need or concern, the process is inherently short-sighted.  This need could be addressed through a player development channel, but the organization remains willing to throw cash at the problem so they don’t have to wait for the solution.  This is a fine approach when used sparingly, but don’t be fooled:  what happens on the back end of the deal could very well be someone elses’ mess.  Acquisitions need to be graded on how they affect the present value of the franchise, not by which move looks less-bad four years down the road.

With respect to this year’s baseball hot stove, I’m proposing the research question: when does it make sense for a team to buy now, and overpay later?  If there’s a hypothetical 35 year old centerfielder who is on the verge of needing to move to a corner outfield position to be viable defensively, under what conditions should be loosely required to out-bid the market for the services of said player.  If he’s in demand, the player can turn his present value into a long term deal.  Teams know that that the same player in the corner outfield will result in an overpaid asset for 3 years or so, and then of course there is all the sunk cost decisions that will go into that at the time.  The proper move may very well be to end up eating the cash on the back end.

Each team has a strict payroll limit that ownership will hold them to, but football franchises have figured out that by promising money in future seasons (via the P5 signing bonus), they can get a year or two of the player-asset to fill a very specific role, and eat the consequences later.  Baseball franchises appear much slower to figure out the same thing, partially because some of the contract value can be recouped in football, while in baseball, the entire remaining contract is a sunk cost.

This analysis will specifically address baseball players in the current labor market who are clearly past their prime.  It is well known that all players listed below will not be as valuable in four years as they are right now, and also that it would be in the interest of all franchises to sign older players to shorter-term deals.  But taken from the small market franchise perspective, the only way you can beat a team with more cash to spend out for a specific free agent without settling is to get creative with the contract.  Offering 4 year-$28 million deal is more lucrative to a 35 year old position players than getting a 2 year, $18 million dollar contract, even though the per-year value of the contract is greater in the second offer.  That’s what a small market team would have to do to outbid a large market team.

But why not let those big-spenders set the market, and then settle for the comparable scraps?  Well, then you can end up with Jose Guillen or Matt Morris, and you’re not saving much money in the process.  At that point, everyone would agree the small market team is better off going strictly through player development channels.

Type A Free Agents will be ignored in this analysis.  And to reiterate: the long term value of the player is being ignored here, as we’re trying to determine who has enough value in 2010 and 2011 to justify some dead money in future seasons.

Jim Thome, DH Even for an American League team with an opening at DH, it’d be impossible to justify more than a single year on Jim Thome.  He has no value as a baserunner, a fielder, or a singles hitter at this point: he’s all on base ability, and left-handed power.  In the NL, that’s barely worth a roster spot.  In the AL, there won’t be very much of a market for that, but you could still get a 7-inning a game middle of the order lineup out of him.  No reason to overpay.

Vladimir Guerrero, DH This is an interesting one, because Vlad is a 34 year old who has the body of a 39 year old, sort of like Thome.  He’s not completely valueless outside of his bat, as he can still run from point A to point B before the sun goes down, and you could stick him in the outfield 20 times a season, and have additional right-handed power in the middle of the order.  But no, he’s not the kind of player who you would want in the lineup this year badly enough to pay him through 2012, and it’s mostly due to his free swinging style going out of style.  He figures to be a run generator for the next two or three years or so, but since this isn’t about his future value, his present value isn’t worth a premium.

Hideki Matsui, DH Might be a moot point if Matsui goes back to Japan, but if I’m a team who has no real middle of the order threat, Matsui is the kind of player you could justify a three or four year deal on to squeeze him in under a tight budget.  Something like 4/$28MM.  I don’t view him as a huge attrition risk, really, just a guy who happened to hit lefty at the new Yankee Stadium for a season where he didn’t really play the field.  Matsui does hit to all fields, so if he stays in the US in 2010, he’s a very productive player, if not a productive outfielder.

Jason Giambi, 1B/DH Not much difference between Giambi and Thome at this point except that the team that invests in Thome knows precisely what they are getting, and can plan for that.  Giambi’s bat might end up being a complete wash-out at this point, given his declining power numbers.  On the other hand, he’s not the horrendous baserunner Thome is, and he still knows which hand the glove goes on.  Still, you wouldn’t offer anything more than one year for any reason.

