Valuing the Jake Peavy Trade, Again
by Mike Rogers on Aug 4, 2009 6:00 AM EDT
in Trades & Transactions
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PrintPlease welcome Mike Rogers to the BtB family. Mike's been around in the comments sections a lot recently, and writes for two other blogs, Fire Jim Leyland and Friar Forecast. I'm a big fan of Mike's ability to talk baseball from a smart angle without making the smart angle the subject of his writing. He'll be tackling current events, with the occasional unique research piece tossed in for good measure. Say hi, readers...
The San Diego Padres managed to get Jake Peavy to OK a deal sending him to the Chicago White Sox minutes before the trade deadline expired at 4 p.m. EST last Friday. Peavy nixed virtually the same deal back in May. Sky valued him at about 3.8 Wins Above Replacement with some generous assumptions going in Peavy's favor two months ago.
Then Peavy tore the posterior tibialis tendon in his right ankle, and is on the shelf until the end of August at the earliest. But that doesn't stop the unpredictable Kenny Williams from doing, well, the unpredictable. What's the verdict, monetarily, on this deal? Win or loss for the White Sox?
Well, Jake Peavy will get about six starts the rest of the way after he returns, providing around 0.75 WAR. Due to winning of the Cy Young in 2007, Peavy's 2009 salary ballooned from an $8 million option to $11 million. He'll be on the White Sox for the last, roughly, 35% of the season, so I'm comfortable saying they'll be paying him ~$3.85 for the remainder of 2009.
Using Sky's Trade Value Calculator, that 0.75 WAR would be worth $3.6 million on the open market. The White Sox are "overpaying" by about $300K, or essentially paying him market value.
But after 2009 he gets more expensive.
For 2009, pre-season FIP predictions put him on pace for about a 4.5 WAR season. Declining by half a win per year for the remainder of the deal means Peavy's WAR would be:
So, the White Sox would, by these projections, be losing about $1.2 million in the value of just Jake Peavy. That doesn't include the value of the pitchers going the Padres way.
But, how valuable were those four pitching prospects?
Well, Clayton Richard is a massive left-hander with a sinking fastball that works in the 88-92 MPH and decent change-up. John Sickels' website rated Richard as a C+. Thanks to Victor Wang's research and Erik's application of that, a C+ prospect over the age of 23 is worth about $1.5 million. Richard's got a 4.32 FIP in 142.1 innings pitched in his Major League career, so I can see him being, in retrospect, better than that C+ rating -- ground ball pitchers tend to be underrated at times, but I'll stick with that $1.5 million.
The big gun in the deal is Aaron Poreda. Sickels rated Poreda as a B+ pitcher. A pitcher rated as a B by John Sickels and being 22-years-old or younger is worth about $6.5 million. I feel comfortable moving a B+ pitcher to around $7 million.
Dexter Carter is a big, power arm with upside. He's dominated Low-A ball thus far and Sickels rated him as a C prospect. At 22-years-old that puts him at $2.1 million in value.
Adam Russell was unranked by Sickels.
So, these four prospects bring in a total of $10.6 million in surplus value. Given that the White Sox pick up the 2013 option year for Peavy, they lose about $1.2 million on the deal. In giving away $10.6 million in value, plus what they lose on just Peavy's deal alone, they're on the hook for about $11.8 million in total value. Without the Peavy option year, the White Sox still come out on the negative side at $-6.6 million.
Looks like a check in the W column on this deal for the Padres.
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Everything I see one of these, I actually wonder what the flip side value would be if the players the Padres got back in return end up actually hurting their team (i.e. performing below average) while Peavy actually helped his team (i.e. performing above average) for the duration of his contract. For instance, if those four guys end up having pedestrian careers and actually hurting their team in some instances, what would the value of the deal then look like? Or is that not taken into effect? I’m just curious, that’s all.
Players can still help their teams by being below average. And above-average performance can hurt, if you're paying too much for it.
In analyses like this, we’re not ignoring the very real possibility that the young players the Padres received don’t stick in MLB while Peavy has three 6 WAR seasons. That’s obviously a large win for the White Sox. But there’s also the very real possibility Poreda becomes a very good pitcher and the other two are at least league average, while Peavy’s barely better than average and misses a season to injury.
