July 21, 2015

Baseball Therapy

So You've Decided To Trade Within Your Division

by Russell A. Carleton

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The trade deadline is near. It's the point after the All-Star break when some teams think that this really is "next year" and some teams decide to wait for next year. Teams are starting to make their shopping lists and put price tags on that soon-to-be-free-agent pitcher they don't want to keep around. Some players are sure to be traded for whatever teams can get. Some might be traded if the price is right, but, of course, the point of the exercise is to get as much value as you can.

But then there's always that one little concern. What happens if the best offer is coming from a team that plays in your favorite team's division? Could the Yankees and Red Sox ever be trade partners in a big deal? Could the Phillies actually send Cole Hamels to an NL East rival? On the surface, it's a silly question. If the Braves have the best offer, why not take it?

The prohibition against intra-divisional trading is more social taboo than anything. Any team can legally trade with any other, yet the fear persists. Some of it is probably fueled by anxiety around having to see a former player come back and beat his old team; intra-division rivals play each other a lot. Why not ship him to the other league (and the other coast) whence he won't come back to haunt your dreams?

Then again, sometimes social taboos like that serve a purpose. When I was in my first year of college—and I'm sure this was hardly unique to my school—one of the first things we were warned about was the danger of "dormcest" (or, even worse, "hallcest"). You don't date someone from your dorm, and especially from your hall. Because my alma mater was so small (1,600 people in middle-of-nowhere Ohio), there were also prohibitions against "majorcest." The reason was simple enough. If you date someone and break up, you will still have to see that person. A lot. Of course, there was always someone among your friends who broke that taboo, and it eventually became an issue.

The intra-division trade taboo is there for roughly the same reason. If something goes wrong, there's more risk involved and a smart team has to factor that in when making its decisions. The reason is that, like that certain someone who lived down the hall from you but was off-limits, you're going to be seeing each other a lot and that team has a much greater say over your destiny than someone in another dorm … er, league. If the trade goes wrong and you just made your division rival four wins better, it means you are going to have a much harder time making the playoffs.

Then again, if the trade package your division rivals are offering really is that amazing, shouldn't you take it? How big is that extra risk?

Warning! Gory Mathematical Details Ahead!
The first thing that we need to know in a trade is how valuable the pieces being traded are and over what time you have to deal with that risk. Putting a value to the immediate risk is a little easier. Established major leaguers have track records we can look at, although thanks to the joy of small sample sizes, they might end up producing more or less than expected. Still, we can reasonably assume that a player with a three-win track record, rented for two months, will provide one win of value, give or take.

Let's not even get into the variance around "prospects." A team could start reaping the benefits of six cost-controlled years of a monster player fairly soon. Or it could be left holding a guy who was barely worth the cup of coffee he got. At some point, you have to have some idea of what you're giving up.

Right now, there are teams gearing up to trade away valuable veterans, mostly in the last years of their contracts, because 2015 is a lost year. Any sober assessment of their chances would say that they're not making the playoffs, so why not get what you can from whoever's offering it. For guys in the last year of a contract, there's no downside, right? If he was going to sign with a division rival next year, he would have had the right to do that anyway. So why keep him away now, other than to avoid embarrassment, and forego a bigger haul of prospects? That is the logical way of thinking about it, and in a video game world, it would make complete sense, mostly because in the video game, you don't usually stick around to play the second or third or fourth season.

It's tempting to say that the reason you shouldn't trade a guy away is because there's always the danger he'll end up liking it there. In fact, in such a deal, you're basically setting him up to like it. He gets to be in the middle of a pennant race, maybe even a successful one. In your city, he had nothing to play for. Now, he's a part of a team that really needs him and they are working toward a shared goal. Plus, if it's successful, he now has warm, fuzzy memories of playing for that team. Maybe all else equal, when he's getting free-agent offers in the offseason, he just decides to stick around. And why not. The team will probably be good again next year. But then, he's not going to play for them for free. I'm guessing that he asks for and gets his $150 million, and if your division rival didn't sign him, they probably would have spent that money on someone else.

But there's another effect to think of. The team you are trading to is "buying" specifically because they think they have a shot at the playoffs. And you are aiding and abetting that shot at the playoffs. It might not concern you this year because you aren't in the same hunt, but we know one other thing about that playoff push that you should be aware of. Making the playoffs is very lucrative for a team. The bump in revenue is something on the order of 25 percent. And what do you think they're going to do with that money? A team that trades within its own division needs to be prepared for the fact that the most lasting effect of dealing away that veteran might be putting a rival into the playoffs and into a nice pot of money that it can spend on other free agents. As a GM, you might not care about this year, but you might have dreams of competing in 2016 and 2017. Why bolster a competitor?

But wait; you get prospects back, right? The problem with prospects is that often, they are a couple of years away from even coming up to the big-league team. That's part of why the other team was willing to part with them. The thing about three years from now is that it's hard to know where a team will be by then.

In fact using data from 2000 to 2014, here are the correlations between wins in one year and wins in year + 1, year + 2, year + 3, etc.

