Updating Prospect Valuations

Over the last five years, a lot of good work has been done on valuing prospects. Victor Wang — now employed by the Indians — got the ball rolling in 2008, and his work was followed up by research from by Scott McKinney in 2011 and Kevin Creagh in 2012. Each piece was well done and is worth reading even now, especially if you’re interested in the various rates at which prospect tiers tend to go bust.

But we’re almost into 2015 now, and baseball revenues are exploding, making the valuations from even a few years ago look a little bit outdated. Just in the last year, we’ve seen three Cuban free agents — Jose Abreu, Rusney Castillo, and Yasmany Tomas — sign for around $70 million each, suggesting that teams are willing to pay significant prices for young talent with upside, even when there’s not an established Major League (or even minor league) track record from which to evaluate. We’re going to get an even better look at the market value of a premium prospect when Yoan Moncada is declared a free agent, and the bidding for his services is expected to reach $80 million once the taxes are accounted for, and that won’t even cover any of his future salaries; that’s just the cost of acquiring his rights.

So, helpfully, Kevin Creagh and Steve DiMiceli decided to update their study this week, adding in new data and using updated calculations for the price of a win based on recent inflation. Let’s look at what they found.

The bulk of the information is found in the table summarizing their research. I’m going to show the table below, but you really should read their entire article, given that it contains a walkthrough of the methodology and some further explanations of how they reached these calculations.

Tier Number of Players Avg. WAR Surplus Value % Less than 3 WAR % Zero WAR or less
Hitters #1-10 53 15.6 $48.4M 13% 9%
Hitters #11-25 34 12.5 $38.3M 32% 9%
Hitters #26-50 86 6.8 $20.3M 50% 31%
Hitters #51-75 97 5 $14.5M 57% 44%
Hitters #76-100 96 4.1 $11.6M 65% 42%
Pitchers #1-10 18 13.1 $40.4M 6% 0%
Pitchers #11-25 47 8.1 $24.5M 45% 28%
Pitchers #26-50 77 6.3 $18.7M 42% 25%
Pitchers #51-75 94 3.4 $9.4M 70% 48%
Pitchers #76-100 105 3.5 $9.6M 67% 45%

The most obvious thing to note: elite prospects are super valuable for a reason. The best hitting prospects from 1994-2005 averaged +16 WAR during their team controlled years, and the best pitching prospects weren’t even that far behind, at +13 WAR over the same period; the #11-#25 hitting prospects almost matched that total as well. A top 25 hitting prospect or a top 10 pitching prospect regularly produced high levels of performance in their pre-arb and arbitration years.

And as much as everyone likes to bag on prospects for being unproven, the bust rates of these types of players was actually quite low; only about 1 in 10 produced nothing at the big league level. At the very top of the prospect charts, Baseball American did an excellent job of identifying players who could make an impact at the big league level, and the risk associated with these kinds of players is generally overstated. Elite prospects often turn into good big leaguers, and the rarely turn into nothing.

As a point of comparison, I looked at the leaderboard for the best under-32 pitchers from 2006-2008, to see how well they would perform in the six seasons from 2009-2014. The 10 best not-old pitchers in that three year window: Roy Halladay, Johan Santana, CC Sabathia, Dan Haren, Jake Peavy, Roy Oswalt, John Lackey, Brandon Webb, and then either Javier Vazquez and Josh Beckett if you’re using FIP based WAR or Cole Hamels and Carlos Zambrano if you’re using RA9 based WAR.

During this three year span, these aces averaged roughly +15 WAR, making them established five win pitchers with a significant track record of success. The age limit helps keep the list to just pitchers who reasonably should have been expected to have six years left in their big league careers. How’d they do over these past six seasons?

Halladay, Sabathia, and Hamels were awesome, producing at least +20 WAR by either FIP or RA9 versions of WAR. Haren was close, getting +20 WAR by FIP and +17 by RA9, and he threw the most innings of anyone in the group as well. But after those four, it’s a pretty big mixed bag, with some good performances, some bad performances, and a lot of injuries. Brandon Webb basically never pitched again. Carlos Zambrano and Johan Santana were okay when they were healthy, but weren’t healthy much. Oswalt had some good seasons and some bad seasons; ditto John Lackey.

All told, the top 10 pitchers by 2006-2008 FIP-WAR produced +14 WAR/+13 RA9 from 2009-2014. The 10 pitchers by RA9-WAR produced +15 WAR/+14 RA9, doing slightly better because Cole Hamels gets added to that group and pulls the average up a bit. Webb is the big bust in both samples, offering essentially the same 1-in-10 zero value return as the prospect group. Besides Webb, there weren’t any other players particularly close to zero value, so the elite pitchers offered a slightly higher floor than the prospects, but their overall average performance was actually a little bit worse than the best hitting prospects, and essentially even with the best pitching prospects.

