Why $63 Million for Yoan Moncada Makes Sense
For the last few months, the baseball world has been speculating about Yoan Moncada. The question of who would sign him was less interesting, as the structure of the deal — a 100% tax on the signing bonus, due by the middle of the summer — meant that this was a bidding war that only teams with significant cash flows could justify winning. From the beginning, the Red Sox, Yankees, and Dodgers were identified as the heavy favorites, and in the end, Boston won the battle of the big spenders.
More interesting was the question of how much Moncada would sign for, because this was a bit of a unique situation in MLB. Because Moncada could only be lured with a signing bonus, and because of the tax on the signing, teams were being asked to spend significant present dollars for a chance to buy potential future wins. While this happens on a small scale in the draft and with other young international prospects, teams generally do not have to make these kinds of short-term investments without getting short-term rewards.
The last time I wrote about Moncada, I noted some similarities between signing Moncada and paying the posting fee for a player coming over from Japan, which pushed over $50 million for both Daisuke Matsuzaka and Yu Darvish. Those players also came with a steep up-front cost and hadn’t proven themselves as big league contributors, but neither one spent a day in the minor leagues before jumping into their team’s rotations; they were viewed more as major league free agents, just without the track record that other big league free agents bring.
Moncada has the short track record in common, but unlike Darvish, Matsuzaka, and Masahiro Tanaka, he’s not big league ready. The consensus is that he needs a year or two in the minors, and given that he’s just 19, that might even be aggressive. It wouldn’t be at all strange for him to not make a significant impact at the big league level until he’s 22 or 23, as even the prospects teams are most sold on don’t always develop as quickly as expected. So, the Red Sox $63 million investment — once you double the signing bonus to account for the tax — will likely return little or no value for several years, and because even very good prospects still have high failure rates, there’s a real possibility that this investment never returns anything at all.
But that doesn’t mean he’s not worth the risk. Every signing is a balance of risk and reward, with the amount committed an attempt to find the sweet spot between the chance of success and failure. The more upside there is, the more risk a team should be willing to accept in order to get the chance for that best-case outcome, and while Moncada undoubtedly carries a significant amount of risk, he also comes with significant long-term potential.
For instance, let’s look at what a $63 million investment might suggest the Red Sox think is the likely range of outcomes for Moncada.
In this graph, I’ve plotted a series of probabilities for various outcomes, ranging from Moncada being a complete bust to him turning into a superstar. The Team Controlled Value axis is an estimate of his value above and beyond his pre-arb and arbitration salaries, which is why the odds of him being worth $200+ million over his six to seven years of team control are so low. That kind of performance would naturally lead to quickly escalating arbitration prices, so Moncada would have to be worth something close to $40 million per year — making him a consistent +4 to +5 WAR player — in order to reach those levels. This is the Andrew McCutchen outcome, basically.
More likely, Moncada does not become McCutchen, or even anything that close to him. History suggests a better chance that he turns into something closer to Neil Walker, which is approximately what the middle of that graph represents. The most likely single outcome is that he develops into nothing of value, but the probability of all the success added together are more likely than the chance of failure.
The graph above is an example of what the the Red Sox are betting on, based on the signing price. Broken down into numbers, the graph’s probability distribution would look like this:
| Probability | Surplus Value | Justified Cost |
|---|---|---|
| 24% | $0.00 | $0.00 |
| 6% | $25,000,000.00 | $1,500,000.00 |
| 18% | $50,000,000.00 | $9,000,000.00 |
| 20% | $75,000,000.00 | $15,000,000.00 |
| 15% | $100,000,000.00 | $15,000,000.00 |
| 14% | $125,000,000.00 | $17,500,000.00 |
| 2% | $150,000,000.00 | $3,000,000.00 |
| 1% | $175,000,000.00 | $1,225,000.00 |
| 0% | $200,000,000.00 | $600,000.00 |
| Total | $62,825,000.00 |
The percentages are rounded to the whole number, so don’t worry, I don’t think $200 million multiplied by zero percent is $600,000. As the graph and table show, however, the Red Sox aren’t really betting on Moncada turning into a $200 million player. They don’t need him to become a superstar to justify this price; the $63 million commitment works if his most likely outcome is a good-not-great player, with significant bust potential but also some slight chance of turning into a superstar.
Now, keep in mind, I made these probabilities up to demonstrate what the price the Red Sox paid suggests that they may see as his outcome range. But this price fits pretty well with what the public valuation estimates that have been produced of late.
As we’ve noted a few times lately, the most recent research on prospect rankings suggests that the average value produced by a top-10 hitting prospect during their team control years is roughly +15 WAR. If Moncada produces something like that from 2017 to 2023 — assuming the Red Sox will hold him in the minors long enough to get a portion of the seventh year from him — and the cost of a win keeps increasing at the rate it has been increasing, then he’d produce somewhere in the neighborhood of $125 million in value.
