The question is about to be cast into the realm of the hypothetical: Would the open market principle have eventually worked against small market teams in the MLB draft? It certainly was showing no signs of doing so any time soon.
It used to be the case, some time ago now, that richer teams exploited the free-market draft by plucking juicy players poorer teams couldn’t afford. That seemed to be what happened as recently as 2006 when Rick Porcello, unanimously considered to be at least a top-3 amateur talent, advertised his unwillingness to sign for less than some astronomical sum—let’s say it was 10 million—and as a result fell all the way to the 27th pick where the Tigers were waiting with a $7.3 million deal spread over four years (only $3.5 in cash up front if Wikipedia is not mistaken). That deal, of course, seems like chump change just five years later.
Actually, it seemed like chump change just two years later when, in 2008, four teams topped the previous record for total amount of money spent in a draft. Three of those teams were in small markets, led the way of course by your Kansas City Royals who dropped $11.1 million from the Enola Gay for soon-to-be-monster Eric the Hoz Hosmer and third round “steal!” Tim Melville (remember him?). The Rays came in third at ~$10 million, the Pirates fourth at $9.7 million.
Now, teams selecting among the top few picks will logically spend more considering they have top picks to sign, but something surprising was going on in 2008. Small market teams were actually out-spending the large markets later in the draft. The Royals gambled 1.5 million on Melville in the third round, for example, while teams like the Mets and Yankees were sticking to their slots. It didn’t make sense. It was as if a few small markets had ‘discovered’ a market inefficiency, and most perplexing was that the inefficiency was money.
The Royals, Rays, Pirates and their scrawny ilk were dropping large bets on amateur talent, not just in the draft but suddenly in Latin America. That same year the A’s dropped a then-record 4.25 million on Dominican amateur Michael Ynoa. The Reds signed Aroldis Chapman, the Royals Noel Arguelles, the Twins Miguel Angel Sano for 3.1 million. I watched all of this in total confusion. Where on Earth were the Yankees, with not just their famously deep pockets but their global brand? There’s no question the Yankees had been invited to watch Ynoa work out, why didn’t they just pay 4.5 million?
I’m getting off track, this rant is aimed at the draft, why were the Yankees not spending 2 million on Wil Myers in the 2nd round? Chris Dwyer? Why not drop 7 or 8 million on Josh Bell last year at the end of the first round? How could it be the case that small markets were consistently out-spending the Yankees? Was Brian Cashman simply standing by in an effort to let the kids play? Was this like a cat not fully killing a rodent so he can play with it for a little longer?
We return to the now-hypothetical question: would this trend have continued?
I should say before I go on that this is actually Kevin Goldstein’s rant, I’m just borrowing it. If you listen to Up-and-In, as you should, you’ve undoubtedly heard him go off on this topic before. He believes that the only chance small market teams have to compete in major league baseball is by overspending in the draft. And if the Royals’ recent activities in amateur talent-collecting are any indication, he’s right. Royals fans have a unique view on this; for twenty-five years, we’ve been unable to compete in any way other than spending over slot in the draft.
Hosmer and Moose were signed WAY over slot. Both threatened to go to college and both were signed at the very last minute. Montgomery, Lamb, Dwyer, Duffy, Myers, were all over slot, some dramatically so. The 2011 draft is an over-slot high school buffet.
There is a contingent of owners and team executives who have convinced Bud Selig to negotiate aggressively with the players’ union for a spending cap on the draft. They apparently believe that small markets would not continue to gain from overslotting. They must believe that big markets were asleep over the last few years while all of this was going on and the Cracken will soon awaken. They believe that spending will get out of control in the draft and the net winners will wind up being teams that can absorb out-of-control spending.
It’s actually a valid question, and one that I would be interested to debate here. With the Yankees dangling, say, 5 million at Wil Myers, would Myers’ asking price – in the third round – have gone up to that 5 million?
Would Jake Junis now be asking for the same in the 27th round or wherever he went?
A couple of thoughts:
(1) You still have to identify Jake Junis – your scouts have to find him and deem him worthy of over-slot money. So the real market inefficiency is not simply in spending cash in the later rounds—the inefficiency is in out-scouting other teams for amateur talent. That is, in selecting who to spend the money on. But the same question still applies—if scouting is the market inefficiency, how long would it be before the Yankees dropped serious cash on scouts? Before the Yankees gathered up all the best—and the most—scouting talent?
a. An auxiliary question from point (1): Wouldn’t this be a good development? Scouts, from what I understand, make shit on a shingle for a living wage. Shouldn’t supply-and-demand be allowed to drive up scouting wages just like everything else? I think the real losers from Selig’s new rule will be the scouts.
(2) Don’t we have a long way to go before over-slotting reaches critical mass? Even if it now requires, say, $15 million to truly work an over-slot advantage, the Royals’ payroll last year was 36 million. Teams like the Rays and Royals can probably afford to spend as much as 30 million, or more, to load their systems with the talent to replace the players they’ll inevitably lose after 6 years of major league service.
(3) The model that is about to be set in motion “penalizes” a team for overslotting with a “luxury tax”.
a. Only rich teams can now afford to over-slot, which is precisely the opposite result of what Selig is trying to accomplish.
b. When revenue from the overslot luxury tax flows back to the Royals, what the hell are they going to spend it on?! Certainly not the draft!
The most fun aspect of being a fan of a small market team is watching them harvest young, raw talent and dreaming on those players. Watching them all the way from rookie ball to the big leagues and then watching a precious few of them become stars. I submit that it is actually more fun to be a Rays fan these days than it is to be a Yankees fan; more fun, that is, if you happen to be a fan of prospecting for gold. In my view, this rule effectively takes that SIM City-esque building project away from the little guy. This wonderful tool that somehow allowed the Rays to field a World Series team is, from where I sit, gone. Will the revenues from the overslot luxury tax now allow the Royals and Rays and Pirates to compete on the level for free agents?
I doubt it. I seriously doubt it.