The New Inefficiency?

One of the main uses of value analysis is to try and find market inefficiencies. Ten years ago, on base percentage was undervalued, so teams loaded up on high walk guys that scouts didn’t care for. More recently, defense has been the undervalued asset, so teams have gone after guys who can turn balls in play into outs.

Everything is cyclical, though. As more teams pursue what is currently undervalued, it becomes more fairly valued, and the competitive advantage goes away. At some point soon, defense will probably become fairly valued again, and the teams who are loading up on good defenders will be looking for some other way to spend their money.

What will the next big inefficiency be? It’s impossible to predict, of course, but I have a guess – old players.

We’re currently in the midst of an age where a lot of teams are operating on reduced budgets, and have shifted towards trying to keep costs down by going with more inexperienced talent whose salaries are deflated by their lack of service time. Teams like Tampa Bay and Oakland are continually attempting to replenish their farm systems to ensure a never ending pipeline of cheap, effective major league players that they can pull from.

As more teams have turned to this model, young talent has become increasingly expensive to acquire. The relative value of experienced veterans has taken a hit as teams have turned towards cheaper labor, even accepting downgrades in on field production in order to keep their payrolls in check.

This has led to yet another winter where guys over 35 are having a hard time finding jobs. It’s not just Johnny Damon, though he is a good example of this effect. Over the last few years, we’ve seen numerous productive-yet-old players pushed into retirement against their will, ranging from the likes of Kenny Lofton, Ray Durham, Frank Thomas, and Jim Edmonds.

Edmonds, of course, is now attempting to get back into baseball, and seems like he may be able to convince some team to give him a job. But he had to publicly ask for a minor league contract at the Cardinals FanFest event in order to begin the discussion – no one was beating down his door.

Teams have become cautious with the contracts they give to aging players, not wanting to get burned paying too much to a guy who may end up not having anything left in the tank, but I feel like we’re passing the point of caution and shifting towards a market failure. If a guy is a good player at 35, you should not expect him to be useless at 36. Yes, you regress his projection for aging, but players who go from good-to-terrible in a single season are the exception, not the rule.

Given the contracts that quality older players have been settling for over the last few years, I think we may see teams in the market for value increasingly going for the graybeards.