But, he’d also have to be paid salaries for each of those years, and if he’s producing at those levels, he’s probably looking at something like $30 million in arbitration awards and pre-arb salaries, which have to be factored out of the value added, knocking him down a bit below $100 million in overall value. $95 million is certainly more than $63 million, but we have to also account for the time differences in the money spent and the wins produced; those 2017 to 2023 wins came at the expense of $63 million in 2015 dollars. So, we have to adjust the value of those future wins into today’s dollars, which looks something like this.
| Year | Value |
|---|---|
| 2015 | |
| 2016 | |
| 2017 | $5,000,000.00 |
| 2018 | $10,000,000.00 |
| 2019 | $10,000,000.00 |
| 2020 | $15,000,000.00 |
| 2021 | $15,000,000.00 |
| 2022 | $20,000,000.00 |
| 2023 | $20,000,000.00 |
| Total | $73,131,318.67 |
$95 million in future value, discounted at 4% percent year — the discount rate MLB and the MLBPA use in their calculations — with no value returned for the next two years equals $73 million in today’s dollars. That’s still $10 million more than the Red Sox actually spent, but perhaps that’s the risk premium that is attached because of the fact that teams haven’t scouted Moncada against minor league pitching. That +15 WAR projection came from the results of top-10 hitting prospects, which Moncada may be, but top-10 hitting prospects generally only reach that ranking level after they’ve performed well in the minor leagues. Moncada hasn’t yet, so perhaps teams priced that level of risk into their offers.
Personally, I’m a bit surprised that the bidding topped out at $63 million, given the players involved. The Yankees and Dodgers are both being hit with significant Luxury Tax penalties based on their big league spending, so they don’t have a tax-free avenue to spend $31 million to acquire additional talent. But again, this is a unique circumstance. Teams are generally not asked to spend big time current dollars to buy potential future wins; even long-term contract extensions push the big money back into the years where the value is expected to be produced.
So perhaps this was a tougher sell to ownership groups than I had imagined. Writing a couple of big checks, and then not seeing any return for several years, with a real chance of never seeing any return, is probably a difficult pitch. That said, if Moncada is as good as has been reported, this feels like a bargain. The Red Sox committed less guaranteed money to Moncada than the Diamondbacks did to land Yasmany Tomas, and while Moncada might not be a 2015 player, the difference in upside here seems to be worth the wait.
Toss in the potential for value beyond the just the team control years — the Red Sox now have exclusive rights to sign him to a long-term deal if he does become a superstar — and this price feels light to me. Of course, I’m not the one writing the check, but I would expect that we’ll probably look back at this and wonder why the Yankees didn’t bid $35 or $40 million to keep him away from their biggest rivals.
Dave is the Managing Editor of FanGraphs.
I’m curious on how certain they are that he’s really 19 years old. We know that there is great incentive to cheat and that players and organizations will cheat (look at the steroid scandal and the Chicago LL for example). So teams are basically betting on the integrity of the Cuban government and the international baseball federation (or whoever verifies birth certificates) that he is the age he says he is. Doesn’t seem like a great gamble to me and I wonder if that’s the reason why his bonus was much less than people expected.
Actually, the new rules incentivize players to be older than 22, not younger. If you’re above that line, you get to sign a big league contract, and teams aren’t subject to the signing pools or overage taxes, so guys like Rusney Castillo and Yasmany Tomas were able to get double the guaranteed money that Moncada just got. If he were older, he’d have been better off financially by telling the truth.
Well, I doubt he’s claiming he’s three years younger than he really is, I was thinking more like two which would still put him under the line. Plus I’m not sure that he would even disclose his “real” age if he were over 22 as that would probably have serious ramifications to Cuban amateur baseball unless you can convince yourself that’s he the only one lying about his age.
He wouldn’t have gotten less money if he was 21.
He certainly would have got less money if he was 21, as he would have been further along the ageing curve and would thus have had less development potential
Yes, exactly.
Dave,
I’m kind of shocked at how wrong this statement is. There is absolutely no way he’d get anywhere near the bonus he got (or what Castillo or Tomas got) if he were 22 years old. Teams were lining up to pay him because of his potential because of his reported age of 19 – at age 22 is he even a real prospect?
Tom,
You’re missing his point. Moncada has huge incentive to say he’s 22. Then he wouldn’t be part of the international pool. He’d jus t be a free agent. So instead of getting 31.5 million he would have gotten all of what teams evaluated him for. Certainly that overall value is less than 63 million at 22 over 19 but he would have gotten every dollar. Even if it was 40 million, we can agree 40 > 31.5 right? Also there is a value to missing out on future signings because of pool penalties that the payout has to absorb. Economics are a bitch.
Ryan,
Actually you are wrong. Moncada will get $31.5m plus whatever he gets as a contract. If he’s in the majors for 6 years that will be well over $40m – if he’s good that’s $50m plus. And you have to figure in time value for money – I don’t have the charts but $31.5m right now may very well be more than $40m over 6 years (if he got the Puig contract). As you said, economics is a bitch.