Carlos Delgado, 1B Offensively, there’s nothing really desirable left here.  Defensively, there never really was much desirable to begin with, but what he had is still there.  Right now, Delgado is right at replacement level, which means that you could justify a contract only if the farm system is just bare with any sort of bat work.  No multi-year deals: if you can’t develop a replacement level first baseman but every five years, you might be the Kansas City Royals.  Still, if you must, there’s some standard upside here, which makes him a better fit than, say, Ross Gload.

Gary Sheffield, RF/DH Nope.  The Mets benefitted from offering him the minimum, and the Tigers would have probably been better off with him than without him, but he’s 41 years old now, and doesn’t have much value left.  Even a two year deal would be pretty preposterous at this point.

Brian Giles, RF His power has diminished much in recent years, but a lot of that is because of where he was playing his home games.  To me, Giles is the kind of the inspired gamble that could really make a team this year.  He really crashed hard, and unexpectedly, last season.  Full disclosure here: I’ve always liked Giles, but despite a crash in UZR and power totals, in my mind, he’s more likely to see a rebound here than further attrition, and most teams should have room in their budgets to fit him in.

Mike Cameron, CF I almost had to disqualify Cameron because he seems certain to land a two or three year deal, as he can still get it done defensively.  He’s worth up to a five year deal in my opinion because for at least one more year, he’s instant runs both produced and saved.  He probably won’t play past age-40 though, so in return for a team offering him financial security for the rest of his career, you can save that money on the back end, and he’s only going to cost $5/6 MM per year.

Mark DeRosa, 3B/OF/2B DeRosa is another good investment, although he’s older than you think (he’s 35).  He’s precisely the kind of player who can help a small market team “win now” and he’s probably worth a lot of money up front.  Listing him as a second baseman at this point is pretty charitable; he can stand there, if you’d like.  His best defensive position is in right field, and though he’s more costly than say, Giles, you can justify three or fours years on a contract because he’s a safe bet for this year if not the future.

Adam Kennedy, IF Kennedy was an May waiver claim for the A’s and was the best hitter on the team for about half a season.  That’s not a good reason to give the guy a multiple year deal.  He could be worth up to three or four million dollars this season, in total, but there’s no power here, and the defense is not what it used to be.

Nomar Garciaparra, IF Don’t remember why I included him.

Jamey Carroll, 2B I say no, just because all of his value is in defense and baserunning, and while that contributes to wins all the same, when you are talking about guys who can get you over the top, Jamey Carroll just doesn’t do it for me.  Don’t get me wrong: since 2006, Fangraphs estimates his value at close to $25 million dollars.  On a one year deal, I’d offer him as much as $5 million to be my starting second baseman/backup shortstop.  But I don’t think I would overbid that with a multi-year deal for Jamey Carroll.

Miguel Tejada, SS/3B Yes.  He has to be viewed as a third baseman in the free agent market, but when you consider that this move will put him behind the Chone Figgins and Adrian Beltre’s of the world, guys who are all-world defenders at third base, Tejada could be just as good as these guys, possibly for longer, and at a fraction of the cost.  One of my biggest problems with positional baselines is it screws up the projection of players like Tejada who do the late-career SS to 3B move, but Tejada is underrated as a defender, and while his move would hurt his offensive value according to positional baselines, he doesn’t actually lose that value.  Put simply, he will outplay his contract this next season, and probably at least one season after that.  A six year deal would not be crazy, unless it pushes above $48MM.

Alex Cora, SS Cora has a run of the mill glove, and is the last person on this list I would want on a long term deal.  He doesn’t offer anything with the bat except the ability to hit from both sides.

Adam Everett, SS On the other hand, Everett offers rare glove work, but he has also become a progressively more useful offensive player.  When you put him up against the baseline of a league average player, the increased plate appearances make his aggregate offensive values look like he’s reached career low levels, but in reality, he’s now playing more than he ever has since leaving Houston.  Most teams don’t have a shortstop as strong as Everett, and I would be surprised if he didn’t get a multi-year deal this Hot Stove season.

It really depends on the free agent.  Deferring payroll to future seasons can be a useful tool for building a team in excess of what your teams’ payroll situation and farm system can accomplish.  The key is to find a player with a relatively low attrition rate and some pop left in the bat, and offer the right guy a contract that is over the market value, but does not cost as much on a per year basis as some of the larger market teams are willing to pay.  This payroll could come back to bite in the future, but only if the team is unsuccessful at winning now.

If your team can land the right free agent piece, it helps to discount future dollars and allows for systematic organizational improvement.

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