Production of ‘Slight’ Over-Slot Signees

Earlier this year, The New York Times’ Economix blog had a discussion of a study conducted by the economists Stacy Dale and Alan Krueger (Princeton). The researchers looked at the value students derive from what they termed ‘elite’ colleges. Their study’s twist was that instead of only looking at the schools students attended, the researchers also looked at the schools students applied to. Interestingly, the researchers found that the average SAT score at the most selective school a student applied to was more predictive of that student’s future earnings than the average SAT score at the school the student attended. The researchers hypothesized that applying to selective schools may be an important indicator of future success since the decision to apply to a selective school may be an indication that the student has characteristics that will help them later in life beyond measures such as high school GPA, SAT score, etc… which typically factor heavily into college admissions decision.

I bring up this piece of research because as I was analyzing the data for the return on over-slot signees I was struck by the number of players who signed for just a few thousand dollars over MLB’s slot recommendation but with the benefit of hindsight would have been drafted much higher. Mike Stanton signed for $55,000 above slot in the second round of the 2007 draft; Brett Lawrie signed for $20,000 above slot in 2008; Danny Duffy signed for a mere 500 dollars above slot in 2007; Brandon Belt signed for $25,000 above slot last year, and the list goes on.

Signing for even a few thousand dollars above MLB’s slot recommendation is a big deal. Scouting directors and front offices are loath to exceed MLB’s slot recommendation whenever they can avoid doing so, as going over slot usually draws the ire of the Commissioner’s office. On the other side of the negotiating table, securing over-slot deals for a client can be a boon for agents, as they can use each successful negotiation as a tool to recruit players in next year’s draft class. All told, a player asking for even a couple thousand dollars more than slot can cause negotiations to go close to the August deadline. With such an emphasis on the slot cap, I wondered if players who went to the effort of holding out for an extra couple thousand dollars may outperform the typical draftee from that round, above and beyond what we would expect from the elevated bonus total.

To investigate, I took players who signed above-slot deals, but whose bonuses did not exceed 118 percent of MLB’s slot recommendation and compared these players’ expected value to the expected value of the average player who signed for that amount. I excluded players whose bonus was over $80,000 more than MLB’s slot recommendation regardless of whether the player’s bonus was less than 18% more than slot. Unfortunately, I only had detailed slot data dating back to 2007. Still, within these parameters, I had a sample of 38 players who fit the criteria.

Based on how players of the same draft position were ranked on Baseball America and John Sickels prospect lists, we would expect these 38 players to be worth just under 124 million dollars. Surprisingly, these ‘slightly over-slot’ signees were expected to provide nearly 190 million dollars worth of value. The increase in expected value was statistically significant. Making these findings even more surprising, the slight over-slot group actually received less in total bonus money than the comparison group. I compared second rounders to second rounds, early first rounders to early first rounders, etc… and several players slotted in at the back end of these comparison groups (ex- the Giants took Wendell Fairley with the 29th overall pick in 2007 and gave him a 1 million dollar bonus, close to $80,000 over slot, but because I compared him to other players in the back third of the first round, the group he was compared to received, on average, a bonus worth 1.3 million dollars. So, Fairley’s bonus was actually $300,000 less than the group he was compared to).

So what to make of these results? Maybe players who believe they are worth more than MLB’s slot recommendation have characteristics that lend themselves to having a productive baseball careers beyond what statistics and talent evaluators capture.

If we believed that this ‘slightly above-slot’ effect was real, would we expect players who hold out from signing completely to show the same increased level of production? That belief doesn’t seem to necessarily square with a quick a priori look at some of the most notable players who have refused to sign and gone to college or played independent ball.

Maybe there is a certain sweet spot where a player has the optimal combination of a high sense of self worth as well as a strong desire to play professional baseball. Maybe this finding is just a statistical blip and with more data we would see this finding go away. There are a number of possible explanations. And even if with more data the effect persisted, it’s tough to find a real takeaway message. If teams began to act on this information pretty soon every player would be asking for a couple thousand dollars more than slot. In some, I think this is a cool finding, albeit one without much in the way of a practical implication.