Washburn and the Winner’s Curse
We’ve mentioned this around here before, but the Winner’s Curse is one of the most important concepts to grasp around baseball valuation. In short: the person who wins an auction is most likely wrong, because they have the highest opinion of the value of the object. Take an oil field, probably the most common example: if ten companies survey it and make a guess at the value, how much oil they can extract from it, of what kind, and how much it would cost, the one that offers the most came up with a set of assumptions that deviated the most from everyone else’s expert consensus, and while they’ll win the auction, they’re probably screwed in how well they’ll do.
Or take Tejada — the M’s thought he was worth x, the Orioles thought he was worth x+y. The Orioles were much less likely to get a good return on their investment.
So here’s the problem with Washburn. One of the arguments about keeping Washburn is that his $10m next year is a bargain in this market, he’s a left-handed innings eater, and so on.
Here’s the problem with that… no one else believes that Washburn’s next year is worth giving up a decent prospect. If they did, someone would have made a deal before the trade deadline. If $10m was a bargain, every team in baseball with a remotely malleable rotation would have lined up to bid.
So we know at least that the remainder of Washburn’s contract isn’t valued highly enough by the rest of the league that many teams will offer a nice package for it.
Moreover, we also know that teams in a pennant race who could use Washburn, where Washburn’s remaining potential contribution could have an enormous return in getting into the playoffs instead of missing them, still didn’t line up to offer prospects for Washburn before the deadline.
So in the mind of 29 other teams:
Washburn 2009+2010 = not worth a decent prospect
Washburn 2009+2010+increased chance of playoff contention = not worth a decent prospect
If the Twins were indeed willing to give up Bonser, that would make them the team outside the M’s with the highest opinion of Washburn’s potential value.
At this point, a rational organization, or one with some kind of internal variety of opinion, would stop for a second and think “I wonder if we’re over-valuing his services. After all, 29 other teams, almost all of which are more successful than us, are coming in far lower than we thought, and that includes teams that we know are really smart and have more to gain from Washburn’s services than we do.”
They might even consider whether this disparity ties into the horrible contracts they’ve been handing out to pitchers for years and years. They might rethink their assumptions, look ahead to next year, and realize that the default option of letting Washburn go for nothing helps the team in the long term.
Not the Mariners. The M’s can manage to lose bidding wars to themselves. And it’s us, the fans, who are going to pay for this continued incompetence until there are massive organizational changes, including those who represent the team’s owners.