Better to Sign out of HS or College? Part 3

Click here for part one and here for part two.

In the previous analyses we saw that while a player increases his expected bonus by going to college, players who sign straight out of high school get to their free-agent seasons more quickly.

So are players better off by signing straight out of high school or going to college?

For most players selected in the early rounds, signing out of high school appears to be the better financial decision.

For each group of rounds below, I compared the average bonus that each group of players was likely to have received after going to college to the bonus they were likely offered out of high school, plus how much extra money they stood to make through extra seasons of free agency to come up with the value of signing out of high school (what I call overall high school value in the chart below).

Click below for an enlarged table of the results.

Based on the data above, players drafted in the 11th-20th rounds appear to come out ahead by going to college. But as several commentators have already picked up on, talent is not the only factor that determines the round a player is selected. Teams also consider how much money the player is asking for, and they don’t want to waste picks- especially early picks- on players unlikely to sign. Thus, players demanding more money than teams believe they are worth tend to slide lower in the draft than their talent alone would dictate.

I suspect the reason players drafted in the 11th-20th rounds appear to come out ahead by going to college in the analysis is that a lot of signability guys end up sliding into the 11-20 round range. Many of these players then go on to be drafted in early rounds out of college, artificially enhancing the average bonus received by players in the 11-20 round range.

The data bears this out. 29 percent of the high school players selected in rounds 11-15 and 25 percent of the high school players picked in rounds 16-20 were picked in the first five rounds after going to college. Both data points are significantly higher than the overall trendline (points in red), suggesting that there may be a high number of players who slip into the 11th through 20th rounds due to their high bonus demands. On the other hand, it’s possible high school players typically drafted in the 11th-20th rounds are undervalued by talent evaluators. However, I think the former explanation more likely.

While the presence of signability guys in the middle rounds makes it difficult to analyze whether signing out of high school or college is the better decision, the data is very clear on what players drafted in the first rounds should do- sign out of high school. Based on the model, a player drafted out of high school in the 2nd through 5th rounds who doesn’t sign costs himself close to $700,000 by going to college.

No HS player drafted in the first or supplemental first round failed to sign from 2003-2007, so my original model did not include a projected value of signing out of high school for either round. But based on how often first-round players become major-league regulars or better (according to Jim Callis’ data), first-round picks who sign out of high school make an average of $2.4 million more than first-round picks selected out of college through extra free-agent seasons. Put more simply, first round picks lose the most by going to college.

Gerrit Cole provides a good illustration of how much players drafted in the first round stand to benefit by signing out of high school. Cole, if you are not familiar with his story, was considered to be a tough sign coming out of high school in 2008, and his asking price scared many teams away. Nevertheless, the Yankees selected him with the 28th overall pick of the 2008 draft, and reportedly offered him upwards of $4 million to sign. Cole ultimately turned the Yankees down, deciding to attend UCLA.

Currently a junior, Cole will likely be one of the top 5 picks in this year’s draft.

So what type of bonus is Cole likely to get? As good as he is, he’s not Stephen Strasburg. Drew Pomeranz, a college left-hander who the Indians took 5th overall last year, signed for $2,650,000. Cole will get more than Pomeranz, but even if Cole gets a lot, even somewhere around the $6,000,000 dollar big-league deal that Dustin Ackley got as the second overall pick in 2009, Cole doesn’t stand to come out ahead of the overall expected value from signing out of high school. He almost certainly won’t throw more than a few pro innings after signing at the August deadline, and with some questions about his fastball command, he’ll more than likely spend all of 2012 in the minors. Even if Cole pitches well in the minors, he probably wouldn’t be promoted to the big leagues until the end of April, to delay his arbitration clock. So a good-case ETA for Cole is mid-2013. Compare Cole’s path to the majors to Tyler Chatwood’s. Chatwood, also a UCLA commit and a second-round pick in the 2008 draft, will be making his major-league debut tonight for the Angels. Granted, Chatwood is pretty close to a best-case scenario for a player who signs out of high school, but Cole is pretty close to a best-case scenario for a player who chooses to go to College.

Based on the data compiled, below is a very, very rough approximation of how much of a bonus a player should expect to receive to justify going to college.

*To give an estimate of the equivalent college bonus, I added the expected value of getting to free agency earlier (by signing out of high school) to the high school bonus, but I was forced to adjust the numbers for the fact that there is a sizeable gap between the talent level of early first rounders and mid and late-first round picks, as well as the fact that a player who gets $800,000 in the 15th round isn’t likely as talented as a 2nd round pick, even though both will bet similar bonus. Because of the latter adjustment, the difference between high school bonus and the equivalent college bonus is smaller than just adding the value of reaching free agency earlier.

Another interesting finding in analyzing the data is that pitchers do not appear to benefit from signing out of high school more than hitters, in fact the analysis suggests that pitchers fared slightly better than hitters after going to college. However, because of the small sample sizes in the early rounds, we certainly can’t draw any definitive conclusions.

Surprisingly, pitchers don’t even seem to go undrafted more often than hitters. Conventional wisdom suggests that with the natural attrition that pitchers face, plus the well-documented workloads that come with pitching for many college programs, many pitchers drafted out of high school would get hurt in college and go subsequently go undrafted. But, as the chart below shows, pitchers and hitters face similar chances of going undrafted based on the round they were originally drafted out of high school.

My hypothesis is that recent medical advances have made teams more and more willing to roll the dice on injured pitchers with the hope that they’ll be able to regain their previous form. Thus, an injury doesn’t hurt a pitcher’s draft stock as much today as it once did.

Finally, to conclude the analysis, I feel it’s appropriate to address the issue of the value of a college education. I’ve skirted the issue to this point, because accurately quantifying the value of a college education is extremely difficult. You could choose to simply value a scholarship as the cost of four years of tuition at an average state school, not something particularly difficult. But, it’s commonplace for teams to pay for a player’s college tuition on top of the bonus they receive. A high school player who signs for- and this is an educated guess- above $90,000 would likely get some or all their college paid for by the signing club. Usually, the team will only pay for an in-state school. And, of course, not being able to play for the school baseball team forces the applying player to get into the school on academics alone.

Depending on how you feel a college scholarship should be valued, you could certainly make a strong argument that players starting anywhere from the 10th round and beyond would be better off by going to college. And with the value of a college scholarship up in the air, this analysis can’t provide much help to players drafted in the later rounds.