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Thanks, Graham!
Car shopping
Let’s say I need a car. My commute’s short, so I take the bus or bike to work as much as I can, but in the winter I frequently need to drive in, and then for errands and whatnot. If I made a list of my needs, it’d be “cheap, runs forever, enough headroom, ridiculous gas mileage, safe”.
Off the top of my head, I’d probably look at the Honda Fit, the Nissan Versa, and a Toyota Prius. They would to different degrees fill the need I’m looking for.
But wait. A Lamborghini Gallardo Spyder calls. I’ve never owned an exotic sports car. It gets ridiculous gas mileage, in a different way of course, it’s safe because it’s so uncomfortable and hard to drive it would never leave the driveway except on sunny weekends for leisurely day trips, it has enough head room, in a sense… and it’s only a bit over $200,000. And insuring it is possible, so that’s good, and I won’t have to put up with it for too long because I’ll wreck it or it’ll explode before a couple years have passed.
All I’d have to do is sell my house and all the stuff in it to live in the cheapest apartment I could find with nothing in it. And I’d have to find a new wife.
No problem, though, right? I’m sure there’s a decent apartment out there waiting for me that only costs $1, because there are more apartments than houses, and the market for houses isn’t that bad anyway. And what’s the total population of women out there — there’s a huge number of candidates. And I didn’t need all that stuff in the house anyway. And if there isn’t a $1 apartment, I’ll live in the car. No problem.
You may think I’m crazy to give up all that and go to all this trouble to get myself something so ridiculously overpriced, but look here:
– Five-liter V10 engine
– 520 horsepower
– 0-60 in negative two seconds
– fully retractable soft-top roof that I’ll never use because I’m in Seattle
The market price for that is over $200,000. If it’s that highly valued, it has to be awesome. Therefore buying one has to be a good move.
KOMO Hot Stove Nuggets of Bavasi widsom
MSB has some comments, I understand.
Adam Jones and Erik Bedard, Quantified
Time is not on my side, so I won’t be able to go into as much detail on this as I would like, but with the Bedard rumors picking up steam again, I figured I should put this out there. What follows is my calculations of the value of Adam Jones and Erik Bedard from a win value standpoint. You don’t have to believe that this is the be-all, end-all of analysis, but if you’re serious about having an opinion on this issue that anyone should care about, you at least have to understand what win value analysis is telling you. If the Mariners aren’t looking at this kind of information (and, let’s be honest, they’re not), they’re not doing enough work to figure out if acquiring Erik Bedard at the cost of Adam Jones is a move worth making.
Here’s the basic concept – every player adds a quantifiable amount of wins to the roster above what could be expected of a league minimum, freely available player. Those wins have tangible economic value – the more wins a player generates, the more they should be paid. But players also cost money in terms of salary, and the difference between their win value and their cost is their net value. We all make these kinds of decisions every day – gas costs $3 a gallon, but it gets me to work so that I can earn $100 a day, so buying gas is a viable economic decision if you have to drive to get to your job unless you live really far away.
So, here’s what the numbers say, based on a conservative estimate of Jones’ abilities (I project him as a league average player this year with small, incremental improvements through 2013, his last year under Mariner control) and a very optimistic estimate of Bedard’s abilities (basically, he retains almost all of his 2007 form, then resigns with the Mariners to a 3 year, $60 million contract after 2009). The variables have all been tilted in favor of Bedard, because I like to present something like the best case scenario for the side I don’t agree with, especially when I think the issue is this cut and dried.
All that said, here are the numbers (I’ll try to post the calculations later when I have time to make a table look decent).
Adam Jones, 2008 net value: $8.7 million
Erik Bedard, 2008 net value: $12.5 million
Adam Jones, 2009 net value: $14.0 million
Erik Bedard, 2009 net value: $9.0 million
Adam Jones, 2008-2013 net value: $61.0 million
Erik Bedard, 2008-2013 net value: $33.1 million (assumes 3 year, $60 million extension after ’09)
In terms of value added to the Mariners franchise over the next six years, it’s not even close. Jones blows Bedard out of the water even in a scenario where Bedard is projected to be the significantly better player (I’ve got the total wins added from ’08-’13 at 17 for Jones and 26 for Bedard). Even if you only look at the next two years, Jones is expected to outvalue Bedard $22.75 million to $21.5 million.
Even if Adam Jones was a free agent after 2009, given their respective abilities and salaries, I wouldn’t trade Adam Jones for Erik Bedard straight up. The fact that the Mariners then control Jones from 2010 to 2013 makes this an obviously horrible trade.
I’m all for acquiring Erik Bedard, and I’d give up practically the whole farm system to get him. But Adam Jones is the kind of player that good organizations just don’t trade. He’s one of the most valuable players in the game, and by himself, more valuable to the club than Erik Bedard.
