Gaming the System 201

Playing the draft game

It is a truism in baseball that teams need to do well in the amateur draft to compete. Even the Yankees, who are often accused of “buying” championships, have internally developed players such as Williams, Jeter, Posada, Pettite and Rivera – key members of their World Series teams.

Clearly, the first step to winning a championship is to “win” the draft game. And, like most games, one of the keys to winning the draft is to understand the rules and make them work for you.

The Jays under A-squared have proven adept at finding creative ways to “game” the draft system.

Case in point: November 2010. The Jays acquire Miguel Olivo from the Rockies for a PTBNL. They decline his option, entitling him to a $500,000 payout but making him a type B free agent. He signs with Seattle, and the Jays get a compensatory pick (pick #53, which they use to draft Dwight Smith).

Further case in point: August 2011. Jays trade Aaron Hill and John McDonald to Arizona for Kelly Johnson. At the end of 2011 Johnson is a class A but Hill is a class B. Under the old compensation rules, a team losing a class A player would obtain two compensatory picks but losing a class B would only earn a sandwich pick. So if Johnson had declined arbitration, the Jays would have gained an additional first-round pick. Unfortunately (?) Johnson accepted arbitration, so this strategy did not succeed. But still a creative idea.

Final case in point: the Jays drafting strategy in 2012, where college players were drafted in rounds 4-10 and paid minimum bonuses, freeing up about $1.2 million to sign earlier round picks.

The Tampa Tango

I was reminded of the benefit of understanding the rules by the recent article outlining how the Tampa Bay Rays will be facing stiff penalties in 2013-14 for exceeding the international spending cap in 2012-13. But the article notes that the Rays landed several of the top international free agents in 2012-13, and that the 2013-14 class is projected to be much weaker. The strong implication is that the Rays were fully aware of what they were doing, but considered the one-year penalty to be an acceptable cost for the benefit of restocking the lower levels of their farm system in a single year.

Fun with “what if?”

Which brings me to an only-slightly-crazy idea for the Jays in the upcoming June amateur draft.

The Jays are in an unusual situation in that their farm system has been significantly weakened by promotions and trades. It will be difficult to restock through high draft picks, as the Jays are expected to be an above-average team for the next few years, which will mean that their first draft pick will be late in the first round.

Could the Rays bird-in-the-hand strategy be adapted to the annual amateur draft?

Teams exceeding their draft pool amounts are subject to penalties. The maximum penalty – given to team who exceed their pool by 15% or more – is 100% of the amount overpaid plus their first round draft picks in the following two years. This penalty is the same whether a team exceeds the pool by 16% or 100%.

What is a late first round pick worth? Many articles have been written on the subject, but a baseball reference table prepared before the 2012 draft showed that the average 25th overall pick had about a 50% chance of ever making it to the majors, and the average pick that did make it earned a career WAR of just over 4. By comparison, the average 60th overall pick had about a 40% chance of making it, and when they did make it they earned a similar (slightly higher, actually!) career WAR. It follows that a late first rounder is not worth that much more than a late second rounder.

My idea is this: in every draft, there are players who are ranked high but drafted late (or not at all) because they are known to be demanding high bonuses. What if a team drafted a bunch of these players and essentially paid them what they were worth, ignoring the draft pool amounts? Such a team could replenish their farm system in a single year – albeit at the cost of two future first round draft picks.

Let me illustrate the idea using the 2012 draft class as an example. The Jays drafted low-cost collegiate players in rounds 4-10. Suppose, instead, they had done the following?

Round 4: Ty Buttrey – RHP, Providence HS

Ranked 34th in Keith Law’s ESPN Top 100 Prospects list, but drafted by Boston in the 4th round (pick 151). Received the highest signing bonus ($1.3 million) outside the first two rounds of the draft.

Round 5: Stephen Johnson – RHP, St. Edwards’s HS

Ranked #62 by Law, but drafted by SF in the 6th round (pick #208). Signed for $180k, just over slot of $168k.

Round 6: Hunter Virant – LHP, Camarillo HS

Ranked #26 by Law, but had a strong commitment to UCLA. Announced before the draft that he expected 2nd round money. Drafted by Houston in the 11th round (#339) but did not sign.

Round 7: Freddy Avis - RHP, Menlo High School

Ranked #69 by Law. Described as “first round worthy” but had a strong commitment to Stanford. Drafted by WAS in the 25th round but not signed.

Round 8: Alex Young - LHP, Carmel High School

Ranked #79 by Law. Athletic, good body, projectable fastball. But a strong commitment to TSU. Drafted by TEX in the 32nd round and not signed.

Round 9: Trey Williams – 3B, Valencia HS

Ranked #81 by Law. Ranked as high as 12th overall in some early mock drafts but fell due to questions about intensity. A commitment to Pepperdine, but expected to be signable for second-round money. Drafted by STL in the 11th round – did not sign.

Round 10: Kyle Carter – OF/SP, Columbus HS

Not ranked by Law, but was rated the #8 HS prospect by ESPN and was an ESPNHS first team all-American. Won 6th Annual Showcase Home Run Derby for HS hitters. Announced that if he was not drafted in the first two rounds he was definitely going to Georgia. MLB teams must have believed him – he was not drafted at all.

Note that this is only an example – there are many other players that the Jays could have targeted with similar high-potential but high-cost profiles (J. T. Phillips? Ryan Kellogg? )

Based on the above example, the Jays could sign 7 (or even more, if this strategy were continued into the 11th+ rounds) players projected as second round – level talents. The cost would be two late first round picks and a 100% penalty that would likely amount to $5-10 million.

This strategy would have other implications. The Jays would be effectively moving 2014 and 2015 draft picks into 2013, which would (hopefully!) accelerate their “graduation” to the big leagues. And the loss of the two first round picks might influence their decision to sign free agents in 2014 and 2015, given that they would only lose a second round pick.

I am sure that the Commissioner would not be happy with this strategy, as it could well be argued to contravene the “spirit” of the new CBA. But could he apply sanctions, when the Jays would be operating clearly within the rules?

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