Given the sound Cuban medical system, I’m inclined to trust their numbers. Especially if in their youth baseball they track their players according to age on their way up. But yeah, if a guy (and all his financial people) can get away with obtaining extra millions of $$$ in return for saying “uh, yeah, sure I’m 21- I mean, 19-years-old then, you bet”, only a bozo doesn’t factor in the possibility.
So, how sure are we as to Cuban ages?
OK, half of that was inane. Only way we confirmed all the guys who were lying about their age was that all their governments DID have that information, just prior to 9/11 had no incentive to give it to us. Said incentives would be in place for the Cuban government too, you’d think.
I’m superficially inclined to go with Jeff below. But you’d think this is something Dave C. could check with his MLB contacts by way of an email or 3. Are MLB teams as a whole confident that the Cuban ages are valid?
I don’t see how they can be confident about their ages. But at the same time there’s absolutely nothing they can do but accept them.
If you think it’s more likely he’s two or three years older than his reported age, you have to know that’s just baseless speculation on your part as well. So there’s that.
I was under the impression that the age of Cuban players were accurate due to the scrutiny of the international tournaments that they play in. Moncada has played in multiple tournaments. On the other hand, most signed 16 year old players from other Latin American countries haven’t had that level of scrutiny with regards to their age. Or at least that was the case in the past.
I’m sure the ages of Cuban players at international amateur tournaments are accurate – meaning that the names of the players match up with a birth certificate that has them at an acceptable age. However that’s not to say that either the names of the players aren’t correct or that the birth certificates haven’t been doctored in anyway (I suspect the former is more common than the latter). We know there was horrible age cheating in the LLWS (even among the US teams, Danny Almonte). The same thing has been going on in T&F – the Africans routinely cheat on their ages which makes junior athletics a complete joke.
Scrutiny or not, players with that talent level start playing at the highest level at 17, and sometimes even 16. While it’s theoretically possible for Moncada’s age to be falsified, it wouldn’t really make much sense. When would this falsification have occurred? You don’t just lie about everyone’s identity just incase they become a great baseball player, If he was really 19 when he was supposed to be 17, where was he before? People are stuck in the 90s/00s with this shit.
I’m amazed at how little understanding there is about age falsification and how people don’t understand how widespread it is (outside of the US). The Cuban baseball federation isn’t falsifying ages on the slim hope that it will help their players get more money from the MLB but because they want to do well in international youth tournaments. It happens when they are younger – they see a good 14 year old and then get a birth certificate that says he’s 12 (for example). Or when he’s 16 they make him 14. It’s simple and nearly foolproof.
I don’t trust the records of any totalitarian country. I remember North Korea had a gymnast that they claimed was 15 for 3 consecutive years. That being said, this is more than a dictator looking to bask in Olympic glory. I’m sure the teams involved did their homework and didn’t just take Castro’s word for Moncada’s age.
I also think it funny that the finest minds in the industry came up with this system for balancing the playing field when it came to international signings while any idiot with a modicrum of sense could see that this would have the exact opposite affect. I’m guessing these geniuses graduated from the same fine institutions as those that say we can reduce healthcare costs by mandating lower prices.
Thank you for that well-informed and thoughtfully considered political remark at the end, which was completely relevant to the point and not something that you tossed off without actually looking into the issues involved with any depth!
I’m sure the socialist government of Cuba is busy, while they’re not desperately trying to keep their own people alive in the face of the American sanctions, flasifying the ages of teenagers on the off chance they become baseball superstars.
Do you have any proof that Moncada is not the age he claims to be? Or is it as strong as your views on healthcare? As a British guy with healthcare paid for from taxes, we laugh at your pathetic, expensive, inefficient system.
Any idiot with “a modicrum of sense”?
Bringo! Ya Dingus.
Totalitarian countries have been known to cheat and abuse loopholes to succeed at international sports and gain the propaganda value of such. Heck, non-totalitarian countries are not immune. If falsifying birth certificates will provide said advantage, it is certainly a tactic that will be used when the perceived gains outweigh the perceived risks. If Cuba is falsifying ages – and I cannot confirm one way or the other but it wouldn’t surprise me either way – they are certainly not going to volunteer that information now. While international sports organizations are known for a certain level of corruption, they don’t like being embarrassed in public and it would be in Cuba’s best interest to keep their mouth shut.
You pays your money and you takes your chance.
Will Boston have to pay additional salary, beyond the $63M — including a spike in salary during arbitration years?
Yes, and he says so in the article.
About 50-70% of the time, according to the chart above, he’ll be worth a qualifying offer, hence a draft pick, assuming the CBA doesn’t change by then.
Wait, did I read that right. Did you say both matsuzaka and darvish had no impact on their teams. Darvish is the ace down in Arlington and matsuzaka was great for the red Sox in his time there before he went elsewhere. I don’t know, maybe I misinterpreted it
What did you even misinterpret? I don’t see anything like that at all in the article.
