Tuesday 29 November 2011

Why Kelly Jonso is gonzo

Ummm, does anybody else watch Pawn Stars?  Have you ever noticed how the main guy will always haggle over a tiny percentage of the cost of whatever the shit he's buying?  I've seen multiple times where he'll be trying to get a guy to come down on his final price from $5000 to $4800, just to make that little bit of extra profit. Well we're going to do that with Kelly Johnson today.

For anybody out there reading this who may have some kind of degree in economics or math or intelligence, you'll have to either excuse me, or just simply help me out with this one (I prefer the latter).  I'm going to focus here on the exact reason why the Jays aren't going to re-sign Kelly Johnson this offseason without having him accept arbitration.  It all comes down to the dollar value of having Johnson, versus the dollar value of having those two draft picks that Johnson would be worth in the event of him signing with another team.

**These numbers are not going to be exact, but conservative guesstimates will get the point across just fine.  I also realize that this is imperfect, since the value of picks 16-30 is much higher than the 31-60th picks, and that p[team without a protected first rounder signs Johnson] and p[team with a protected first rounder signs Johnson] are not equal, but without knowing the likelihood of where Johnson signs, it's too difficult to weight the percentages and values.**

With Aaron Hill signing in ARI for 2y/$11MM ($5.5MM average annual value (AAV)), I think we can safely put Johnson's contractual demands in the $6.5-$8MM/year range, and he'll probably get 2 years, if not 3.  Let's just say that, no matter where he signs, he does so for 2/$14MM, for simplicity's sake.  The only real snag is the fact that a few teams have already grabbed a 2B off the free agent market (Infante was locked up before the free agency period began; Hill, Carroll and Barmes have all signed), which obviously limits the market for Johnson a bit, though the Cubs, Rockies and Tigers are all still in.  If Johnson signs with any of those three teams, or any surprise team for that matter, the cost to that team is $14MM, whereas if he were to sign with the Jays, the cost would be the same $14MM, but they would technically be costing themselves 2 draft picks as well, which is worth an extra ~$5MM.

Now, I realize that the link above says that a Type-A FA is worth ~$3-5MM, but I moved the value up to the $5MM figure for a few reasons.  First, that link is from 2009, so the numbers can obviously be changed to reflect today's dollar values relative to the 2008 season/2008-09 offseason (i.e. inflation -- As a point of reference, 1 WAR in 2008 was worth ~$4MM, 2011's WAR value was just shy of 5MM).  We see $3-5MM as the value for a type-A free agent, whereas Johnson isn't technically the Type-A that Wang mentions, as another team isn't giving up a 1st round pick, but rather, are just moving their first rounder down by a single selection, a change that is typically pretty negligible when outside of the first 5 picks of the draft (the top 15 picks are protected).  This makes Johnson's signability much higher, as there is so little downside to a team signing him now, as opposed to when they had to give up a pick.  It doesn't hurt that this year is the final chance to really game the system the way they've done in the last few years with the Type-B relievers and sandwich picks.

Finally, and I think most importantly, the way AA values his draft picks is probably different than practically every other GM in baseball, save for Andrew Friedman, Billy Beane, and any other GM of small market, micro-budget, squeeze-every-penny team, who have to abide by such small margins of error in order to compete.  Teams like the Chicago White Sox and Detroit Tigers seem to value the draft as if it were completely unnecessary, so they could probably use a number closer to that $3MM valuation on those two picks.  Alex Anthopoulos, however, has a massive scouting department, and is constantly focussing on building the farm system to be as deep as possible.  He is more likely than practically anybody to value these picks at a higher price, since he has so much trust in his scouts and minor league system.  I wouldn't be surprised if AA had a higher valuation in mind than the $5MM, especially this year, but for all intents and purposes, $5MM is a nice round number, and is probably close enough to get the job done.

The math isn't exactly easy; Johnson signing elsewhere is still going to cost the Jays something, since they need to find a replacement at 2B, assuming Luis Valbuena/Mike Mccoy isn't the plan as a starting 2B platoon.  We'll know a lot more once the decisions are made regarding where Johnson goes and who plays 2B, and then we'll be able to retroactively do some math.  AA obviously knows more than I do about the current plans for 2B and KJ, so I'm sure he's looking in to some system somewhat along the same vain as what I've got going on here.

I'm currently more interested at looking at this in a vacuum, however.  If the Jays are immediately paying $5MM more relative to all other competitors to sign Johnson (that is, signing Johnson forgoes $5MM of value in picks, plus whatever the contract actually costs), then simply, the Jays need to get a really good deal to make the signing worth their trouble.  If Johnson's market value is somewhere in the realm of 2y/$14MM, the Jays would need to get him for 2y/$9MM to simply break even (more succinctly, they need to get him for [market value minus AA's value of the 2 picks]).  Obviously, it is incredibly unlikely that Johnson signs for such a price.

I think it's too much to assume that only the three teams listed above (Cubs, Tigers, Rockies) are interested in Johnson's services, but at the same time, I think those are the three frontrunners.  The Cubs and Rockies have protected first rounders, which would turn the compensation in to a sandwich pick and a 2nd rounder, something that we would certainly need to consider when valuing the picks.  I'd feel comfortable valuing that at $3MM, based on Wang's numbers for his tier 2 and tier 3 values, plus the variables listed above.  As such, if the market became solely the Cubs and Rockies, the Jays could bump their breakeven point from 2/$9MM to 2/$12MM, and could squeeze extra value by including club options or performance incentives, but at the end of the day, I really believe that if Johnson doesn't see an offer of at least 2/$14MM, he'll just accept arbitration, and this will all be completely moot, and I'll have just wasted your time and mine.

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