How Do You Objectively Measure a Trade?

The Trade Deadline is passed - how should deals be judged?

The action-packed Major League Baseball trade deadline has officially passed, and most fans have subsequently dived into the evaluations of these deals. But, for some bizarre reason, they are obsessed with identifying the winners and losers of these trades. John Smith from Missouri is quick to jump on Twitter and voice the so-called winner of a trade, citing that one team “fleeced” another.

The mainstream outlets enforce this thinking — ESPN, Bleacher Report, and others talk about who won and lost a given trade, implying that these transactions must be defined in a binary zero-sum win/loss sense. But, a binary answer implies that each team has the same objectives, which is not the case in baseball. With the criteria seemingly in flux for all parties, a true question becomes apparent: how do you fairly and objectively measure a trade?

 

Types of Trades

Before objectively measuring a deal, the type of deal must be considered. Major League Baseball is filled with a variety of trade scenarios based on goals, making the definition of trades evermore important. Waiver-related trade issues will be disregarded because they have a generally small impact on a franchise. Three-way trades will also be disregarded, as they are just different iterations of two-way trade types. Divided into three main groups based on team goals, some franchises may make a trade that overlaps multiple categories. Being concise is important, but not everything fits into a neat little box – some trade scenarios may fit outside of these groups.

 

Trading Future Talent for Talent Now

In this type of deal, a contending team (Team A) and non-contending team (Team B) will generally transact prospect player(s) for a current player(s) that could make an immediate impact. Team B generally has an above-average player but is not looking to compete for a few years. The player generally has between 0.5 to 3 years left on the contract, which will not be the difference between Team B making the playoffs or not. Team A, on the other hand, is likely a few wins short of making their coveted Wild Card or Division Winner spot. If they were to acquire the player from Team B, they could make their desired spot and earn the extra revenue that follows. With Team A dedicated to now versus the future, they offer prospects that Team B could utilize when their team is ready. If a fair exchange, each side is benefiting from fulfilling their needs at the given time.

 

Trading Need for Need

In this trade transaction, generally, two teams (Team C and D, for example) decide that they each have a need. Both of these needs happen to be at the same level, with Team C wanting a catcher and Team D wanting an outfielder. Luckily, Team D happens to have an extra catcher and Team C has an extra outfielder. The double coincidence of wants is satisfied, and both teams make a swap to satisfy their respective wants. This happens mostly at the Major League level, but teams will sometimes swap prospects in hopes of adding depth at certain positions. Given that the returns are fairly similar in value, each side of the trade stands to benefit. 

 

Trading Expensive Talent for Cheaper Talent

Commonly called a salary dump, this type of trade involves a team looking to lower payroll (Team E) and a team that can afford to take on extra payroll (Team F). Directed by owners or just as a result of entering a rebuilding mode, Team E decides that they have a few extra contracts they need off of their balance sheets. Team F, with money to spend, offers to take these contracts for a price. Depending on the skill level of the players on the contracts, Team F will want more or less to take them on. If the player is worth far less than the contract, Team F may want Team E to tack on another skilled player, cover part of the contract’s dollars, and/or add prospects. When Team F decides the appropriate combo, they will generally send a low-cost Major Leaguer and/or prospects to Team E. If the player is worth more than the contract, the deal can take on several forms that might overlap with the aforementioned trade types. As with any trade, a somewhat equal transaction will be beneficial for both sides.

 

Don’t Grade on the Same Goal

In each type of trade, the last sentence contained similar lines – the transaction can be beneficial to both sides involved. Earlier, it was mentioned that many fans and media outlets support the idea that there must be a winner and a loser in trades. But if both sides can benefit, that simply must not be the case. A loser must be defeated – adding benefit to a team is not being defeated. After all, the point of each trade is to improve or benefit the team.

Seeing as every team is trying to improve upon itself, the marketplace would be non-existent if each team was attempting to improve in the same way. If all teams are vying for a playoff spot and need starting pitching, no team would be able to transact with one another. The double coincidence of wants is not established, with only a buyer being present in the marketplace.

Yet, this is how some fans and reporters grade teams. They grade them on their willingness to compete and go after a playoff spot without the acknowledgment that these different goals allow the marketplace to exist in the first place. Fans rant endlessly about the batch of new prospects they’ve received, sad and angered that their sub-.500 team got rid of their favorite player. They quickly claim that the opposing won team outright, not acknowledging the fact that their team was acting in their best self-interest and fulfilling a market necessity. Without buyers and sellers, a market does not exist. Considering only half of the equation is not going to provide an accurate answer.

These same people insist that every team must go after wins, but the supply of wins dwarfs the demand. On any given gameday, only half of the teams will add a win to their record. 12 of the 30 teams will make the playoffs. and two of them will make the World Series, with only one taking the trophy home. Clearly, not everyone is going to win. So as a team, would it be wise to keep players or invest dollars during a time where your chances of gaining market share on these wins are slim?

Simply put – no. The resources would add no value in the short run, as contention is already out of the picture with the current roster. In the long run, no additional resources will be saved from year-to-year, making the leap to being a formidable team unlikely. A team may get lucky with their prospects or drafting to boost them, but “going for it” every year will also affect this. If a team is attempting to win every year, their draft slots will never rise by a significant amount, affecting their farm system. They will lack the core necessary to build upon, unable to foster a somewhat competitive team without cheap-controlled young talent on their roster.