You are misreading that.
“Those players also came with a steep up-front cost and hadn’t proven themselves as big league contributors…”
He’s talking about the fact that they hadn’t played in the majors yet when they signed their first contracts, nothing about what they did once they started playing.
Right, he missed the use of the pluperfect tense.
Stop making up words.
Made up probabilities? Come on.
Seriously, putting stuff you made up on a graph does not make it data. Stuff like this seems almost like it’s designed to mislead readers, or at minimum borrow the superficial appearance of actual data analysis to dress up something that is not that.
The idea is to walk through the process, with one example visualized. Teams know about error bars, and probabilistic modeling. This is how that works. Is that chart the exact one used by the Sox to come up with their offer? Of course not, and it wasn’t used that way.
well, while the analysis looks reasonable, it does seem to be presented as justification for the pricetag when in fact its just an explanation of what that pricetag indicates the red sox are valuing him as.
you could do the same thing with any pricetag, really.
How do you figure it’s presented as justification for the price rage rather than an explanation? See, when I read that same article, I noticed Dave wrote this:
“For instance, let’s look at what a $63 million investment might suggest the Red Sox think is the likely range of outcomes for Moncada.”
&
“The graph above is an example of what the the Red Sox are betting on, based on the signing price.”
So how did you interpret the graph into a justification, when he repeatedly said it was based on the Red Sox offer and their possible idea of his potential value?
To be fair, the title of an article sets the tone for interpretation of that whole article, and it doesn’t take much mental juggling to read this as: $63 Million for Yoan Moncada Makes Sense, and here’s Why. That would be an explicit endorsement of the valuation.
I don’t think Dave intended to state flat-out that the Sox made an objectively appropriate offer, just that it is possible to come up with a set of reasonable assumptions that place this deal within the realm of providing surplus value for Boston.
Every team likely did this same analysis, and used equally justifiable assumptions, Boston was just slightly more bullish.
yeah what AC said – the title implies a justification.
Hmm, a bit of a failure on reading comprehension on your part.
The probabilities aren’t “made up”, they’re an example of the probabilities that balance out to be worth a $63M signing. They’re hypothetical, yes, but no more “made up” than saying “if we buy X equipment we need Y sales to return on the investment”.
We don’t know what Boston’s projections are exactly, and they wouldn’t be “made up” either…they would be based on scouting, analysis, and the historical record. This article was written to give us context as to why a team would feel its worth making this move.
BOOM!
And the author won’t respond because… BOOM!
This site can be so shit sometimes. I understand the wont to place a value on everything, rational or not, but most times is just comes down to ceilings, as that’s what’s paid for. If that presumed ceiling is not reached, the acquisition was a failure. I laugh at the author’s claim that if Moncado becomes a 2 WAR player BOS comes out even on the acquisition.
Or u don’t understand fairly simple math. Its like complaining the article is invalid because he used to many big words.
‘you’
‘too’
GBYS, kid.
JOHN MIDDLETON
SOLD
CURT SCHILLING -Three Rings
HUNTER PENCE – Two Rings
SCOTT ROLEN – One Ring
SHANE VICTORINO -One Ring
BOBBY ABREU
CLIFF LEE
for
VICENTE PADILLA
That’s SEVEN Rings in 14 years while the Phillies have won two World Series in 125 years.
So it was the Red Sox who signed the $6 Billion TV deal?
I got these two teams mixed up?
Why are the Phillies the only MLB team that has not spent any of it’s TV money?
Google: Phillies $6 Billion TV deal
The Phillies B O Y C O T T the open markets.
This entire rebuild will be through the June MLB Plantation
Slave Auction. Those players will be exploited just as the last
crop was – assuming success which may not happen – and
then they will be “rewarded” by becoming lifetime Phillies
if they so choose.
When Bill Giles father was President of the N.L. there was
no free agency. There was no Scott Boras. That’s the way
these Blue Blood racist bloodsuckers think it should be.
The Dodgers celebrate their TV deal by buying division titles.
The Angels celebrate their TV deal by buying division titles.
John Middleton celebrates his new TV deal by announcing
a rebuild and slashing the payroll.
_
Highlight and Google: John Powers Middleton Felony Fraud
_
I can’t even…I…what?
This could break -100…..
Well, I’m still available, if John Middleton wants to buy a division title.
(The CROWD sits in stunned silence. Several seconds pass before it erupts into applause.)
CROWD: * cheers *
BOLDFACE AND ALL CAPS
I R R E L E V A N T R A N T
Highlight and Google: Get Your Own Blog
Click my name.
Why on earth would I want to do that?
He’s the Heisenberg of the internet, except that Heisenberg was interesting.