Year	Correlation
Year + 1	.538
Year + 2	.418
Year + 3	.225
Year + 4	.168
Year + 5	.160
Year + 6	.196

This is a nice way of showing that even three years from now, we have very little idea which teams are going to be on top and which are going to be in last place. It's not that we know that the top teams from 2015 will be basement dwellers in 2018. It's that we have no idea where they'll end up (at least based on their success in 2015.) Statistically, we have to assume that in a few years, everyone will be a .500 team. Of course, that won't actually be true, but that's where you have to start. All-Star free agents become overpaid ho-hum veterans. Teams swing and miss a lot in the draft. Can't miss prospects miss. Baseball is a cruel game. But if we assume the prospects a team receives for that rent-a-vet could eventually have some value, it means that you've basically made the other team better than you by some amount … three years from now. At least in the aggregate. Even if they turn out to be players who aren't world beaters, there's a lot of value in a one-win cost-controlled guy. We know that wins for cost-controlled players tend to be about half the price of free agents, so even if those prospects don't turn into stars, they allow a team to build its free-agent war chest by filling roles that the team doesn't have to fill through free agency.

So a team trading veterans for prospects has to understand that the positive effect that veteran has on the other team will outlast even the veteran's stay in that city. The team trading prospects for veterans needs to understand that when those prospects are ready, they won't have built an impenetrable dynasty. In fact, it's most likely that they will have built a rather middling team. The amount of "penalty" will depend on what's being traded, but that's the kind of calculus you have to do, and it doesn't end at the end of the year.

But let's say that a team believes it is trading away one win of value after all those calculations are done. Their potential trading partners are 1) the four other teams in their division, 2) the ten other teams in the same league, but not in the same division, and 3) the 15 teams in the other league. One of them is about to get better as the result of this trade. What's the cost of making each one of those types of teams better? Let's see what one win of value does for a team, and since the only goal that really matters is winning the World Series, let's look at it from that framework.

We know that in the short term, teams that are making this sort of trade are going to be in different places standings-wise. But three years down the road, we assume that everyone is an 81-win team. Last year, it took 88 wins to snag a Wild Card berth and 90 to win a division. An 81-win true talent team would win at least 88 games 15.3 percent of the time and at least 90 games 9.1 percent of the time. If the team has a one-win head start (they are an 82 win team), they would win at least 88 games 19.3 percent of the time and 90 games 11.8 percent of the time. Let's say that your team somehow won 90 games. If that team you traded with (and gave that one win head start to) was in the same division, we can expect that they'd at least be around to interfere with your plans of winning the division an extra 2.7 percent of the time (although the Wild Card might still be an option for you, which we will consider half of a playoff appearance). There's also the possibility (we'll say 9.1 percent, as above) that some other team was a 90-game winner in your division, and the chances that you would have to fight it out with your former trade partner for a Wild Card are increased by 4 percent by virtue of your trade with them. There's some chance that they notch an extra win or two against you because you will be playing them 19 times in each season. There's some residual chance that you face the other team in the LDS or LCS and they beat you. With the guy you traded away pitching a perfect Game 7 against you.

In reality though, we're talking about slivers of a playoff appearance, but it all works out to about a .1 percent chance reduction of making the LDS. (It's worth pointing out that this can easily be overcome by just being relatively decent at player development in those three years.)

If your trade partner is in the same league, but not in the same division, there's no danger of losing a divisional crown, but again, their chances of being Wild Card level go up by 4 percent, meaning their chances of being Wild Card level (88 or 89 wins) at the same time as you goes from 0.38 percent to 0.46 percent and it's possible that they might just end up winning the division. It's also possible that you're the only two in competition for the Wild Card spots. But ignoring that, that's a net loss of 0.04 percent of an LDS appearance. And again, there is a chance (equal to the above) that you'll meet that team in the LDS or LCS.

If your trade partner is in the other league, there's no chance they'll impact your chances of winning the division. The only thing you have to watch out for is both you and them to making the World Series and such that the little edge you gave them be the difference in the series.

You Have Bigger Fish To Fry
So all told, it is (comparatively) a lot safer to trade to the other league, or at least another division, but even trading within your own division isn't really all that big a deal. Even if the amount of value surrendered is a couple of wins, the likelihood that the team you trade with will be the one that comes back to bite you is relatively remote, to the point that a team would do better to get as much value as it can to ensure it is in the postseason discussion. While the idea that trading within the division does make it more likely the trade could come back to bite you directly, the order of magnitude of the effect is so much lower than other things that a team has to worry about.

We actually shouldn't be too surprised that one trade doesn't move the needle that much. Last year, when the Cubs and A's made their now-infamous Jeff Samardzija and Jason Hammel for prospects trade, it only pushed the A's World Series championship odds up a fraction of a percent. I actually calculated that the A's got almost as much of a bump from the AL winning the All-Star game last year.

If your favorite team is submitting an offer to one of its nearby rivals, fear not. Yes, it might come back to hurt them, but you can't let fear of a little thing stop you from doing something big.

Russell A. Carleton is an author of Baseball Prospectus. Follow @pizzacutter4
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