That’s right; for all the talk about unproven risky prospects and established #1 starters, the average performance of six years of an elite pitching prospect lately has been in the same range as the average future performance of six years of one of the best pitchers in baseball. You can re-do the same calculations for other years, and the numbers will fluctuate a bit with age and stuff, but in general, once you’ve identified a “true ace”, you’re probably looking at something in the +15 WAR range over the next six years.

And Creagh/DiMiceli’s work suggests that elite prospects have been performing at similar levels. In other words, even without taking the massive cost differences into account, elite prospects and frontline starting pitchers seem to have about the same long-term values. If we redid this analysis to focus solely on the short-term, the aces would undoubtedly win out — the six year timeframe clearly creates a bias towards young players, which all prospects are — but it’s worth knowing that the long-term future of a prospect isn’t that different from the long-term future of a pitcher who has established himself as a legitimate Cy Young contender.

And, of course, Cy Young contenders cost a lot of money, while players in their pre-arb and arbitration years come at a significant discount. For the surplus value calculations, go through and read the full methodology of Creagh/DiMiceli’s work, as they do a good job of discounting future wins and attempting to account for arbitration payouts. The one thing that I’d add to that section is that there’s also a significant value in having an elite young player because of the chance to sign them to a long-term extension that goes beyond just the 0-6 years, and often create value for the franchise in what would have been free agent years. Once you factor the extension opportunity into the mix, I think the values listed by Creagh/DiMiceli could be a bit low, and teams are likely placing an even higher value on these types of players than the numbers stated in their article.

But even with that minor quibble, this is still excellent work, and worth referencing as a baseline for when teams make prospect-for-veteran trades. It’s never as simple as proven versus risky, and as the data shows, the best prospects in baseball are probably not as risky as many think, relative to established big league stars. Kudos to Creagh and DiMiceli for putting in the work to update the data, and helping to provide evidence of the fact that elite prospects are being highly coveted for a reason.



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Dave is the Managing Editor of FanGraphs.


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Johan Santa
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Johan Santa
1 year 5 months ago

You did miss me after all!

Johan Satan
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Johan Satan
1 year 5 months ago

¡ll? ????? ?? ss?? p?p no?

Matthew
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Member
1 year 5 months ago

Who has more risk: A player like Xander Boegarts/Betts or a pitcher like Harvey/Fernandez who is recovering from TJS?

Colonel Obvious
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Colonel Obvious
1 year 5 months ago

Who has more risk out of a healthy position player or a pitcher who’s already had Tommy John surgery?

Matthew
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Member
1 year 5 months ago

In all fairness: A healthy position that was a top prospect that treaded water and a top prospects that has a limited sample in the majors. Or a pitcher who put up Cy Young numbers who has TJS.

Ned
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Ned
1 year 5 months ago

You asked who has more risk, not who will perform better.

Matthew
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Member
1 year 5 months ago

Let me rephrase: Which will generate more value going forward?

a eskpert
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a eskpert
1 year 5 months ago

Risk involves who will perform better.

Matt
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Matt
1 year 5 months ago

Another approach would be to take a look at the % of the top players (maybe top 100 or so) in MLB that were(n’t) top prospect at one point – to see how rare it is for an unheralded player to become a really good player at the major league level.

Jeff Zimmerman
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Matt
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Matt
1 year 5 months ago

Thanks! – Good stuff.

obsessivegiantscompulsive
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1 year 5 months ago

Yes, good stuff, too bad I missed it back then.

One thought that I didn’t see in the comments there is that perhaps it is easier to identify pitchers who are good than hitters who are good.

That fits into the TINSTAAPP mode of thought, that pitchers are never prospects, either they are or they aren’t. That suggests that that there is some way of detecting this tipping point where a non-pitcher becomes a pitcher.

It appears that perhaps there is an issue with scouting where there is something about successful hitters that is hard to identify. Not as a knock against the profession, just that it’s just darn hard.

As a sudden thought experiment, great hitters like Pujols and Piazza were totally missed by all of baseball. Even Mike Trout was overlooked by almost all teams, including his own (the Angels selected someone else with the pick before; if they knew, why not pick him first?). I can’t think of any pitchers like that, but I’m probably missing some.

Balthazar
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1 year 5 months ago

For hitters, the jump from AAA to the majors is like two full levels. Most guys are prospects that got that high because they could hit good fastballs, but in the minors pitchers are more likely to be putting those fastballs in the fat part of the plate (because they are working on command as much as making outs) while they may have only one decent secondary pitch or none. Pitchers who are having success in the majors are there because they command their fastballs well, and have good secondaries they can sequence and usually locate. It’s an entirely different order of magnitude in challenge. Then there are specialty delivers who blast plus stuff at a guy for a few pitches, whose numbers are legion.

