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Are First Round Draft Picks Overpaid?

For all of Bud Selig’s efforts to strong-arm owners into signing draft picks to slot recommendations, it is painfully obvious to anyone paying attention to the game of baseball that this system is woefully broken. Every year, it’s the same thing. A good chunk of the draft class has to while away time rather than playing baseball before Bud will allow ownership the freedom to do whatever the heck they want. Development time is lost; recommendations go completely ignored and the amount of bonuses getting handed out goes up instead of down. It’s completely counterproductive on both sides.

While players are waiting to sign, plenty of rumblings go out on what different player’s asking prices are, and threats are issued of going to play at college or the independent leagues are made if demands are not met. Players and agents are vilified as selfish little punks. The general feeling seems to be that draft picks need to prove something before they get paid, and that handing out big dollars to a player who hasn’t done anything in the big leagues is a huge waste of resources. After all, even first round draft picks bust all the time. But are they really overpaid?

I’ve gone back and researched the draft from the past decade, similarly to what Victor Wang has done, only using WAR. In my research I’ve listed out the total WAR for each first round draft pick during their cost-controlled years to see what sort of surplus value they have. We’ll say a win on the free agent market is worth today’s rate, $4.4 million. I know we’re looking at six years, so just forget inflation for a moment. The picks were worth –

• Picks 1 though 5 on average gave their teams $32M of production.
• Picks 6 through 10, $22.4M
• 11-15, $17.6M
• 16-20, $18.9M
• 21-30 $6.6M

That’s a lot of surplus value. Even with the relatively high failure rate, first round draft picks are incredibly valuable and actually have proven to be quite a bargain. For example, recommended slot for the first overall pick is this year was $3.6M. While it’s only a group of ten players, 1st overall picks from ’90-’99 produced on average $51.5 million worth of value that a team would normally pay for on the free agent market, or about roughly 14 times today’s recommended bonus!

Even with his record deal, Stephen Strasburg is a great value. If you don’t think so, just imagine the bidding war that would go on between large market teams if he were a free agent. Dump the slots. Let teams do whatever they want. If they can’t do their homework on what a kid’s asking price is before the draft him, that’s their own failure.