Touki Toussaint and Prospect Valuation by Dave Cameron June 22, 2015 On late Saturday night, the Diamondbacks and Braves made a trade, but while players were sent in both directions, this was really more of just a sale. Sure, the Braves did give up a player — replacement-level utility guy Phil Gosselin, currently on the DL — in the swap, but they traded Gosselin for a legitimate prospect and a Major League pitcher, which only makes sense when you add in the financial aspects of the deal. In taking on the remainder of Bronson Arroyo’s salary — roughly $10 million, including the buy-out of his 2016 option — the Braves essentially bought pitching prospect Touki Toussaint from the Diamondbacks for that $10 million figure. While this isn’t an entirely new type of trade — the Dodgers essentially did this same thing a few months ago when they bought a draft pick from the Orioles by taking Ryan Webb off their hands — it’s still a little unusual to see a team make a trade that can so clearly be broken down as a legitimate asset for just straight cash. And in this case, it’s made even more unusual because the team selling the prospect is in rebuilding mode, so we have an organization focused on the future selling an asset with future value in exchange for short-term financial relief. But it shouldn’t be a big surprise that the team doing the unexpected is the Diamondbacks, who have been marching to the beat of their own drum ever since Tony La Russa and Dave Stewart took over. The D’Backs don’t operate like the other 29 franchises do, and they don’t see things like everyone else, so they make moves that cause a lot of heads to be scratched. This move is no different, with the trade drawing near total criticism from Arizona’s perspective. At its heart, though, this is simply a question of how to value an A-ball pitching prospect, so let’s break this down and see if the D’Backs really did get fleeced on this deal. Let’s start with Toussaint, who represents the talent aspect of this deal. Taken with the 16th overall selection a year ago, Kiley McDaniel rated him as a 50 FV prospect, placing him 116th on his pre-season Top 200 list, noting that he had plenty of upside based on raw stuff but was not particularly polished and was a long way from the big leagues. In the 58 innings he’s thrown as a professional, he’s lived up to that billing, as his good stuff has not led to good results, but in talking with Kiley, he doesn’t believe the industry consensus has changed on Toussaint in the 12 months. He’d still grade him a 50 FV, said he’s “easily in the Top 200”, and believes he would have gone in the 12-22 range in the most recent draft, the same range he went in a year ago. As a raw right-handed pitching prospect, Toussaint represents one of the highest risk/reward profiles of any prospect in the game. In fact, the overwhelming likelihood is that Toussaint never makes any real substantial impact at the big league level. In 2011, Scott McKinney did a great job breaking down the success rates of different types of prospects ranked in Baseball America’s Top 100, and his data showed a bust rate north of 80% for pitching prospects in every bucket of the back-end of the Top 100, with it climbing as high as 88% for pitchers ranked in the 90-100 range. There’s something like a 9-in-10 chance that Toussaint never turns into anything, and the D’Backs end up having saved $10 million without losing anything that will hurt them long-term. The most likely outcome, by a lot, is that the D’Backs win this trade when it’s looked at with the benefit of hindsight. That fact alone should give us pause before roasting Dave Stewart for making this deal, but it’s not a good enough justification for doing it. After all, there’s more to valuation than simply calculating failure rate; you absolutely have to weigh that risk against the potential rewards of success. Any proper valuation will arrive at a conclusion that balances risk and reward, giving you a sense of how much you should pay for an asset with a range of possible outcomes. Even if pitching prospects like Toussaint have a 90% failure rate, then you should still be willing to pay the 10% chance of success, and the fact that failure is the most likely outcome doesn’t make him worth discarding. A number of people have built prospect valuation models that include both risk and reward, and turn those odds into a dollar value based on what teams have spent to buy wins in the past. The most recent model to attack this problem was presented by Kevin Creagh and Steve DiMiceli, and we’ve highlighted their model before. Based on their calculations, a back-of-the-Top-100 pitching prospect had an asset value of $9.6 million, almost exactly the price the D’Backs just sold Toussaint for. So, if you’re looking to defend this trade from the Diamondbacks perspective, this model is a pretty good place to start. That said, I think there’s a pretty decent argument that their reported valuations are too low. Their estimated value of the elite hitting prospect was just under $50 million, but Yoan Moncada — generally ranked as more of a #10-#20 prospect in baseball than a top-tier guy — signed for a total cost of $63 million, plus the Red Sox absorbed some penalties on acquiring future talent for signing Moncada at that price. The Dodgers were reportedly willing to offer as much as $35 million — which would have doubled to $70 million with the 100% tax — if Moncada would have waited until July 2nd to sign, so that they could retain their flexibility to use their trucks full of cash to sign international talent this summer. So Moncada’s market value looked to be roughly double