Essentially, hitters who get a shot at a major league career can hit major league quality pitches but haven’t faced very many guys at all who have multiple such pitches and can reliably command them. They ain’t seen nothing yet, in other words. This is why the failure rate is high: the jump is huge.

Elite pitchers in the minors are scouted as elite because they have several pitches that are major league, at least one that is plus, almost always have excellent velocity which they sustain through a game, and have had a consistent record of success dominating advanced minor league bats. They are simply damn good. Yes, major league hitters are better than most guys they faced in the minors. Even great hitters fail two-thirds of the time. A pitcher knows what he’s going to throw and a hitter has to react, a huge advantage we all know about but consistently under-rate. A pitcher can give up contact, but if it’s contact of a kind he was looking for off a pitch he threw to that purpose it can be as much a hitter’s undoing as missing the ball. The advantages all favor the pitcher _if he commands his stuff_, and elite pitchers command their stuff to get that kind of rating.

The undoing of elite pitching prospects is usually a) injury, a non-performance aspect usually, or b) borderline command despite plus raw stuff. To be honest, no pitcher should ever have an elite rating if his command isn’t good. This isn’t entirely about walk rates, because elite pitchers may have so much movement that they don’t always pick up the strike zone. If their stuff has nasty movement and/or great velocity, that plays up much better than batting-practice power for a hitter.

Four word synopsis: DON’T trade Taijuan Walker.

Matthew
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Matthew
1 year 5 months ago

Really interesting stuff. So, purely as a hypothetical, the Indians would be likely to improve the long term health of their franchise by moving Kluber, even this offseason, for someone like Correa or Buxton?

theo epsteins left nut
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theo epsteins left nut
1 year 5 months ago

even as a hypothetical kluber would net more than either of those 2 alone. astros he’s prolly somewhere around correa+ 2 top 10 prospects in their system and a lottery ticket.

Jimmy
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Jimmy
1 year 5 months ago

Only if they make sure to trade Correa after 3 years.

AK7007
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AK7007
1 year 5 months ago

That wasn’t really what Dave was saying, he was comparing players out of their cost controlled years to ones that were still in cost-controlled years. Kluber still has a lot of cost-controlled time. However…

Probably on average it would improve their long-term health to gain those extra years of control you would get with a Buxton type. But due to risk aversion, just the 10% of the time that somebody like Buxton would bust would be enough to scare off the Indians.

lurker
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lurker
1 year 5 months ago

Thanks for highlighting this new data set. But I think you’re distorting reality a bit. That table includes only eighteen top-10 pitching prospects — and according to the original study, that’s over twelve years. So there’s only one or two of these pitching prospects at any given time, which means they almost never get moved. (Addison Russell is an obvious exception on the hitting side.)

Anyway, ” . . . all the talk about unproven risky prospects and established #1 starters,” as you call it, focuses necessarily on a far bigger pool of prospects than one to two arms per year. If you want to refute this “talk” more usefully, you need to look at the top-100 pool. And the failure rate there is much higher, which undermines your case.

Enjoyed the writeup, but I don’t think you’ve really debunked the common wisdom here or told us anything that’s useful to the vast majority trades. That said, the original study looks really solid.

chuckb
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chuckb
1 year 5 months ago

You know Dave likes an article a lot when he embeds the link to that article twice in 4 sentences.

Cool Lester Smooth
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Cool Lester Smooth
1 year 5 months ago

Awesome stuff.

novaether
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novaether
1 year 5 months ago

Interesting start, but the I don’t think that taking the average surplus value is the stopping point for valuing prospects. There’s no question that a prospect carries much more risk than an established player. Most (if not all) clubs are risk averse, and therefore would levy a risk premium on the surplus value.

Kevin
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Kevin
1 year 5 months ago

This is a very interesting piece, thanks, Dave. I wonder – if a top 10 prospect is likely to produce as much as a top pitcher today, doesn’t that mean that the prospect is worth the same sort of thing as a top pitcher? If Max Scherzer gets $200M this offeason, isn’t that a reasonable ‘price’ for a Bryant/Buxton/Correa/Russel type? Or at least a comparable price for a top pitching prospect?

Also, this analysis seems to have focused on the top pitchers from 2006-2008 and compared them with the prospect analysis referenced. How do top position players compare? Is the bust rate, success rate, etc the same for MVP-caliber hitters as it is for position player prospects?

Joe
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Joe
1 year 5 months ago

This doesn’t apply to pitchers, but could younger players’ defense artificially inflate their WAR production? In other words, even if they don’t set the world on fire with their bats, could the younger players increase their value simply by having younger legs? (This could also apply to baserunning values, too.)

I’m certainly not an expert in how WAR is calculated, so please feel free to poke holes in this theory. :)

Jeff
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Jeff
1 year 4 months ago

I’d like to see it broken down into even smaller groups than 10. My guess is there’s a significant gap between even hitter 1 and hitter 10.

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