You’re better off pulling his finger
lol
wat
What is this..I don’t even….I mean…
I like this guy. Might be a little heavy on the slave talk (I’d like a more open market for amateurs, but they are getting paid millions to hit balls and aren’t hunted down if they stop playing). But my retort would be: who cares what an owner does with his money with the team he bought? They got the TV deal because that’s what the market would bear. If the fans don’t like it, they can stop going/paying, then they’ll have to do something about it.
I just feel like there is much more malfeasance among the 1% that he should be spending his time on. No crying in baseball, dude.
Why did the Phillies get a $6 Billion TV deal?
Phillies fans delivered the highest local TV ratings in MLB for two years in a row.
Not the Red Sox.
Not the Yankees.
Not the Dodgers.
The Phillies had the highest TV ratings in all of MLB.
The contract is for 25 years.
Boycotting the games does not stop that money from flowing in.
John Middleton can slash the payroll down to the Astros bare minimum
level and rake in $150 million in after tax profit.
So in other words, boycotting the games means more fans staying at home which means better ratings for the sponsors of the Phillies games.
Until the fans get turned off by a bad product and Comcast threatens a lower $ for the next TV deal. At which point notorious war criminal Adolf Middleton opens his vaults for a Jon Lester type signing and makes everything right again.
In other words, patience, Mr. EAC. At least you’re not an Astros fan with no WS championship to remember.
I’m actually starting to enjoy your posts just to see how ridiculous they can get.
Also the reCAPTCHA has me hunting for pizza…
That escalated quickly.
troll.
This post is a thing of beauty. All you need to do is invoke Godwin and maybe capitalize the boldface, but then walk away. This comment belongs to the ages.
My favorite comment ever though, on fangraphs, was the first one on the article criticizing the Royals for signing Mike Jacobs.
nice analysis, dave.
fun for us that this seems to put the deal in the “debatable” range, rather than being a slamdunk win or loss.
that said I just don’t get how this guy got a $63 mil total commitment
I mean is 55 hit/55 power with an uncertain position and no minor league track record really worth that?
I guess they just don’t make 19 year old cuban imports like they used to
good questions all, my minion.
or were you hoping to make those quesyions seem silly by posting them under my name?
All I know is that you guys better not steal my user name.
do not sully my name, minion
i’ve worked hard to cultivate a respected brand following here on this site, when people see the name “everdiso” they automatically respect what’s being written below
do not challenge that
being right seems much more fun than worrying about interweb respect.
although, in the interest of full disclosure, I’m only saying this because he signed with the red sox
if he signed with someone else obviously it would be a better deal
this unprecedented pricetag for a 19yr old would have plenty of doubters no matter which team paid it.
the red sox victim card is kinda funny.
oops, that was supposed to be to the above comment, obviously i didnt mean to reply to myself
Can’t we just IP-ban anyone who ever calls themselves everdiso? This is so tedious.
but then the terrorists win.
No, we’d all win by not having to read any everdiso comments.
Whether real or troll, the way you think the industry has some great love for the Red Sox at the expense of all other teams is hilarious. You know what? Come back with some research about how all Red Sox prospects are consistently overrated, while others are exactly properly rated and we’ll talk.
Two points: why do you think any evaluator would risk their credibility in order to puff up one team? It’s stupid.
Second, have you ever actually read Boston media? The people that would most likely benefit from flattering the Sox, the local media (including the JWH-owned Globe), are incompetent and rip on the team all the time. There’s no way national media is going to try the opposite.
Again, do the research and then come back. Until then, take a breather.
i have research showing red sox prospects perform worse than other teams’ relative to their rankings
i also have research showing preseason projection systems overrate the red sox more than any other team
Not that you actually do, but even if Sox prospects were overrated there would be a valid reason why, or do you trust Cashman’s bumbling Yankees player development division more than Cherington’s?
well that last guy wasn’t me but hey, let’s look at boston’s recent top 50 prospect history (BA)…guys who are no longer prospects:
X.Bogaerts
J.Bradley
M.Barnes
A.Webster
W.Middlebrooks
R.Westmoreland
C.Kelly
L.Anderson
Total: 618gms (77gm/plyr), 1.7war (0.4war/150)
that’s 7 years worth of graduated top 50 prospects.
seems to me to be considerably less than what you’d expect from elite prospects.
edit: mbrooks actually peaked at 51st but given he’s the most successful of this group so far you might not want to remove him.
its been a long time since the sox produced that legendary crop of kids – pedroia hanley lester papelbon ellsbury. its even been a while since they produced that secondary mediocre crop of kids – bucchholz bard reddick lowrie moss…..but they still seem to get the benefit of the doubt.
and for the record, it doesn’t help that the lead writer of fangraphs literally ignored prospect $ evaluations he made just last week in order to write an article praising this signing today.
You didn’t include Anthony Rizzo, who by himself pushes the entire list up to 10.2 WAR.
Ryan Westmoreland had brain disease. So, I’m not sure what point you’re trying to prove by including him. Maybe that doctors underestimate the probability of brain disorders, but only for people who play for Boston Red Sox minor league affiliates.
