Fun With Trade Value

Much of the focus for the Brewers offseason is potential free agency targets, given the excitement of the opening of the “hot stove” and the chance to dream about improving the roster with nothing more than cash and pricing risk: there are several fantastic free agency options that Milwaukee can sign without surrendering a draft pick, meaning that the club really simply needs to figure out its maximum payroll ceiling in this scenario. Yet, the Brewers are similar to many current playoff teams insofar as their roster yields best value from trade, and with a series of potential rebuilding efforts announced, as well as new General Managers in key markets, GM David Stearns could justifiably ignore the free agency market given the proper trades.

Of course, the risk with trading is amplified: information asymmetry shifts from a player’s agent (on the free agency market) to a front office (in the trade market), which requires Stearns and the Brewers to maintain a different game theory (i.e., when making a trade, the Brewers cannot simply solve a coordination failure with another team by outspending all other comers); in addition to contractual risk, the risk of prospects or return assets must also be priced, which adds more room to strike a deal (“find the new market inefficiency!”) and to absolutely lose all value (the Jonathan Schoop and Andrew Susac / Phil Bickford trades are two examples of this for the Stearns front office).

There are several interesting trade partners across the league, including franchises that are tied to the Brewers’ front office personnel by lineage (as an example, Tampa Bay and Houston are probably the most prominent teams in this category). It would not be surprising to see the Brewers go after players that they are familiar with from Matt Arnold or Stearns’s previous organizational pipelines (or, whatever rumors those two can continually collect from the….er….informal information market). Recent changes across the league offer new trade opportunities as new eyes look over existing talent stock; here the Mets and the Giants most clearly come to mind. Additional rumors about rebuilding efforts in Arizona and Seattle, as well as the situation in Baltimore, add further trade opportunities for Stearns.

So who wants to deal? To make this article easier to read, the “Surplus Assumptions” are posted at the bottom of the article, as well as a Brewers roster (for full trade comparison).

First things first, everyone wants Jacob deGrom, so let’s take a look at the very best players that the Brewers could trade. At the top of this list, prospects like deGrom would basically require prospect packages like Keston Hiura / Corbin Burnes plus some filler; if the Brewers could acquire almost anyone atop this without surrendering Hiura, that would be magical.

To this observer, if the Mariners end up entering rebuild mode, the Brewers prospect package that could get the most mileage would be for a grouping of Mitch Haniger and James Paxton; this type of deal might be “lead” by Domingo Santana and Corey Ray if the Brewers also included a couple of their best arms. The price would be steep, but would bolster right field defense and On-Base Percentage (balancing the batting order, as well) and the starting rotation. Notably, this prospect cost would be roughly equivalent to spending one full market deal on Patrick Corbin.

There are also some players on this handful of teams that have gigantic contracts, and this is a place where Stearns could create a deal to “buy a prospect” or otherwise leverage the Brewers’ positive revenue scenario. The practice of “buying a prospect” basically means that the Brewers would take on the full balance (or significant balance) of a “bad” contract in order to receive a prospect from their trade partner. One example of this trade is how Atlanta acquired Touki Toussaint by “purchasing” Bronson Arroyo’s contract; to a lesser extent, the Brewers accomplished this when they grabbed Aaron Hill in the Jean Segura / Chase Anderson deal, which netted the Brewers potential impact prospect Isan Diaz (this was a great example of a “contrarian” deal by Stearns, as he acquired MLB talent during a supposed “rebuilding” cycle).

If Arizona is indeed rebuilding, a trade for Zack Greinke would be quite intriguing (someone like Corey Ray would fall right between his “raw” contractual surplus and total performative surplus). What is interesting is how many bad contracts the Orioles have; one would expect a creative rebuild from that organization, as they have so few valuable MLB assets that simply making solid trades for prospects will not be a clear option (at least not yet). It is interesting to imagine the type of trade the Brewers could make by retrieving Alex Cobb’s or Chris Davis’s contract from Baltimore. The Orioles are rebuilding, but their 2019 Top Prospect list indicates that there are nonetheless quite a few interesting players atop their farm system.