What we’re looking at here is a middle of the road scenario. That scenario itself is actually pretty unlikely, but it represents the middle ground. If you beat the middle ground in a lot of trades, you have a much better chance at succeeding than if you pour a little expected value down the drain with every transaction.
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Understandable. Makes sense. I just find it odd to try and determine future value for prospects while keeping the veteran at nearly the same level throughout.
You can give some extra credit after the trade I think.
But it doesn’t change the whole trade. No amount of injuries from Adam Jones and company and health from Erik Bedard would have made that trade a “good” trade, even if Bedard’s contributed WAR ended up being higher.
But I think you can give credit in the case of the Gutierrez acquisition. At the time, most people saw the JJ Putz trade as a good “sell-high” trade and a positive trade for the Mariners. Now we realize, as we have to give GMZ some credit for realizing before, Gutierrez is an extremely valuable asset, the type of player who you expect on a championship-calibur team. So in that case, the Mariners get a little extra credit after the fact.
Some people may disagree with me, but I think we have to give the FOs credit for having some info we don’t.
What do you mean by "the same level"?
We’re projecting future value for both prospects and veterans.
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I don’t have reliable evidence that they are different people. In fact, secretly, I suspect all Mariners bloggers are the same guy, over-caffeinated and holed up at some Tacoma-area Seattle’s Best.
(Sorry, Graham.)
by Tommy Bennett on Aug 4, 2009 4:07 PM EDT up reply actions
Great stuff
and welcome to BTB writing, you had a good first article. As a sox fan I am a little mad at the deal kenny Williams made. He picked up all the money and gave our top prospects, a whute sox fleecing
Carlos Guillen, the Latino Nick Punto
Top prospects?
Jordan Danks, Tyler Flowers, Dayan Viciedo, Daniel Hudson, all appear to be comfortably playing in the Sox minor league system……
The Chicago Bulls.....the more profitable Los Angeles Clippers.
by Ozzie Montana on Aug 4, 2009 1:34 PM EDT up reply actions
Assuming the Pads didn't put anyone else in the deal, it appears so.
This is an attempt to predict the most probable result of the trade – either team could end up making money off the deal. The point here is to try to judge, at the time of or before a trade, if it was a smart move or not.
@bs_uf15bosox9be The Original Gameday; Learn to use SB Nation
I know that this question is outside of your analysis
but what is the value of a playoff series or playoff wins in these equations. I know that players are assigned a value based on WAR, but going to the playoffs or World Series generates revenue for the team. So if the White Sox make the playoffs this year does that change the value of the deal?
by Delgado on Aug 4, 2009 1:55 PM EDT reply actions 1 recs
Obviously, yes.
But that hasn’t been quantified yet, and if subject to many factors. Plus, if you consider that, then you have to start considering merchandise sales, ticket sales, replacing the expected production from the prospects, etc.
@bs_uf15bosox9be The Original Gameday; Learn to use SB Nation
Usually I would agree with you
However, in this case it doesn’t seem to be that Peavy’s contributions are being mis-valued by “our” system; more that Kenny Williams is mis-valuing players.
Peavy projects be about a 4 WAR player, while Peroda and Richard both project to be about 2 WAR players. You can make a case for linearty; however, it’s clear that Peavy doesn’t add that much more world series of playoff probability.
F*** Billy Beane... actually, I kinda like Holliday
Welcome
But I wouldn’t make my guesses based off of those prospect rankings. 4 months is an eternity in the prospect world.
The biggest problem I have with this type of analysis is that it never fails exclude the young players’ salaries. Even if it’s a rookie over the span of Peavy’s contract, that’s still 1.5 million at least over three years, more when Richard reaches arbitration. If and when each of the pitchers reach the majors and stick, that’s about 6 million total the Padres will be paying for what likely will be non-stellar performance. If they don’t make that much, the White Sox make out pretty well.
You might say, well, that’s about minimum salary for a good pitcher, so it’s not really paying for him when you think about it, just the roster spot. Well, what makes the prospect better than the next option? The White Sox are a winning team that pitching-wise tries to have a strong point in every spot on the staff. Until the value of the pitchers they gave up is better than what they’re using, you can’t really say they lost much. The prospect of getting Peavy under your control ensures that you probably won’t have to deal with less than above average production for a considerable period of time whereas what they give up doesn’t ensure that they are maximizing their resources. So while neither team really made a home run of a deal, at least in my opinion, it was good enough to make from both sides considering the circumstances.
