A Quick Turnaround Story: The Cleveland Indians
The Cleveland Indians were one of baseball’s biggestsurprises through late May, using a strong offense, decent starting pitching, and a good bullpen to record a 26-17 record at the 43-game mark of the season.
Although Cleveland has struggled since – the Indians have gone 6-16 over the past 22 games, mostly due to their offense slowing down –, the team’s season has still been fairly successful for a team with modest expectations coming into the season.
Much of the Indians’ success is due in large part to shrewd moves made in the offseason, mitigating the loss of Shin-Soo Choo by acquiring Nick Swisher, Michael Bourn, and Mark Reynolds via free agency and Drew Stubbs and a few solid bullpen arms via trade.
The cost-benefit analysis and marginal upgrades behind the acquisitions of Swisher and Bourn, upon reflection, deserve particular praise.
“Having it all”: Weighing future vs. present value
Swisher and Bourn were both tendered qualifying offers by the Yankees and Braves respectively over the past off-season – thus, any team that signed either free agent would have to surrender its highest pick in the 2013 Draft under the current CBA (this should resonate with Nationals fans, given Rafael Soriano’s presence).
However, teams with a top-10 first-round pick are protected from surrendering their “lottery” pick; those teams instead surrender their ensuing picks when signing tendered free agents. In Cleveland’s case, the team gave up its second-round pick for Nick Swisher (rather than its first-round pick) and second-round competitive balance pick for Michael Bourn (rather than its second-round pick).
Victor Wang and Sky Andrecheck – both current members of the Indians’ front office – did research a long time ago on compensation pick values that adjudged Cleveland’s first-round pick to have at least ~$5.2M surplus present value and second-round picks to each have around ~$0.8M surplus PV. (For Indians’ No. 5 pick Clint Frazier, I calculated a very back-of-envelope surplus PV of ~$17M, given lifetime 10 WAR, assumption that 50% of win shares were roughly earned during cost-controlled years, and slot signing – given Frazier will be a BA Top 100 hitter when he signs, the rough number is generally grounded.)
Note: These values are dated to the time the research was published (and the vintages of players analyzed may provide different numbers now), so these values: 1) are guidelines, and 2) have presumably inflated.
Assuming that Swisher and Bourn are signed to open-market contracts (at quick glance they appear to be paid as such, and the Indians’ FO is smart enough to pay linearly per WAR), Cleveland extracts no surplus present value from either Swisher’s or Bourn’s contracts.
However, the Swisher and Bourn signings advance the Indians’ along the win-curve (Cleveland essentially upgraded from Casey Kotchman and Shelley Duncan to Swisher and Bourn – a net gain of almost 10 WAR), which has obvious present value. Vince Genarro determined that the marginal value of an Indians win (their 81st, to be specific) is approximately $1 million.
Cleveland was 65-91 last season, but made solid acquisitions (replacing Choo with Stubbs – plus prospect Trevor Bauer, unorthodox training methods aside –, and adding Mark Reynolds and various bullpen arms) aside from the Swisher and Bourn signings that slightly improved the team. Making the assumption that Cleveland would be a 65-70-win team without Swisher and Bourn, it’s safe to say that the two free agent additions make the Indians a near-.500 club and provide nearly $10 million surplus present value through their play this season (despite their open-market contracts).
If the Indians had to relinquish its first-round pick to sign either free agent, the acquisitions of Swisher and Bourn probably wouldn’t have been worth it from a cost-benefit perspective. The team would be giving up almost $20M+ surplus present value (through the drafted prospects) for the $10M surplus PV the two free agent signings provide helping the team win in the present.
By exploiting the protection mechanism provided by the CBA, however, the Indians both protected its future (by keeping their first-round pick) and improved its present, gaining a net $8M surplus present value from signing Swisher and Bourn and relinquishing the two second-round picks. The preservation of the first-round pick over the second-round competitive balance pick alone provides an additional $16M surplus PV swing, which makes Cleveland’s off-season decisions even more illuminating.
This example naturally compels me to think about the Rafael Soriano signing and how the numbers net for the Nationals. Given the prospect values of a late-1st round pick, and the assumptions that the net gain from Soriano is +2-3 WAR and marginal value of a WAS win is $1.2M, Washington comes out slightly behind for giving up the draft pick. However, the marginal value for a curly W is probably higher than $1.2M given the team’s ambitions this year, so the signing could probably be perceived both ways.