You also didn’t include Mookie Betts who has already produced 1.9 major league war and was on all midseason top 50 lists.
No one in their right mind thinks that Xander Bogaerts is ready to be judged as a finished product.
And why is Lars Anderson included, but Ellsbury and Buchholz from the year before are not? Why is the cutoff year of 2007 significant?
nothing special about 7yrs ago. I have no problem acknowledging that the red sox had a great system 8+ yrs ago. my point is they’re still living off that rep.
rizzo was never ranked as a red soxbptospect, so he’s not relevant.
but yes, the red sox have had their fair share if success from non elite prospects in thosecyears – reddick, lowrie, bard etc. nothing crazy good but some decent success from borderline top 100 guys.
and I love mookie. even if I think the assumptions that he’ll be a plus defensive player are a bit optimistic. no argument there. xander, too.
Rizzo was ranked 75th as a Red Sox prospect following the 2010 season
“I have no problem acknowledging that the red sox had a great system 8+ yrs ago”
Since then (all top 3 since you included Webster): Pedroia, Ellsbury, Lester, Papelbon, Buchholz, Reddick, Lowrie, Masterson, Rizzo, Xander, Betts.
“my point is they’re still living off that rep”
That’s the value of ‘rep’, it’s earned with results. But if you really think the glut of talent the SOX have in reserve is crap, you’re very, very alone.
“rizzo was never ranked as a red soxbptospect, so he’s not relevant”
He was rated higher than Webster.
“but yes, the red sox have had their fair share if success”
Unlike your Yankees who are forced to hang their hats on starters turned relievers and 4th outfielders. And 2 decades ago, of course.
“I love mookie. even if I think the assumptions that he’ll be a plus defensive player are a bit optimistic. no argument there. xander, too.”
Says the guy with a Jeter basket on his mantle.
This is a response/question to Everdiso listing ‘overvalued’ prospects on the Red Sox.
Here is a list of Red Sox prospects that have debuted in the last decade (since 2004) that became all-stars (all-star years in parenthesis)
Jonathan Papelbon (06, 07, 08, 09, 12)
Kevin Youkilis (07, 08, 11)
Hanley Ramirez (08, 09, 10)
Dustin Pedroia (08, 09, 10, 13)
Jon Lester (10, 11, 14)
Clay Buchholz (10, 13)
Jacoby Ellsbury (11)
Justin Masterson (13)
Anthony Rizzo (14)
Brandon Moss (14)
Is that below-average, average, above average for a system to produce about 1 player a year that goes all-star at some point (genuine question)?
again, I’m saying they had a fantastic prospect class from 2001-2005 drafts, and that they may be still living off that rep without really deserving it.
2001-2005 drafts (5yrs) (anyone with >1 career war)
D.Pedroia (30): 38.7war
J.Lester (30): 35.4
K.Youkilis (35): 28.4
J.Ellsbury (30): 27.3
J.Papelbon (33): 19.6
C.Buchholz (30): 14.1
J.Lowrie (30): 11.1
D.Murphy (32): 10.0
K.Shoppach (34): 7.6
B.Moss (30): 6.5
M.Murton (32): 5.4
that’s a tremendous 5yrs of drafting. not so much the average depth ( ~2per draft), but that’s 5 legit stars in 5yrs that formed the core of a championship team. throw in an IFA signing like Hanley (30, 40.2war) and its just a tremendous system at the time.
what’s more, the sox did this mostly with with underrated prospects who were not given a realistic star ceiling at the time.
absolutely fantastic drafting by the sox here, and they reaped the benefit in championships.
but the next 5yrs don’t really compare…
2006-2010 (5yrs)
A.Rizzo (24): 8.5
J.Masterson (29): 14.6
J.Reddick (28): 11.1
D.Bard (29): 3.6
K.Negron (28): 1.6
W.Middlebrooks (25): 1.5
B.Workman (25): 1.4
C.Vazquez (24): 0.7*
G.Cecchini (23): 0.1*
S.Coyle (22): 0.0*
now these 5yrs look at best average, and if those bottom five guys don’t develop well then this would turn out to be a flat out poor 5yrs of drafting. they might hit the average of 2 per draft if the bottom guys pan out but there’s not much in terms of impact performance outside of Rizzo….and we don’t know if rizzo can repeat his breakout year.
but the key point here imo is that the prospects from these 5 drafts actually received as much or more hype than the prospects from the previous 5 drafts, and haven’t remotely come close to matching their success.
and now we have the current crop of prospects from the 2011 draft on that are getting similarly hyped again, even though the last cohort came in well under expectations, and even though the front end of the current cohort – bradley, barnes, bogaerts, marrero, cecchini – have stumbled as they’ve reached or neared the majors.
it feels to me that the sox are still getting the benefit of the doubt from that awesome cohort from 10-15yrs ago, and based on the last cohort from 5-10yrs ago, and the iffy start from the current cohort, I’m not quite sure they deserve it.
