Ottoneu 101: Production, Salary, Surplus, Value

If you discuss player valuations with anyone who plays Ottoneu, chances are the word “surplus” has come up. Fellow Rotographs contributor Justin Vibber and his robotic heart love the S word, while others believe it to be a catch all that does a poor job of incorporating context, and therefore should be applied a little more conservatively. Maybe the S word isn’t used; maybe owners mention a player is “overpaid” or “underpaid.” Maybe they mention that they prefer talent they “view as a keeper.” Or maybe they claim someone is a “$30 player” without defining what they mean by “$30 player” and without acknowledging that they actually own this player for $15 salary.

As with all areas of life, communication comes with barriers. Written communication creates more barriers than most. Whatever jargon or form of communication is being used, we should recognize that owners tend to skew heavily toward talent that fits these descriptions “surplus”, “keeper”, “underpaid”, etc. We’re all very loosely trying to define the same thing. First let’s talk about why paying a player less than he produces is important.

If Mike Trout is a $70 player (generally), and you own him for $60, that would be viewed as a very good contract. It doesn’t matter that Trout is eating up $60 of your budget (especially if acquired via trade with a loan), because if he was cut, he would auction for more than $60. So, let’s say this hypothetical Trout is $10 underpaid. Does that change the fact that he is still producing $70 of production? No. Regardless of the salary I own Trout for in my league there is zero impact on his on field production. However, he is certainly more valuable to me at a $1 salary than a $99 salary (extreme I know). In this example, his salary of $60 would allow you to buy around $10 dollars more of production in the auction next season. If I bought Trout at $70, I would still have $70 dollars of production. However, I would now be unable to spend $10 on something else compared to if I had owned Trout at $60. If I owned Trout at a $90 salary, well I am still banking a $70 dollars of production, but now I have given up the ability to spend $20 later. Make sense? Because of this, players who are underpaid tend to be the building blocks of successful teams. They are the most highly coveted assets across leagues.

First, Let’s define a few terms. Then we’ll come back to this example.

Production – The on field value a players produces. This is independent of salary and is strictly tied to performance.

Salary – The price a player is currently owned at. This is independent of production and only measures what a player is currently paid within the league.

*I recognize that players with higher levels of production are more likely to have higher salaries over time and therefore are not strictly independent, but for the purpose of this conversation, we can view Production and Salary separately.*

Surplus – Production minus Salary. This can be positive (better) or negative (worse).

Value – The sum of Production and Surplus. What a player produces on field, added to the benefits of owning him at a specific salary.

Why did I do this? None of these terms are too complicated or difficult to understand. There is no high level math here and I didn’t even use a spreadsheet. The reason is because language can create a real barrier in discussions across leagues. Typically we don’t get caught up on jargon, and because of this owners or teams end up arguing over red herrings. When I see discussions around a player’s “value” it usually refers to a portion (production or surplus) of the Value I have defined above. However, if we start using the same language in referring to these components of a players worth, it can cut down on a lot of the disagreements and misunderstandings that exist. Let’s have better discussions. I’m trying to stick to the terms defined above.

Back to Trout. The value of a player is most often brought up in trade discussions. As Ottoneu has progressed from infancy, many owners have seen numerous trades occur with a common theme. Non-competing owners will try to offer lot of current production (usually in the form of high salary players with negative surplus), in hopes of receiving positive surplus assets. However, beyond a subjective “fleeced” or “great return” I rarely see teams try to measure how these trades (or any trade, for that matter) compare. To compare these trades, I have started to compare value on both sides of the deal.

Value Samples
Name Salary Production Surplus Value
Mike Trout $68 $70 $2 $72
Corey Seager $13 $42 $29 $71
Jake Lamb $4 $26 $22 $48
Edwin Diaz $3 $17 $14 $31
Andrew McCutchen $51 $32 -$19 $13
Sonny Gray $21 $8 -$13 -$5
– Salary = Ottoneu Average Values.
– Production estimated for example.

Now, I can look at a trade and say, “Is a $51 Andrew McCutchen worth an elite asset? Is a $21 Sonny Gray worth anything? What is a fair return for Mike Trout? Is it hard to trade Edwin Diaz?” Why does this matter? From discussion I have witnessed, crowds who chase surplus have valued it more highly than production and tend to prefer the highest surplus asset. However, by viewing players in terms of value we can recognize the importance of surplus, while also showing production plays a real role in player values. Is a player with a $20 salary and $30 of production ($40 value) more valuable than a $1 player with $15 of production ($29 value)? We don’t need to guess. We can value both simultaneously. We can determine if trades and owner valuations pass the sniff test.

Does this mean that you shouldn’t trade ~$45 of value for ~$44 of value? No. I am the first to admit that our values cannot possibly be that accurate. It probably helps to see a ~$45 value for ~$40 value as in the ballpark and know that asking prices are reasonable. Certainly, there are reasons to accept or reject each trade based on where you sit in the standings. For example, value helps me see that a $32 salary Ryan Braun can still be worth owning on a non-competitive team – showing that he should return more in a trade than a couple back end prospects. Also, it helps solve the riddle of what an overpriced Mike Trout is worth if traded in April. By value, a the $90 salary Mike Trout referenced above (assuming $70 production) would be worth about $50 in value. That’s still a lot, but does it let you command any asset in the league? Probably not. These are the types of comparisons and questions I like to dive into. I’d wager that anything within $5-$10 of value either way is probably “fair” (removing $1 of production or adding $1 of salary, causes a $1 reduction in surplus, for a $2 loss of value.) Either way, it helps us take a step toward comparing players when production and salary both have a large impact on how valuable a player is.

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Joe works at a consulting firm in Pittsburgh. When he isn't working or studying for actuarial exams, he focuses on baseball. He also writes @thepointofpgh. Follow him on twitter @Ottoneutrades

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Trey Baughn

This is a great article, and the definitions do definitely help smooth the communication between two parties when discussing a trade. I guess the big takeaway here is when using this value calculation as a baseline, the negotiation can now focus almost entirely upon settling on the “production” variable. Owners often talk past one another when debating terms like value, production, etc as you mentioned, so narrowing it down to a single variable in the negotiation seems very helpful.
I guess the next challenge in figuring out how to estimate “future” production (prospects)…