Did the Red Sox Really Overpay for Drew Pomeranz?

Last week, when the Red Sox jumped the starting pitching market — surrendering Anderson Espinoza, their best pitching prospect in the deal — to acquire Drew Pomeranz from San Diego, the general consensus was that the team overpaid, like they did in acquiring Craig Kimbrel some months earlier, as the team tries to take advantage of David Ortiz’s last year in baseball. After all, Pomeranz was traded for Yonder Alonso a few months earlier, and despite a great start to the year with the Padres, no one really knows how well he’ll hold up down the stretch, given that this size of workload isn’t something he’s handled before. And just days before the trade, Baseball America had rated Espinoza as the #15 prospect in baseball, 24 spots ahead of Manuel Margot, the primary chip the Padres acquired from the Red Sox in exchange for their closer over the winter.

Giving up a top-15 prospect for a guy with as many question marks as Pomeranz comes with is certainly a gamble, as the deal will look disastrous if Pomeranz can’t hold up through October and Espinoza reaches his upside. But I can’t help but wonder if this deal is perhaps an example of how public prospect ratings and a player’s current market value can diverge pretty significantly.

I talked about this a bit during last week’s trade value series, as the order of the prospects that appeared on that list differed from the order they appear on most of the prospect lists published at various outlets. This isn’t meant as any kind of criticism of public prospect evaluators, but simply an acknowledgment that their mandate is a bit different from MLB teams, and producers of public prospect lists can afford to take on a bit more risk in order to maximize their chances of identifying as many future stars as possible, as early as possible.

We can see the results of this risk-seeking behavior in the results of how variously-ranked prospects have turned out over the years. Earlier this year, Kevin Creagh and Steve DiMiceli updated their prospect valuation model, and included in that post, they showed the expected average WAR and bust rates for different types of prospects. To show the differences in outcomes for pitchers and hitters in each range, I’m going to reconstitute their table slightly, and present hitters and pitchers in the same tier of ranked prospects next to each other.

I’ve highlighted the line showing pitching prospects ranked 11-25, since that’s where Espinoza was most recently ranked; note the stark difference between the outcomes for a pitching prospect and a hitting prospect in that same tier. #11-#25 hitters perform only slightly worse than hitters ranked in the top 10, but pitchers in that group have performed significantly worse than the top-ranked pitchers, with a huge spike upwards in the percentage of pitchers who provide little or no value at the big league level.

In fact, the outcomes for a pitching prospect ranked in the #11-#25 range are almost exactly the same as they are for a hitter ranked in the #26-#50 range. This is the result you’d expect if those lists were weighting upside significantly more than downside, as pitching prospects have more variance in their outcomes; this is the natural effect of discounting risk a bit more than teams would. It’s a perfectly rational decision to make, given that prospect analysts are judged mostly on how often they hit on the big names, and no one really holds pitching injuries against their credibility.

But teams don’t really get to make that same calculation; they aren’t judged based on how many stars they correctly identify, but by how many wins their big league team puts on the field. And having a bunch of highly rated prospects end up producing zero value is a significant detriment to that goal, so teams can’t afford to be as optimistic with pitching prospects as the public outlets can be. As such, even if Espinoza is considered a top-15 prospect based on current rankings, his value to a club has to be diminished, more in line with a #26-#50 hitting prospect based on recent outcomes.

And there’s actually an argument for discounting Espinoza’s trade value a bit beyond that, because he’s much further from the big leagues than most pitching prospects ranked in that #11-#25 range. For instance, Jose Berrios is the closest-ranked pitcher to Espinoza on Baseball America’s midseason Top 100, coming in at #20; Josh Hader is at #22, and Jose de Leon is at #25. All three of them belong to the same bucket as Espinoza, in terms of Creagh and DiMiceli’s valuation system is concerned, but they’re all in Triple-A, knocking on the door to the big leagues, and each will likely finish the year in the majors.

With Berrios, Hader, and de Leon, you could look at that ~+8 WAR projection and see the fulfillment of that value coming from 2017-2022; with Espinoza, you’re probably looking at his value coming from 2019-2024 if he develops well and avoids injury. And the further out you push a player’s contribution, the less valuable it is. When teams are looking at the trade value of a particular prospect, they have to take the timeline of expected production into account, and they will pay more for players closer to the big leagues than guys who aren’t going to show up in the majors for several years.

How much you discount for proximity to the majors depends on each organization. Given the Padres current situation, they’re probably correct to not discount for proximity to the majors that heavily, given that their road back to the big leagues is going to be a long one. This isn’t a knock on their side of this trade at all; betting on long-term upside is probably the right play for them. But for other teams that aren’t looking as far off, Espinoza may not have had the same kind of appeal as other pitching prospects in his tier, given his distance from the majors.

So, realistically, the Red Sox gave up a pitching prospect that, based on where he was most recently placed on the prospect lists, projects for something like +8 WAR over his controllable years, and has a 50-50 shot of producing less than +3 WAR during that time; he’s about as high-risk as a prospect gets, and even if he lives up to the hype, he’s at least two years away from contributing in the big leagues, with three or four years a more realistic expectation.

In Pomeranz, certainly, the Red Sox didn’t get any kind of safe bet either; they traded a risky minor leaguer for a risky big leaguer. But even at only 150 innings per year, given his current projections, Pomeranz is forecast for something like +2.5 WAR per season, and he’s under control for the next couple of years beyond this season. Realistically, Pomeranz should probably be forecast for something like +5 to +6 WAR before he reaches free agency, and he should provide that value at fairly low salaries, given his low number of career innings pitched, which will hold down his arbitration awards.

The free agent market has already shown it will value high-risk, average-to-above-average starters; Scott Kazmir got $48 million and an opt-out last winter, Brandon McCarthy got $48 million and Francisco Liriano got $39 million the year before. Pomeranz has put himself in that class of pitchers, and pretty clearly has a good amount of value above and beyond what the Red Sox will have to pay him over the next couple of years. Pomeranz will make a fraction of that over the next few years, and since he’s going to get his salaries through arbitration, the Red Sox will be taking on less risk, since the money won’t be guaranteed.

In terms of overall value, Creagh and DiMiceli put Espinoza in a bucket of prospects worth about $40 million; accounting for his distance to the majors, I’d probably push that down to $30-$35 million; Yadier Alvarez, who Eric Longenhagen put a similar 60 Future Value grade on, signed for $16 million last July, and with the 100% tax they paid, he cost them $32 million.

Given what Pomeranz would be probably worth on the open market right now, he probably has at least $30 million in surplus value; if he were a free agent this minute, and could sell his remaining 2.5 years of service, I’d guess he’d land something close to $50 million, and that’s in guaranteed money; the Red Sox get additional value from having non-guaranteed arbitration years.

To me, this looks like the Red Sox and Padres identified the prospect in Boston’s system that was worth something very close to what Pomeranz is worth, and settled on a reasonable swap that makes sense for both sides. This one doesn’t look like Dombrowski undervaluing prospects to me; Espinoza is fun to dream on, but when factoring his risks in, he’s probably not as valuable as his “#15 ovearll prospect” status makes him sound. He’s a good get for the Padres, who should be betting on upside, but this is the kind of prospect that the Red Sox could afford to move. And for Pomeranz, this looks like the right return for both sides.