Shouldn’t the header of the second column of the first table just be value instead of surplus value or am I misinterpreting something?
Surplus value is correct. It’s what his value will be worth in those years of team control minus what his contract will actually be. The $63MM is purely the signing bonus and league tax.
I don’t think so or the 24% chance he’s a complete bust (corresponding to the graph in which it’s labeled “team control value”) would yield a negative “surplus value”
No, because if he’s a complete bust he won’t make the majors and will never get paid more than his pittance minor league salary.
You have to also think the Moncada signing made even more sense to prevent droughts of talent in the future because the overage penalties.
I don’t really understand the point. We have a recently updated prospect valuations chart that DAVE wrote the Fangraphs article on. According to that, Moncada would be worth something like $38-48 million in surplus value, depending on whether he’s a top 10 hitting prospect or in the 11-25 range.
So now we’re just changing assumptions until we can write an article justifying the Red Sox decision?
He’s worth whatever a top hitting prospect is worth, which is less than the Red Sox paid. They could afford to pay more because they have more money than God.
huh.
good catch.
http://www.fangraphs.com/blogs/taking-a-stab-at-valuing-the-farm-systems/#more-176880
is it really that hard for dave to say “the red sox overpaid by ~$20m, but they can afford it” ?
That table uses $6.5M/WAR which will not likely be true over the next several years.
It also doesn’t factor the cost of the money the Red Sox spent this year on a player who won’t contribute for several years.
Mr. Cameron spent a lot of time breaking down the cost of the Max Scherzer deal and how inflation affects the actual dollar value the Nationals spent but in this case completes ignores that aspect of the deal.
Bingo
It’s like the articles justifying the Sandoval signing despite ZiPS & Steamer disagreeing.
now this here is a very good point.
The only flaw in logic I see is that the $30million tax to be paid by this summer is a huge fee. Deferred money isn’t a big deal (see Scherzer, Bonilla, etc.) as inflation and new sources of revenue minimize the impact.
But what could $30 million dollars this year buy your team? Especially at the trade deadline? To me that is a sunk cost, which makes it not worth the price. There are always more players up and coming especially now that Cuba is pretty much fair game.
Well it’s pretty late in the offseason and we don’t know if the Red Sox are actually at their budget. If they aren’t and there just currently aren’t options for them to spend their money on, then, financially, this makes a good deal of sense.
I think I read somewhere that with signing, the Red Sox now are limited to $300k in international money until after the 2018 season. How does this impact the value of this contract? They’ve essentially fired their one bullet for 3 years.
The signing limits the Red Sox only until 2017. But, the CBA is up after 2016. Theres a good chance the rules are completely changed by then.
MLB can’t just abbreviate the Red Sox (and others’) future international signing limitations, can they? Wouldn’t that greatly tick off the teams (Giants, Mariners, Marlins… kinda guessing at these) that didn’t break the bank for Moncada because of this very limitation?
If this 2 year signing limit rule were not in place currently I wonder where Moncada’s bonus would’ve ended up….
Any team that claims they didn’t bid for Moncada because of the signing limitations is lying. Moncada is a top 10-15 prospect in all of baseball, and normally the best July 2nd guys are outside the top 150-200. Even if someone better comes along, you can’t get them, because someone else will bust their pool to sign them (as happened with Baldoquin and Lopez).
Teams regularly make verbal commitments to international signees well in advance of their actual signing. The Dodgers didn’t jump into the Moncada sweepstakes because of commitments they have already made and didn’t want to renege upon.
It’s also not really that hard to believe some teams would prefer ten rank 150-200 prospects to one ranked 10-15.
They had already gone over the limit by signing 3.3 MM worth of int’l prospects against their 1.88 MM budget.
Preface this with I could be wrong but… Over the limit caused the luxury tax, but they are at a hard limit now and only have $300k for the next couple years.
You are wrong. They had already busted their limits, so they were already restricted to not spending more than $300K on any one player in the next two years. This is still the case even after signing Moncada.
but yet they did..
Actually I am right..
International bonus pools are determined based on the reverse order of the previous year’s standings, meaning that the Astros have the largest budget ($5,015,400) while the Cardinals have the lowest ($1,866,300). The Yankees have drawn a great deal of attention for their reported plans to shatter their spending limitations, but reports have also indicated that the Rays and Red Sox are willing to incur the maximum penalties as well. This year, penalties for exceeding bonus pools has changed slightly from previous signing periods. Here’s the breakdown:
All overages are taxed at 100 percent.
Exceed bonus pool by 5 to 10 percent: Team is not allowed to sign a player for more than $500K in the following international signing period.
Exceed by 10 to 15 percent: Team is not allowed to sign a player for more than $300K in the following international signing period.
Exceed by more than 15 percent: Team is not allowed to sign a player for more than $300K in the following two international signing periods.
