March 2, 2015

The Quinton

Market Corrections and Undervaluing Closers

by Jeff Quinton

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Like many, I have been dreading relief pitcher week. I would call closers my fantasy baseball Achilles heel, but that would be understating my other flaws. For years now, we have heard experts say, “Don’t pay for saves.” What these experts really meant by this sentiment is either (i) that we should not overpay for saves or (ii) that the (fantasy baseball) market was overvaluing saves.

While closers are still overvalued in some leagues, the closer market has corrected itself in many. Additionally, there appears to be some overcorrection happening—some owners end up avoiding saves all together. This can be a profitable strategy if the market is overvaluing saves, but it can also be a decision-making crutch for avoiding the most volatile position. If it is the latter (as it was for me last season), then we are likely to miss out on good values in the closer market and unnecessarily handicap our teams. While the majority of fantasy baseball participants are not undervaluing saves, this article is for those, like me, who have done so and are at risk of doing so in the future. We will take a look at how we came to do so and how we can hopefully overcome this weakness.

When Experts, Advice, Results, and Fears Align

It should be said that this is entirely unfair to the experts. No expert was saying, “Improperly value closers” or “undervalue closers.” The advice that they were passing down was in fact expert in that across the fantasy community as a whole, saves were being overvalued (maybe because of 4x4 or Mariano Rivera or (probably) some other factor, but the why does not really matter here). The problem, then, is how we use this expert information. Many fantasy baseball participants rightly heeded this advice and were able to avoid the bad value proposition that was closers at the time. This was great, but good results can often lead to future bad processes, as they cause us to march onward under the “if it ain’t broke, don’t fix it” mantra. Additionally, advice that can be misconstrued to mean “avoid the most volatile, unpredictable, and risky assets” is very appetizing to our risk-averse nature. You all see what is happening here. Good advice that has led to past good results and that allows us to avoid risk is advice that some will be likely to use as a decision-making crutch (an analysis-void decision making tool) rather than to help us improve our process and analysis.

A Market Correction and a Crutch

It was mentioned earlier, but guess what happened in a lot of leagues when teams that correctly “didn’t pay for saves” achieved success with that strategy? You guessed it: More often than not, the closer market corrected itself. Given what we discussed above, about a sound strategy becoming a decision-making crutch, many owners failed to adjust to this market correction. Put differently, good advice became blanket advice. This is how I ended up with no closers in both my AL- and NL-Only keeper leagues last season. Sure, some closers went above the prices I had them at, but they did not all do so and I still did not pull the trigger. I spent my auction dollars elsewhere, but the marginal increases in other categories were more than offset by posting zeroes in the saves category. So we can see the end result of the “avoid closers” process is suboptimal decision-making, but let us take a look at how it is corrupting our choices in order to try and improve our process going forward.

Theory Dressed as Analysis

By using this decision-making crutch, we are allowing theory to stand in the way of thorough and sufficient analysis. It is fine to use theory to come up with hypotheses or help us see things in different ways, but it should not drive valuation when more specific and correlated information is available. Put differently, if we go into an auction or draft assuming that closers will be overvalued, then we are going to be less likely to be able to act accordingly when a closer is available at or below their value, we are going to be less likely to be strategically agile. From my experience, we also allow theory to act as a façade for decision-making heuristics and biases. Instead of looking at how we are being affected by ambiguity, expectations, risk, and past results, we take the path of least resistance by following a strategic theory, by “not paying for saves” even when they are good buys. So what can we do about it?

Solution: Be the Fox

In The Signal and the Noise: Why So Many Predictions Fail—but Some Don’t, Nate Silver mentions Isaiah Berlins’ essay, “The Hedgehog and the Fox,” which divides thinkers (with the exception of Leo Tolstoy) into two groups: those who see everything through a single, overarching idea (hedgehogs) and those who do not (foxes). These distinctions and the title of the essay come from a saying attributed to the ancient Greek poet Archilocus, that saying being “the fox knows many things, but the hedgehog knows one big thing." Silver asserts that while hedgehogs might make for better television, we should want to be “more foxy” in order to be better forecasters. A bit wordy (me, not Silver), but the point is that by using theory in place of analysis when determining closer values and making decisions based on those values, we are being too hedgehog-like.

So how can we be more fox-like? We can start by continually updating our processes and valuations as we get new information. If we had done so originally (like our leaguemates who did not undervalue closers), then we would have seen the market correct itself and conducted our valuations accordingly. Lastly, we should be keeping tabs on the theories that we are operating under—whether they have led to either positive or negative results. In doing so, we might be able to catch ourselves from buying into our internal hedgehog, get back to analyzing players with the information at hand, and hopefully do a better job with closers this season.

Sources:

Silver, N. (2012). The signal and the noise: Why so many predictions fail--but some don't. New York: Penguin Press.

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