that of what Creagh and DiMiceli estimated with their model. And we’re seeing higher prices on lower-end guys as well. The Angels spent $8 million to sign shortstop Roberto Baldoquin, who ranked at the back-end of Kiley’s Top 200, and with the tax on the overage, their total cost for acquiring him pushed up over $13 million. And then there was the D’Backs own signing of Yoan Lopez, another 45 FV prospect rated lower than Toussaint by essentially every prospect evaluator out there; the D’Backs paid him $8 million and paid a 100% tax on that signing, so Lopez actually cost them $16 million. The same front office that sold Toussaint for $10 million paid 60% more than that for a pitching prospect just a few months ago, and surrendered the right to sign high-end international talents in the year that they have the largest allotted bonus pool in the process. And as previously mentioned, the Dodgers paid $2.7 million back in April to buy the 74th pick in the most recent draft; that pick comes with a slot value of $827,000, so by the time the Dodgers sign Josh Sborz, they’ll have paid roughly $3.5 million to acquire a prospect who isn’t anywhere near Toussaint; Kiley has profiled him as a “future reliever”. With restricted spending, rich teams are now driving up the values of prospects, and while Creagh and DiMiceli did a very good job with their information, I think their valuations are roughly half of what the market has been paying for talent. So I’d say Toussaint is probably worth something closer to $20 million than $10 million, at least if we believe that he’s still roughly a back-end Top 100 pitching prospect. But this trade should perhaps cause us to reconsider how strongly we are convinced of that stance. Perhaps one of the more important research pieces done in the last few years was Matt Swartz’s work on “Other People’s Players”. In the 2012 Hardball Times Annual, Swartz showed that players who change teams often perform worse than their projections would have suggested, but players who are retained by their current team perform at a higher level. Swartz posited that this was evidence of information asymmetry, as the team-switchers group is biased because they include mostly players who the organization with the most information rejected at the market price. In this case, the Diamondbacks are the team with the most information on Toussaint, and the fact that they sold him on the cheap is a data-point in favor of the idea that Toussaint may not be as good as everyone else thinks. You don’t want to carry this idea to an extreme and use it to justify every decision every organization makes, since having more information doesn’t guarantee you’re making the right evaluation, but when a team dumps a player for what seems to be too light of a price, we should at least allow for the possibility that they know more than they’re letting on. The fact that Toussaint was sold for $10 million should moderate our certainty that he was worth $20 million. He may have been, but that’s less likely today than it was a few days ago. If the D’Backs know something about Toussaint that hasn’t reached the masses yet, or if his mediocre performances aren’t just a guy working on command in the low levels, then this is probably a reasonably valuation for Toussaint. But I’ll posit that even if we allow that $10 million isn’t too far off what Toussaint might be worth — and that’s probably the most generous conclusion we can draw, based on the evidence — that this deal is still pretty freaking weird, given that the Diamondbacks need talent more than they need $10 million in present cash. After all, this is an organization that just signed a $1.5 billion TV deal a few months ago. And it’s not clear exactly how the D’Backs could really spend that money to acquire talent any better than Toussaint. As noted, the Lopez signing disqualifies them from going big on international free agents for the next two years, so they can’t use this money to buy a bunch of new prospects that they like better. They could theoretically use the cost savings to take on a 2016 contract that brings them someone more likely to help them in 2016, but then again, why not just trade Toussaint for whoever that guy might be and try to get more than $10 million in savings on the contract? Realistically, this looks like the D’Backs just deciding that they don’t buy into Toussaint’s future value, and if they thought his stock was only going to go down the longer everyone got a look at him, this could be seen as salvaging some value from an asset with declining value. That’s basically the only argument you can put together on why this trade might make sense from Arizona’s perspective. If they know something about Toussaint that suggests he’d be valued significantly lower this winter, then taking what you can get now is a reasonable proposition. But I can’t find anyone else in baseball who thinks this was the right time to pull the plug on last year’s first round pick. Not for $10 million in cash savings for a team who doesn’t have a good way to reinvest those savings in order to get a better return. Not for a rebuilding team who should be prioritizing the present over the future. The D’Backs might be convinced that they know something everyone else doesn’t know, but they thought about Peter O’Brien being able to catch too. Sometimes, weird ideas are just weird ideas. Maybe in a few months, we’ll all see what the D’Backs think they saw in Toussaint. It’s possible, and probably more likely than has been allowed for. But it’s quite also possible that the D’Backs just screwed up, and sold an asset for a fraction of his actual worth.