Finally, there is a group of very interesting trade targets that exist in a range of potentially cheaper prospect costs. I formed this group by looking at “raw” contractual surplus that would roughly cost an average prospect (50 Overall Future Potential), with total surplus that could range anywhere from average to impact prospect. One of the players on this list (Mike Zunino) has already been subject of a trade today:

Madison Bumgarner and Zack Wheeler are guys that jump off the page here for the “improve the starting rotation” types, and they are crucial examples of how tough it will be to price some veteran options. The range on Bumgarner’s value is quite extreme, and there is no way the Brewers would acquire the veteran southpaw close to his “low” price; so, the question would be whether one of the organizational impact prospects would be worth a player with quite a short-term contract horizon. Kyle Seager is another interesting trade candidate here, with a range that is almost impossible to decode into a useful prospect package: do you trade for elite Seager, or current Seager? What is the premium to be paid for his previously elite production?

Ironically, Jonathan Villar might be the Orioles’ most interesting and best available trade asset.

In short, there are plenty of intriguing players that the Brewers could acquire via trade. This exercise has hopefully opened a few of the strategies available to the Brewers (such as making a huge splash trade with prospects, or “buying” a bad contract). Additionally, the importance of being honest about high costs should also be apparent: the Brewers cannot simply “add an ace” if they view players like Keston Hiura as a part of their future, or even Zack Brown, Jacob Nottingham, Corbin Burnes, Brice Turang, and Trey Supak for that matter. Yet, in the event that the Brewers make a large trade, the pay off must be accurately assessed, which is one benefit of using a range of surplus assumptions to look at the high and low value markers available in a trade. For example, viewing Christian Yelich’s “raw” contractual surplus and total performance surplus below should show why it was worthwhile to surrender the prospect haul that Yelich required; the Brewers could conceivably do the same with an impact player for 2019, so long as the continued diminishing profile of their top prospects is assessed. If the Brewers forego a huge trade in the offseason, they could pay dividends both in terms of MLB development (in the case of prospects like Hiura), role determination (in the case of players like Supak and Turang), and more realistic roster need assessment during the midseason trade deadline.

Surplus Assumptions

To make it perfectly clear, here are my common surplus assumptions, with background here and here:

• Teams receive surplus value by retaining production and a contract (or, “scarcity”). Value in the MLB can be defined as the on-the-field performance and the scarcity of that performance (which is thus controlled by contractual terms).

• Surplus can be calculated in a “Raw” fashion, where the value of performance over time is simply assessed against contractual value; alternately, a “full” surplus assessment can be made by considering the future value on the field the club will receive, as well as the contractual hit they will take for employing that player.

• Arbitration and league minimum “reserve” contracts produce extremely high value because teams can frequently cut those contracts without paying full price. This adds value beyond the stipulations stated above.

• For this to work, MLB players, prospects, and cash must be translated to dollars. While this is an assumption that many do not like (opposing WARP/$ frameworks), I argue that the simple fact that teams trade prospects for MLB players, or cash, all the time demonstrates that these different asset classes can indeed be translated into a common currency.

• This should not be viewed as the be-all, end-all of player valuation, simply because there are different developmental models across organizations that could result in alternative models based on organizational strengths; WARP itself is only one way to measure players; prospect risk is nearly impossible to uniformly quantify across one group of players, which necessarily means that almost any prospect valuation system will be incomplete. Additionally, player development cycles are quite long, meaning that the value a player could be expected to produce within the next three years is nowhere near the value that could be produced in a decade; this matters depending on a team’s resources and the player’s distance from the MLB (or MLB service time), among other factors.

Here is one example of Overall Future Potential (OFP) pricing, based on a model that assesses all players in MLB history (to the point of that publication), and an update from 2017. These models will be further updated.

Based on these assumptions, here are the Brewers, including most of their players listed under contract at Cot’s Contracts, as well as a couple of their best advanced prospects (to compare prospect grading within the system). This article focuses on four calculations to produce surplus value:

• After depreciating production from 2014-2016, 2015-2017, and 2016-2018, those three figures are averaged to produce a “Blended Surplus.”
• The largest of the depreciated production from 2014-2016, 2015-2017, and 2016-2018 forms the “High Surplus.”
• “Immediate Surplus” takes a different look at production by simply using full 2018 performance and extrapolating it for three years. This is the equivalent of taking the most extreme view of immediate performance by a player.
• “Raw Surplus” is calculated by subtracting the average of these three figures, prorated for each player’s remaining contract, from the player’s contract (options excluded).
• “Surplus” is the final figure, adding the average of Blended, High, and Immediate surplus to the “Raw Surplus” contractual figure. This is equivalent to valuing a player’s on-field production separately from their contractual value.
• The “Raw” figure is meant to demonstrate a “buy low” price, and the “Surplus” column is meant to demonstrate a “buy high” price, but obviously these figures are not exclusive; they merely seek to establish potential boundaries for a trade.