Hence, they will not win now or in the future. This is admittedly an oversimplification of the various processes, but the fundamental reasoning remains true. Insisting that a team must win now to be successful will be their ultimate demise. So why would grading them based on them solely winning now make any sense?

 

An Objective Way to Judge

In each type of trade, teams had a given type of goal, with the hopes of achieving a deal that was beneficial to them. In the second section, the fact that all teams have different goals is emphasized, making judgments based on a singular goal that may not align with a team that is mistake-ridden. Given that those appear to be the primary barriers to entry regarding objectivity, it only makes sense to utilize these principles to establish a sound thought process. In the interest of wanting the fan to be able to think for themselves, no mathematical concepts or formulas will be included. A more thorough approach may be expanded upon (if necessary), but for now, the establishment of basic principles is a necessity.

 

Evaluating Teams Separately

There are not necessarily winners and losers in a trade. One team may benefit more than the other, but that does not make them a winner or a loser. Instead, each team should be evaluated individually based on the cost versus the expected output of a group of players and/or assets. Teams are independent entities and should be treated as such in evaluation.

 

Using Yearly Transactions

While markets are decided by supply and demand, the first type of transaction needs to be established to base the supply/demand fluctuations on. For reference, let’s say starting pitcher J was moved. Starting pitcher J garnered a group of highly-touted prospects, setting the starting price high for starting pitchers in the market. With the line set, teams can try to trade their starting pitchers in relative to what was traded for J, adjusted a bit for a little less demand.

Using this relativity, it becomes easy to identify an underpay or overpay for a set of players. Acknowledging starting pitcher J’s trade, starting pitcher K (the same time left on the contract, a bit less skilled) received a bit less, making the trade an underpay. As the skill of a dealmaker in baseball is only apparent to the relativity of counterparts, prior transactions provide a great basis for judging this objectively. 

 

Remembering Relative Costs 

As far as relative cost, this is pertaining to the percentage of payroll that a team is spending on the payroll. This is especially important in salary-dump type deals, as the impact on a given team varies greatly. In a made-up scenario, let’s say that Team A has a payroll of $40m and a player with a $10M average annual value, or 25% of payroll. Team B is interested in that player and they currently have a $200m payroll, which would account for 4.7% of payroll (now $210 million) if added.

Seeing as teams should want to spend the tiniest percentage of their payroll possible on a given player, this same salary has insanely different impacts. The player would be considerably more valuable to Team B than Team A, as Team B would not be financially tied up in the deal. As the level of financial commitments is crucial to long-term team success, considering the net incoming costs is crucial in evaluating a given team’s trade grade. 

 

Assigning Value Based on Team Situation

The same player is not worth the same to all teams. They may have a market value as calculated by WAR measures, but that does not mean they’re worth that to a given team. In this scenario, Team X has an absolutely amazing hitter this year. He produced 3 fWAR in the first half, and his said market value is about ~$27m according to Fangraphs value estimator. The thing is… Team X is 20 games under .500 – this slugger has not added $27m worth of value. On the other hand, Team Y is 8 games over .500. Based on their projections, Team Y believes that they are 3 Wins short of a playoff spot. Needing a slugger desperately, acquiring the player would likely push them over.

If Team Y reaches the playoffs, they fall into loads of extra dollars, which would make the player worth much more than the $27m evaluation. Even overpays, in the right scenario, are worth it. The same scenario works for prospects who are believed to add value in the future. Ergo, team trading should be evaluated not on what the player was worth by market value, but on what it was actually worth to the team. 

 

Always Considering the Goal

Without knowing a team’s goals, grading a trade for the said team will be impossible. If Team G’s primary goal was to slash the payroll budget no matter the return, then that said action should garner a very positive grade. If Team H wants to fill their weak spots to make a playoff run, then the fulfilling of that want should yield a very positive grade. The goals of these teams can be murky, but once personal bias is injected into what one thinks their goals should be, then the process is no longer objective. And given that subjective grades can be subject to a multitude of possible flaws, the intent of this article is to avoid such a mistake. So when a trade may not look good on the outside, remember to consider what they were going for in their goal in an objective measure. 

 

Conclusion

As people, we love to fit things into groups: yes and no, right and wrong, winner and loser. Major League Baseball trades are no exception. But like everything else, these trades don’t always fit squarely into one category. These various evaluation angles allow a person to acknowledge the fact that trades are not binary, and that multiple points need to be considered. Evaluating teams separately leads to each team’s individual cost/benefit coming into play. Using yearly transactions establishes a good marker to base any type of market underpay or overpay classification. Remembering relative costs is crucial in figuring out the payroll impact a trade has on a team. Assigning value based on team situation is a necessity to figuring in the value of a player to a given team, not the market. And lastly, always consider goals – a team’s trade is only as good as their ability to fulfill their personal objective. When thinking about a good trade, remember these factors.

The points brought up should be thought of as a guide, not an ended list. There are likely countless other factors not being brought up that are crucial to measuring a trade. But with a basic understanding of where to start looking, I encourage the reader to think long before they react to these deals. A good transaction on the surface can be horrendously flawed. A bad transaction on the surface can be a team’s gleaming savior. Just look into it, and strive for objectivity.

Adapted by Justin Redler (@reldernitsuj on Twitter)

Dylan Drummey

Studying Economics and Finance at the University of Kentucky. Founder and Writer for sabermetrics blog The Drummey Angle. Loves trying to identify the inefficiencies that remain within baseball.

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