Eighteen days
As rumors of a horrible, horrible Bedard deal swirl.
Seventeen days without a bad move
Good job team! Let’s see how long we can keep this string up!
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Silva’s contract, free agency, my general economic pessimism
The Silva contract has brought up again the question of whether any free agent signing is a bargain in a world where free agent contracts are ever-increasing. I’ll call this the Washburn Effect: today’s overpayment is tomorrow’s good deal. One of the arguments I’ve had here with Tom Tango is that his valuation of a contract’s worth is based on a formula that, to vastly oversimplify, goes
year N expected contribution * value of that contribution in the year N market
for each year of the deal. It assumes that salaries will continue to inflate as we’ve seen the last couple of years over the value of every deal, and so it hinges on whether you think that MLB revenues can continue to grow at 10% year over year for the foreseeable future. Many people believe they can, and I disagree with the certainty of those assumptions entirely and to a lesser extent, about what we should expect of the next few years.
I see two things I see stopping that escalation.
First, as we’ve argued many times here with different players, there’s often a similar skillset available for very little money. A team can sign Silva to a massive deal or find a reasonable facsimile on the minor league free agent market for $1m or so. That price isn’t increasing with the price of free agents. At the same time, we’re slowly seeing a replacement of more traditional major league front offices with smarter personnel who understand replacement value. They’re going to take the cheap option. If nothing else, that’s going to reduce the number of bidders for guys like Silva. Certainly, it doesn’t take many to keep the prices high, but even in the next few years we should start seeing the effects — and even ownership groups who don’t get it will start asking difficult questions about why they’re paying so much for so little. Just moving Texas from dumb to smart takes a huge spender on bad FAs (Chan Ho Park!) out of the market.
That may not have a huge effect, though. The larger is economic. Major league sports are entertainment, and while they have a loyal audience, in a larger sense they compete for dollars with movies, concerts, bowling alleys, nights on the town, and so on. And their sales of super-high-revenue luxury suites depends on the local corporate economy.
You can take your economic indicator of choice against MLB payroll or revenue in the post-collusion era and you’ll see they’re pretty tightly bound (I ran payroll against the price of the S&P 500 since 1989 and it came out at .86, which is amazing considering there are labor issues included). The error I see everyone making is that they’re looking at the last couple of years and seeing MLB developing new sources of revenue, especially in the web subscription money, and drawing a straight line out forever.
And that’s where I part ways. We can’t assume the economy’s going to go up, up, up. If it doesn’t, revenues don’t go up and payrolls don’t go up, and the whole model falls apart. I can’t think of any mature entertainment business – really, any major discretionary spending category – that can sustain 10% year over year growth through an economic downturn.
To our current situation specifically — we’re seeing the real estate market decline, severely so in many parts of the country. The immediate fall out’s been in the mortgage markets, affecting liquidity, credit, taking down hedge funds, and a huge increase in the number of foreclosures. Now, whether you think it’s all going to bottom out later this year and be hunky-dory from there out (it won’t) or what, you can already see some effects. People who feel less wealthy cut back on spending, and you can watch Applebee’s and Chili’s and Whateveree’s revenues taking the hit already.
I’m no economist, but if national real estate values are headed back to 2000 levels, however slowly, it’s going to be painful and tough, and between people spending less and the banking industry trying to ride the whole thing out, baseball’s revenues won’t be going up 10% year over year the whole time.
And if that doesn’t happen, today’s overpriced contract becomes tomorrow’s overpriced contract.
I don’t think the economy’s going to do well over the next couple of years. Now, you’re free to disagree, but none of us can know for certain the direction it’ll take. Maybe we’ll all be happily serving new robot overlords in a money-free economy by the time Silva’s contract expires. If it does, and salaries stagnate, today’s free agent mistakes are still going to look bad. If the free agent market gets more rational, they look even worse.
Arguing that Silva’s deal is okay because the market’s going to continue to go up forever is at least making a set of assumptions that aren’t tenable, and certainly aren’t knowable with that degree of confidence. Washburn’s contract may look decent now, in the same way getting into a house in a booming market in 2004 might have. That doesn’t mean that deal didn’t involve risk — or that you’d be right to not take that risk again in 2007.
And the teardown continues
If you, like me, wondered if Beane was going to have the energy to tear down the A’s and rebuild this off-season, well… this just goes to show us, O we of little faith.
Gio Gonzalez is a top-tier pitching prospect, and they also got RHP Fautino De Los Santos and OF-L Ryan Sweeney.
They may move into the new park is ready to reel off another series of pennant runs.
Stone on Jim Rice’s Hall of Fame candidacy
You know here at USSM we’re fans of Larry Stone (“Official Seattle Sports Writer of USS Mariner”) so I want to point you to his piece with Phil Rogers on ESPN about Rice.