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Agreed to terms with shortstop J.J. Hardy on three-year, $40 million extension with an option for a fourth year.

Hardy has posted positive WARPs in each of his past four seasons, which also happens to be his tenure as an Oriole. While this extension (like almost all extensions), will probably be less savory on its back end, the Orioles need players now to help them continue to compete for championships.

Here is what we are pretty sure we know about Hardy: by most measures, he is a very good defensive shortstop, and while Hardy has had year-to-year fluctuations with the bat, he has mostly been an average offensive shortstop. There are indicators, and right now that is all they are, of decline both on the production side where he has seen a decline in power and an increase in swinging strike rate, and on the physical side where he missed 11 games with lower back spasms, two games with a thigh strain, and three games with a thumb strain this season. While the health concerns are nothing major, the back is notable for a defense-dependent shortstop that has just been paid to play through his age 35 season.

All in all, this is a pretty vanilla extension, but a seemingly necessary one for a team looking to maximize its chances of making the playoffs and winning a World Series in its current competitive window. The extension seems to become necessary once we take a look at the other options available to the Orioles. They do not have the internal candidates that they can depend on to fill the role Hardy would have left and their trade candidates are either seemingly too valuable (which is debatable) to be traded (Kevin Gausman and Dylan Bundy) or not valuable enough to bring anything significant back. Consequently, resigning Hardy seems preferable. The Orioles also could have either signed a different free agent shortstop, one of Hanley Ramirez, Asdrubal Cabrera, Jed Lowrie, or Stephen Drew or signed Hardy after suppressing his value through a qualifying offer. With rumor of Hardy being the Yankees number one preference to replace Derek Jeter, with the Yankees track record of signing qualifying offer-attached players from fellow AL East teams (well really just ex-Red Sox centerfielders), and with the external shortstop candidates either being unable to be above replacement level (Drew) or field the position (all others listed), again, re-signing Hardy seems preferable.

This is kind of sounding like a too good to be true scenario and a look at some phenomena of human behavior shows that an about-market-rate signing of a seemingly dependable, consistent, and somewhat without significant flaw-like player such as Hardy may actually be too good to be true. Before I get too gloomy, which is certainly not my intention, there is also evidence that the signing may just well be fine and dandy.

Disclaimer: while I discuss human behavior below, I am not saying, “this is what was going through Dan Duquette’s mind when he made this decision;” rather, I am saying, “there are factors we know influence most people when making decisions and valuations.” Decisions such as contract extensions lend themselves to constructive discussion of decision making; thus, we have what follows.

No one ever got fired for buying IBM

People like to appear correct. When we cannot ensure that we will be correct, we like to ensure that our decisions are defensible. Re-signing the shortstop with the least amount of red flags (compared to the alternatives), who also happens to be a mainstay in your lineup for your first ALCS birth in 17 years, is a defensible decision. Throw in some clubhouse leadership and approval from a much-heralded manager and you have a very defensible decision. In other words, no one is losing their job because of this extension. Gerd Gigerenzer, a psychologist, great name-possessor, and author of Risk Savvy: How to Make Good Decisions calls this defensive decision making, which he explains better than I can:

“A person or group ranks option A as the best for the situation, but chooses option B to protect itself in case something goes wrong.”

Now “best” is a funny term when discussing contracts for professional athletes, but for our case we will use the definition of best as, “most likely to be a good value.” In this case, Hardy may very well be the best and the most defensible; thus, making him even more defensible and maybe even defensible for all of the right reasons. There are, however, a few reasons that indicate that we may be overrating Hardy’s chances to be the best.

Relativity and the Distinction Bias

As one of our main people, Dan Ariely, writes in Predictably Irrational, “most people don’t know what they want unless they see it in context…Everything is relative, and that’s the point.” Just as we do not know we want local, organic apples until we see them offered next to non-local, not organic apples, we might not know that we want a defensively dependable shortstop until that shortstop is offered alongside less defensively dependable (although potentially more offensively prolific) shortstops. Combine this with the distinction bias, which, per Wikipedia, “is the tendency to view two options as more distinctive when evaluating them simultaneously than when evaluating them separately” and we can see why we may be making too big a deal out of Hardy’s defense. Put differently, if there were four other defensively proficient shortstops available, all with mediocre bats, we would probably embellish the value of the one hypothetical shortstop that brings middle of the order production to the table even if he was suspect in the field. This is not dissimilar to the “power is now at a premium in today’s game” or the “left-handed power pitching is at a premium in the 20XX draft class” cries that we have heard in the past. An important note: “at a premium” almost always means overvalued. This is especially true in baseball when there are so many ways to produce value. No matter how Hardy, or any of the soon to be free agent shortstops, creates or prevents runs, the one who can do so the most relative to his market value is going be the most valuable, not the player who can do what the other players cannot do.

Information Asymmetry

Even given all of the above, we still probably need to give the Orioles the benefit of the doubt because of information asymmetry. The Orioles know more about Hardy than any other baseball team and certainly know more about him than any internet baseball writer; therefore, the Orioles, even given all of the previously discussed cognitive biases and behavioral factors, are most likely to be able to accurately assess Hardy’s value. This is supported by the findings of Matt Swartz in the 2012 Hardball Times Annual (and in a Hardball Times article comment section) that: “(a) Other People’s Players still get paid substantially more $ per WAR” and “(b) Other People’s Pitchers still perform relatively worse compared to their projections on longer deals.”

Given information asymmetry and Swartz’s findings, I am comfortable believing that the Hardy extension will be a solid deal for the Orioles. That said, given defensive decision making, relativity’s impact on decision framing, and the distinction bias, I am also comfortable giving the Hardy extension just a little bit less benefit of the doubt than I would otherwise.

Sources:

Gigerenzer, Gerd. Risk Savvy: How to Make Good Decisions. London: Allen Lane, 2014. Print.

Ariely, Dan. Predictably Irrational: The Hidden Forces That Shape Our Decisions. New York, N.Y.: HarperCollins, 2008. Print.