Thanks guys for the welcome (Daniel, I’ve seen you around Project Prospect, if I’m not mistaken…). I just wanted to say, publicly, thanks to Sky for the opportunity give the tiny little blog that I run, and that I’m extremely excited/honored to be able to work along-side the talented group of writers BtB has working for them currently. This place is one of my first stops for baseball analysis and news and I hope I can keep that reputation in tact and bring some insight along the way.
You know new employees aren't eligible for the prime parking spots until after a three month trial period, right?
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Well this job is bogus. I hear Pizza Cutter hooks their new employees up.
And now at Beyond the Boxscore!
Yeah, and that's why Pizza Cutter was forced to quit and is under investigation by the SEC.
Or he had a baby, I forget which is true.
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Excellent reminder of why
3+ yr contracts are a bad idea for pitchers unless they are drastically under-market and/or the extra years are team options (see: Shields, James)
Based upon this model, Peavy would need to produce 39.5 WAR
over the life of the contract for the Sox to break even. Your findings seem to conclude that any trade involving a player who is being paid market value will always result in the acquiring team losing money in the deal. I know the math is correct but this just doesn’t seem right to me. I guess the model assumes that any 4.0+ WAR player can be readily attainable in the free agent market. I know you didn’t come up with the 1 WAR =$4.5 mil but shouldn’t a premium be placed on players above a certain WAR, say 4, since they are more scarce?
They are more scarce, yes.
And teams like the Yankees should be willing to pay more for these types of players, because they have so much money to spend and a limited number of positions.
But most teams have a few holes, where replacement level players are playing. So there’s little reason to pay extra for a 4 WAR guy when two 2 WAR guys will be just as good. Spending on top talent compared to middle of the road and cheap talent has shown to be pretty linear historically, maybe every so slightly not.
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The Time Value of Money
Hi, this is my first post here, after a year or so of admiring what you guys are doing.
Some comments and questions:
1. When calculating the Value of an active player vs. prospects, shouldn’t one take into account the Time Value of Money ? Theoretically, you can continue to keep trading A level prospects for new A level prospects every 3 years or so, without your prospect ever leaving the minors. You might be doing equal value trades all the time without ever generating any real Value. I’m not sure what the discount rate per annum should be, but the way you calculate things now doesn’t seem right to me.
2. Why use the average dollar amount per WAR on the free agent market as a comparison ? That’s where the dumbest decisions get made. Isn’t some form of total MLB salary / Sum of All WAR (I like the sound of that) a better estimate of the cost of WAR ?
3. Has anyone ever looked at non-lineair efects of hitting and pitching stats on the WAR of a team ? I mean, the difference between 10 and 11 hits per game has a bigger effect than the difference between 5 and 6 I guess. Also, going from a tERA of 5 to 4.8 might be less important than going from 4.2 to 4.0. So, I’d be looking for the marginal effects on WAR and how to maximize those.
WAR is pretty much linear in terms of both salary and value (playoff probability added)
F*** Billy Beane... actually, I kinda like Holliday
Plus, didn't you just do a post about how it would be best for teams to play to their strengths when acquiring new players?
I agree with OPS2000 about his first comment – couldn’t inflation make the more distant seasons of a contract a better value?
@bs_uf15bosox9be The Original Gameday; Learn to use SB Nation
Whoops, it was jh moore, not VEP.
My bad.
@bs_uf15bosox9be The Original Gameday; Learn to use SB Nation
If WAR is linear
Should Replacement Value start where it starts ?
Having 10 players @ 1 WAR kinda sucks vs 1 player @ 10 WAR and 9 at 0
With the latter there is room to upgrade.
I’m sure this point has been made already elsewhere (the added benefits of a superstar).
Scarcity matters at a certain point, yes.
But there are so few teams with at least a 1 WAR player at every position (let alone 2 WAR) that it’s more of a strategic issue than a theoretical issue, in my opinion. To the Yankees, a 5 WAR player might be worth extra money, and sometimes they pay that premium, but unless there are other teams demanding that particular superstar at extra money, the Yankees don’t have to pay it. To teams without the need to sign a 5 WAR player instead of two 2.5 WAR guys, they have no reason to bid up the price beyond linear.
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