August 28, 2009

Future Shock

Fixing What Ain't Broke

by Kevin Goldstein

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Between the Stephen Strasburg factor, prime-time coverage on the MLB Network, and just a general growth in interest, the 2009 draft was quite easily the most publicized baseball draft ever. As such, the August 15^th signing deadline received the most publicity ever, and more people were exposed to a system quite unlike what those familiar with football and basketball's talent procurement systems expect.

Following deadline day, there were a flurry of articles concerning baseball's draft process, with the two most words attached to it being "broke" and "fix." I've given a lot of thought to this, and here's where I've ended up: the draft isn't broken. If you disagree with that sentiment, then you have to admit that if one wants to fix it, they shouldn't hire the same contractor who did the job last time.

Let's start with the second half of that statement first. When talking to an agent about the draft for a series of pre-deadline pieces on the draft, one quote stuck with me. "It's an imperfect system, but trying to make it perfect is just going to screw it up more," said one agent, and he has the track record to prove it.

Prior to the 2007 draft, Major League Baseball, tired of the season-long holdouts perpetrated by players like Max Scherzer, instituted a new signing deadline of August 15^th. It proved to be a myopic gesture, solving one problem while creating several more. In baseball's first year with the new deadline, several players held out until the deadline day itself. The following year, even more players followed suit, realizing that those that waited ended up getting the most money. This year, the number of holdouts grew significantly once again: in 2006, there were 26 slot-busting bonuses in rounds two through ten, and in 2007, there were 32. With the lessons the players and agents learned from that year, that number increased to 90 this year.

It's important to talk about rounds two through ten. While people are focused on the kind of money players like Strasburg, Dustin Ackley, and Donavan Tate are going to get, that's not where "the problem" is. The problem is with the later picks. From 2006-2009, the amount of money spent on bonuses for players from round one through five has risen just 19.6 percent, obviously stronger than our economy, but when measured solely against the modern draft, a fairly moderate rate of inflation. But in rounds six through ten there has been a 65 percent increase.

What happened? Well, first off a few teams started taking those "signability" guys, and then other teams got smart and realized that the teams doing that were the teams adding the most talent to their system. So that started more teams doing it, and more teams than ever joined that club this year. The two most aggressive teams with this late round big-spending strategy over the past two years have been the Royals and the Pirates. Do you really still want to pull a big-market, small-market argument with me?

So the lesson here is that baseball tried to "fix" things, but the holdout problem they tried to correct in actuality became much worse.

But are things actually broken, or are they simply different? People scream about the necessity for a system that provides a more equitable distribution of talent, but that perpetuates the myth that the primary purpose of a draft is to provide that equity. While that was consideration when big-league officials first designed the draft in 1964, of greater concern were the amateur bonuses that were spiraling out of control, highlighted by the Angels' payment of $200,000 for University of Wisconsin outfielder Rick Reichardt. And for the most part, the system worked, as no draft pick would exceed that mark until 1980.

Still, even with the current system of seven-figure bonuses extending well into the later rounds, the system still works by limiting a players ability to negotiate with one team. The so-called loophole picks of 1996 (including Bobby Seay and Travis Lee, among others) proved that as true free agents these players were worth eight to ten times what they were signing for, and that was before the laughable slot system was implemented by MLB. For all the wailing and gnashing of teeth, the fact remains that draft picks are still the biggest bargain in the business, which is why more and more teams are following suit and spending money not only on their first-round pick, but well beyond.

This brings us to the argument that the draft is broken. The fact that teams are the ones claiming such problems borders on comical. The teams are the ones writing the checks, and then go out and complain about their size? It's the equivalent of giving a toy to a five-year-old kid, watching him throw it against a wall, run over it with a tricycle, let the dog chew on it for awhile and then complain that it doesn't work anymore.

Teams that don't like the way the draft works need to flip their way of thinking, much like the Pirates and Royals have begun to do, as well as many other teams, and make the draft work for them. The current draft system allows for the most flexibility and rewards those teams that do the best job in indentifying talent and properly valuing it. I don't understand how anyone would want it any other way.

Kevin Goldstein is an author of Baseball Prospectus. 
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