January 12, 2015

The Quinton

The Value of Having Options

by Jeff Quinton

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“No decision is an island.” –Earl

Regardless of whether the author created a fictional, quotable Earl for the sake of making a point, the quote attributed to Earl is important for our drafts and auctions. Any decision we make is influenced by both past decisions we and others have made and future decisions we can imagine making. In theory, we should be cold, calculating decision-making machines, only weighing the relevant information, but that theory does not usually hold. Instead, we factor in how others will view our decisions, take sunk costs into account, try to remain logically consistent, and often weigh irrelevant information (even though it feels relevant to us). Also, our physiology keeps us warm.

This brings us to the value of having options, which is something we place inherent value on and therefore overrate. Before the rambling goes too far, it should be asked, “What does this have to do with fantasy baseball?” The answer is that we often overvalue keeping options open—such as taking a third baseman before taking our second first baseman in order to avoid filling our corner-infield slot and not filling our utility spot too soon. The reason this topic is being brought up during first-base week is that of the thousands of owners who will take Miguel Cabrera, Paul Goldschmidt, or Edwin Encarnacion in the first rounds of their drafts, many will be deciding whether they should avoid taking, for example, Anthony Rizzo in the second round even if he is the best player available (there are plenty of non-redraft takeaways in the article, too). It is not surprising that we value keeping options open in fantasy baseball because we do so in our non-fantasy baseball lives all the time. Having options is not worthless, but that is not the point. The point is that we overrate keeping options open. In Predictably Irrational, Dan Ariely shares his findings that people fear losing options and will go at great, often counterproductive length, to keep options open. In testing this through experiment, Ariely concludes, “[the participants] just couldn’t tolerate the idea of [losing an option], and so they did whatever was necessary to prevent their doors from closing.”

As we can see, leaving an option open is a way for us to hedge when faced with a decision. (That is correct, Earl, sound the defensive decision-making alarm). The problem is that by doing this, we are usually overvaluing a small probability. Just as we may be afraid to commit to dinner with our parents this weekend because something more exciting might come up, we tend to avoid closing off options in drafts and auctions out of fear that our decision will cause us to miss out on some great opportunity. Some examples of these fears: What if a great $1 hitter is left and the only reason I cannot roster him is because I only have pitching slots open? What if by buying my second first baseman, albeit at a good price, I miss an even better bargain on a position of greater need? What if I cannot take the second base sleeper I was targeting because I already filled my second-base and middle-infield spot? These are fears we all have, but the key is finding them ahead of time and determining how realistic they are. Only when a position is super-deep or there is a huge disparity between the likely remaining options (for example, an AL only league where the bottom tier second baseman are much better than the bottom tier shortstops), should we really be factoring this into our decision making. At all other times we should not fear closing off options. Why not? An answer follows:

1. There is only a percentage chance that these endgame values will be available.
2. There is only a percentage chance that these endgame values will be restricted as a result of a specific option being closed.
3. There is only a percentage chance that these endgame values actually end up being the values that we think they will be.

For starters, none of these hoped-for payoffs via option are guaranteed. Moreover, while “percentage chance” is quite a range, we can be pretty certain that given the nature of drafts (or auctions) and forecast accuracy for player performance, that when we multiply these three percentages together for most scenarios, the chances of removing an option actually coming back to bite us is going to be small. In fact, the entire reason that this article is being written is because the benefit to be gained through these options is usually smaller than the advantage of taking the better player earlier in the draft or auction. That said, let us take a look at how this manifests itself in keeper leagues, drafts, and auctions.

Keeper Leagues

“Should I keep these three stud outfielders or should I keep the best two and a tier-below-stud shortstop?”

“I can keep Miggy and Goldschmidt, but Goldy would have to start at utility. I am being offered Puig for Goldy, what do you think?”

The format and gist of the above questions are bat signal classics. The gist of these questions was also discussed quite well on the most recent episode of the Flags Fly Forever. Given all of the above, barring an extreme league dynamic, the recommendation will almost always be to keep your best players. The flip side of this is that we should strive to be the owner offering our not as great player for another team’s great player in order to “help” that owner alleviate their perceived roster crunch. This actually brings us to a more important strategic point, which is that when searching for trade targets, it is more lucrative to search for players being discounted by their owners than paying a premium to fill a need of our own.

Drafts

Drafts are the most straightforward regarding the closing of options and how we value these options. Because of this, most of us probably imagined a typical round by round draft when we discussed examples in the above paragraphs. And because of this, the main takeaways have already been discussed. One additional point that should be touched upon is drafting (or buying or keeping) players in a non-starting role. This can certainly be an advantageous strategy given the structure of the league, but if you are only doing so with the intention of trading such a player, then it is important to be cognizant of your league’s trade market. Most leagues have barriers to trade, making it difficult to recoup equal value for an asset through trade. Given such a scenario, a player can still be far and away the most valuable player available even given the “trade tax,” but we need to make sure we are making it a part of our valuation.

Auctions

In theory, avoiding the keeping-options-open-trap should be easiest in auctions; just stick to your bid values and do not worry about where your buys fall. This is great in theory, but good luck once an auction is actually underway. As the anxiety and complexity mount, it is easy to give way to crutches and tell yourself that you think better options will be available elsewhere and it just so happens that those other options leave more doors open.

Lastly, the “positional scarcity is long overwrought, take the best player available” is nothing new and this is certainly the first article to give this advice. However, knowing why we have trouble executing against this advice even when we know better, will hopefully help us make better keeper, trade, draft, and auction decisions this offseason.

Sources:
Ariely, Dan. Predictably Irrational: The Hidden Forces That Shape Our Decisions. New York: Harper Perennial, 2010. Print.

Jeff Quinton is an author of Baseball Prospectus. Follow @jjq01
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