The Red Sox had already blown their pool limit for 2014-15 before they signed Moncada. The sanctions had already been triggered for 2015-16 and 2016-17, but don’t apply to the rest of the 2014-15 period, hence the Red Sox being able to sign Moncada. They didn’t get any additional sanctions for his signing (except the 100% tax).
So this might just be silly of me, but what is his actual contract? I know the 31.5 million is the bonus, but there has to be more money under that right, with a year total? I know it probably is not much, but I just can’t find the answer.
It’s a minor league contract, so he’ll get paid whatever a minor leaguer gets paid until he reaches the majors. Then he’ll get paid the minimum/what the club feels like paying him for three-ish years, then arbitration. So the bonus is just that. Pure gravy.
It’s analogous to Kolek, Bryant, Appel, Gray, and other drafted guys taking home a signing bonus and being put into a system. Yoan Lopez had the same thing.
What about the cost of not having international money for the next two years? Six years of control of a reliever and a utility infielder has a benefit… yet it’s absent in this otherwise outstanding CBA.
I’d be a lot happier if they had added this $63 million to their lowball offer to Jon Lester last spring.
the difference between the Yankees and Boston’s bid was Stephen Drew’s 2015 salary *sobs*
There, there, big fella. Look on the bright side! At least you guys have A-Rod coming back!
*sigh*
One thing that the MLB and sports writers alike don’t think about is the incentive to come to play in America. For example, adding an international draft that limits spending on each player (or one of various non-draft proposals others have come up with, in the name of “fair”) would de incentivize many players from moving to play in the U.S. especially when one’s life is risked to get here. In Japan, for example, putting in place a $20 mill maximum posting fee reduces the incentive for teams to post their players: “why post player X for only $20 mill when he is worth, to us, more than that in marketing and revenue and fan interest and wins?” When before, the market would reach an equilibrium price that the team thought was worth their player. The same thing has been happening here, the only problem is that 1) there is a tax preventing it from being reached and 2) many fans don’t like how the small market teams don’t haventhe resources and they think it is “unfair.”
I trust the integrity of the Cuban government more than the U.S. one.
You got that right.
I feel bad for you everdiso; nobody deserves to be sided with Free_AEC.
Integrity is vanity’s lying cousin.
Trust in nothing.
Has a 4% discount rate been used at all on this site prior to this? I notice the reference to “this is what the MLB and MLBPA use” but I seem to remember the Scherzer analysis using an entirely different discount rate and I’m not sure I’ve ever seen 4% used.
With Scherzer, Dave assumed the discount rate should be 7% which is the expected return if investing in stocks… which of course made the Nationals deferral of money look better than it would have been had it been discounted at only 4%.
It’s little details like this and a lack of consistent assumptions and methodologies when analyzing various moves that leads to criticisms of bias and skewing assumptions based on the desired outcome of the article and perception of the GM and team involved.
So I guess we should assume the analysis of Scherzer’s deferred money was wrong and the savings weren’t as much as what was calculated? Or has the discount rate changed over the last month?
Of course not. The Sox (& Cubs, & Rays, & A’s, & Astros) are held to a different standard, in which DC assumes that they are right, and writes a proof from there.
And I say that as someone who supports the price the Sox paid for Moncada.
Shouldn’t the whole $125m be discounted first? This would give $100m so the PV is $70m for a top-10 prospect. This seems really high to me but sometimes that happens. There’s immediately an issue with this, growth is probably assumed to be 7%-9% and the discount rate is 4%. This is an unstable combination in the long-run so continuing to use growth > discount rate seems aggressive (even if past results point to this). You may point to the IB arena as a guide but they are in the business of facilitating company sales.
Using 4% growth and 8% discount:
$125M SV = $77.2m – $30m = $47.2m xSV
Your value of Moncada ranges between $47-$70m based on growth/discount rate. It looks to me that the Red Sox overpaid by $25m. I kind of hope Moncada fails so this prospect-bubble pops.
http://www.thepointofpittsburgh.com/how-much-an-mlb-prospect-is-worth-updated-trade-surplus-values/
Yea, but there’s no way those numbers hold up if there’s a 20% shift in the growth market within certain subsections of the GDP profit margin deposit funds. Unless, of course, you were factoring in marginal percentage risk assessment with a 31% error fluctuation.
I will join in the fun by grinding an axe for my own team: “Consistent +4 to +5 win player” is not an accurate description of Andrew McCutchen.
Axe grinders only wear down their own tools.
Kind of surprised by that myself. Before his contact extension, sure, he was a consistent +4 to +5 win player.
But after that, he’s cruised into being a consistent 6-7 WAR player. I’d say the 4-5 win analogy is better for Puig, whom Moncada has been compared to in the past.
Or, with the same general position and team, Dustin Pedroia, who’s just about at 4.5 WAR/600 for his career. (I wouldn’t say Puig only because I think he hasn’t had long enough to establish a consistent level–he could settle in higher or lower.)
Good one. Makes you wonder if the Red Sox are working on a special three-2B defensive shift….
Can I have $63 million, too?