Theoretically, trades in baseball should roughly balance out. The “present value” obtained by buyers should be somewhere in the ballpark of the “future value” obtained by sellers. There are exceptions all over the place, and uncertainty abounds, but we’re going to try to put numbers on every trade at this year’s trade deadline. Here’s how we’re going to do it:
Units: WAR, $
Even this is a little tricky. We’re going to limit ourselves to WAR and $. We aren’t going to consider playoff impact in this iteration (that should be baked into the $/WAR price, theoretically) and we aren’t going to deal with questions of reliever WAR vs. leverage (that should be baked into WAR). When the deadline is over and every trade is in, we might find something telling in our data—that there’s a price associated with presumed playoff impact, that the relative upgrade from one player over the guy whose PA’s they’re replacing is important, that relievers come at a premium, etc. Consider this, then, a first step of sorts. A first step measured in WAR and $, with the conversion rate 1.0 fWAR = $9M (as this is the value Craig Edwards used in his prospect valuation research, which we’ll reference later).
Present Value Considerations: Rest-of-Season Projected WAR
Over the remainder of 2022, what matters is a player’s projected WAR. For this number, we’re going to use FanGraphs’s Depth Charts projection of the remainder of the player’s season, since it’s readily available and the thing they rely on for a lot of their own projections elsewhere on the site, which are projections we generally trust. We’ll also consider the salary components of each deal, and any cash that’s exchanged. So, when Luis Castillo was traded, the Reds gave up an estimated 1.2 WAR over the rest of the season, which converts to $10.8M in value.
Future Value Considerations: Rest-of-Season Salary, Cash, Prospect Value, Rest-of-Contract Projected WAR, Rest-of-Contract Salary, Cash, Luxury Tax Implications, Qualifying Offer Compensation Implications
This is, as one would reason, more complicated.
We initially included rest-of-season salary and cash in present value, but we moved it here because it has a larger impact on the franchise’s ability to spend in the future. In the case of Castillo, no cash was exchanged but the Reds saved about $2.5M (roughly one third of his $7.35M 2022 salary remains to be paid).
The most complicated part—the value of the prospects—has been made easy for us. Craig Edwards took this on in November of 2018 at FanGraphs, and FanGraphs’s Farm Rankings still rely on his research (or so is our impression). We’ll be using FanGraphs’s Future Values for each prospect, to keep this all coming from the same source. For the Castillo trade, the Reds acquired a 60 FV position player in Noelvi Marte, a 40+ FV position player in Edwin Arroyo, a 40 FV pitcher in Levi Stoudt, and a 35+ FV pitcher in Andrew Moore. Using Edwards’s valuations (which we understand to account for the amounts these players will be paid in the future), that’s $60.5M in value, which converts to 6.7 WAR.
The rest-of-contract projected WAR isn’t something FanGraphs offers with complete transparency. Based on the available information, our best guess seems to be to treat ages 27 through 30 as a player’s prime, assigning them a 0.5-WAR decrease in value every year after 30, with their baseline determined by the average of their performance in their prime seasons. Exceptions are going to be everywhere, so this will involve our own best guesswork (heavy on the guesswork when it comes to Juan Soto). 2020 will be treated as one third of a season, but won’t be magnified to the weight of a full season. We’ll try to account for injuries without overrating a player’s health. For Castillo, still a year out from free agency, his 2.4 fWAR in 2020 at age 27, 3.7 fWAR in 2021 at age 28, 2.1 fWAR so far in 2022 at age 29, and 1.2 projected fWAR over the rest of 2022 (still at age 29) come out to a 4.0 fWAR baseline for his prime, which we’ll make the expectation for his age 30 season. This is worth $36M.
The rest-of-contract salary is simple except for when it isn’t. When players are in their arbitration years, we have to estimate. To make those estimates, we’ll use Ben Clemens’s February work, which covers arbitration proceedings from 2013 through 2021. Using that estimate on Castillo, we expect him to make $11.7M next year (this is a median estimate with a wide margin of error, but that can be said of all of this), which will come out of the Mariners’ wallet.
Cash is simple. Luxury tax and qualifying offer implications are not, but they’re rare. Our research—we took a look at the median prospect FV for the compensation round in question plus the eight picks before and after it, then compared those to the bonus slot—suggests that the bonus slot and the quality of prospect drafted roughly cancel out for teams who do not receive revenue sharing money. For teams who do receive revenue sharing money—those whose qualifying offer compensation can come after the first round—prospects seem to be worth an average of $1.1M more than their signing bonus. There are additional complexities, and we’ll address them if relevant, but for someone like Luis Castillo, if he had been someone the Reds could tag with a qualifying offer (he’s not), trading him would have cost them roughly $1.1M in value, or 0.1 WAR, rounded.
So, for the Mariners and Reds, the Mariners obtained 4.0 WAR in future value, which is worth $36M, but will have to pay $14.2M for it, while the Reds obtained 6.7 WAR’s worth of future value, which comes out to $60.5M, and will save $14.2M. Taken altogether, the Reds’ future value increased by $38.7M, or roughly 4.3 WAR. The Mariners’ decreased by a corresponding amount.
Present vs. Future
Adding it up, the exchange between the Reds and Mariners seemed to be one with about a 1.0:3.6 ratio between present and future value if we use FanGraphs as our source for pretty much everything.
What Does This Mean?
In the case of Castillo and the Mariners, it’s possible the Mariners “overpaid.” The scare quotes are heavy, though, and not only because of all the caveats. They’re heavy because market prices are important, and franchise incentives are important, and because we don’t know what discount teams apply to future value. That’s part of what we’re trying to figure out. Calculating these values will hopefully help us do that.
What to Expect
The plan is to apply this math to at least every trade of note conducted at this year’s deadline, to publish the calculations, and to sum it all up at the end: How much present value did each team add? How much future value did each team subtract? What did we learn about the market? What did we learn about this approach?
Long term, we’d like to use this to make a sort of “trade machine,” but that’s a long ways off. For now, we’re just trying to put numbers on trades. That’s the first step here.
