Dave Stewart’s Misguided Comments on Market Value

Over the weekend, the Diamondbacks made a pretty controversial trade, selling Touki Toussaint to the Braves in exchange for $10 million in salary relief. I wrote up my thoughts on the deal on Monday, noting that while it’s certainly possible that the Diamondbacks have more information about Toussaint than other teams, it still seems like they simply misread the market value of a prospect in making this deal.

If you didn’t think that’s what happened a few days ago, you can be sure of it now, because in Ken Rosenthal’s latest column, Stewart says some things that, for a baseball executive to say publicly in 2015, are absolutely remarkable. And should scare the crap out of Diamondback fans.

Per Rosenthal’s column, here’s the entire text of what Stewart said in regards to trading Toussaint.

“The truth is we did not know what Touki’s value would be if we shopped him. There is a lot of speculation on that. People are assuming it would have been better, but we don’t know.”

“There was an opportunity to make a deal that gave us more flexibility today as well as next year. We took that opportunity. It’s tough to say we could have gotten more. He was drafted at No. 16, given ($2.7) million. In my opinion, that’s his value.

“To this point, he has pitched OK, he has pitched well. But guys are mentioning that he throws 96 mph. He hasn’t thrown 96 mph since he’s been here. We haven’t seen 96 once. There is some inflation of what people think Touki is.

“We think he’ll be a major-league pitcher. We don’t see it happening in the next three or four years. Maybe five or six years down the road, he’ll show up and be a major-league pitcher. But that is a long ways down the road.”

There is so much to unpack there. Let’s recap the critical points.

1. The D’Backs did not test the market to find out if other teams would have offered more.

No, teams don’t take the time to let every person in the league know before they trade a player, and this isn’t the first time a deal has been made where a player wasn’t shopped extensively. Sometimes, GMs just target a certain player that they happen to really like, and they don’t necessarily care whether another team could make an offer that would be perceived to be better; they want that certain guy, and they figure out how to get him.

But that isn’t the case here, because the D’Backs were selling Toussaint for cash, so there was no room for evaluation differences on the return. This isn’t a case where Atlanta just happened to have the guy who caught Arizona’s eye; they were offering the exact same asset any other team could have offered, and the D’Backs didn’t even bother to find out if another team would have outbid the Braves cash offer. If the market’s valuation of similar prospects held up with Toussaint, they should have been able to use him to dump Aaron Hill instead of Bronson Arroyo. Maybe no one in baseball would have taken the ~$18 million remaining on Hill’s deal just to get Toussaint, but they’ll never know, because the D’Backs front office didn’t even try to find out.

2. Dave Stewart apparently believes that the slot-value of a draft pick is equivalent to that player’s market value.

This is the one I couldn’t believe I was actually reading, because it’s so obviously wrong in ways that should be clear to absolutely anyone working in baseball, much less an executive in charge of making significant decisions. To claim that Toussaint’s market value is $2.7 million because that’s what he signed for in a closed-market system with constrained spending is so ridiculous that I can only hope Stewart was just making an off-hand comment to a reporter and didn’t think about about the ramifications of what he was saying.

Because if he actually believes that a player’s trade value is equivalent to their signing bonus, then he’s simply unqualified for his job. It should be glaringly obvious that the slot values assigned to draft picks are a tiny fraction of what the player’s open-market value actually is. The implosion of MLB’s recommended pools for international free agents — which are essentially soft-caps, given that the penalties for exceeding the limits are not as severe as they are for exceeding your pool in the draft — should have made that clear, and it’s not like the D’Backs are unaware of the inflation of international prospect bonuses; they signed Yoan Lopez for $8 million and paid an $8 million tax on that signing just a few months ago.

But even if things like Yoan Moncada costing the Red Sox $63 million didn’t convince Stewart that there’s a huge difference between open-market prospect values and the slot-values that draft picks are constrained by, he simply needed to look at the Dodgers purchase of a draft pick from the Orioles back in April. By taking Ryan Webb (and then immediately releasing him), Los Angeles paid $2.7 million for the 74th pick in the draft, which had a slot value of just $827,000. And they’ll have to pay the signing bonus to get Josh Sborz in their organization, so he’ll cost them $3.5 million when all is said and done.

Even if the D’Backs are down on Toussaint — and they are, obviously — there is no rational way to argue that he’s worth less than the 74th pick in the most recent draft, and that pick was traded for a cash savings equivalent to what Stewart is claiming Toussaint’s value is. This isn’t a matter of interpretation or an area where reasonable people can disagree; Stewart’s comment is just out-and-out wrong. If he actually believes it, and is going to continue to value the team’s prospects at the same level of their signing bonus, he should be fired before he gets around to swapping Dansby Swanson for a middle reliever this winter.

3. The D’Backs think Toussaint is being overrated.

This is the part where I’m somewhat inclined to defer to the organization. That isn’t to say that they are definitely right about Toussaint, but there is a history of draft scouting reports having too large of a role in prospect analysis even after a player has begun to demonstrate a different set of skills. And I have no reason to doubt Stewart that Toussaint’s stuff isn’t as lively as has been reported; the very mediocre numbers he’s putting up in A-ball suggest that he’s not exactly throwing unhittable pitches down there.

But if you think everyone is overrating your prospect, your goal shouldn’t be to help them understand why they’re wrong; you should be taking advantage of that information asymmetry before they realize their mistake. The D’Backs weren’t under any obligation to tell other teams that Toussaint’s stuff might be ticking down a bit as a professional, which is totally normal, by the way. If other teams hadn’t yet noticed that he was throwing more 94 than 96, and they still wanted to trade for him like he was the same arm he was coming out of the draft, then the D’Backs should have let those teams pay the price for his perceived value based on older scouting reports.

But, this gets back to the first point; other teams weren’t given a chance to do that. Instead, the Braves essentially won the lottery by being the first (and maybe only) team to realize that the D’Backs just didn’t really want Toussaint anymore, and they got Arizona to take an offer that was consistent with their internal valuation of him rather than what an external market valuation might have been.

As I said on Monday, the most likely outcome of this trade — by far — is that Toussaint never develops into anything and the D’Backs end up winning the deal in retrospect. The bust-rate on prospects like Toussaint is in the 80% to 90% range, and so this deal probably won’t come back to haunt the the team long-term. The actual cost to the organization of this trade is likely not going to do anything to the team’s future, given Toussaint’s high-risk status, but if I was a Diamondbacks fan, the process that led to this trade would scare the crap out of me.

You don’t have to think much of Touki Toussaint — I think he’s the kind of prospect that is most often overrated, and I might have been inclined to trade him if I was in Stewart’s position too — to see this trade as a huge red flag about how the D’Backs value assets. Understanding market value, or at least trying to ascertain the market value of your own players before you trade them, should be a requirement of running a front office in 2015.

This trade raised real questions over whether the D’Backs understood Toussaint’s value to the other 29 teams. Based on Stewart’s comments to Rosenthal, it’s not clear whether the Diamondbacks front office actually knows how to value players at all.