A Lesson in Playing the Market

The inimitable Colin Wyers of Baseball Prospectus summed up this off-season’s free agency in one sentence after news broke that the Boston Red Sox had acquired Andrew Bailey in a trade with the Oakland Athletics:

So the big losers this offseason are Madson and the Phillies, huh.

As you are no doubt aware, the Phillies acquired closer Jonathan Papelbon in November, agreeing to a four-year, $50 million contract with a fifth-year option. This was days after Madson and the Phillies reportedly agreed to a four-year, $44 million deal. For a still-unknown reason, the Madson deal fell through, allowing the Phillies to pursue Papelbon.

GM Ruben Amaro has always been aggressive in free agency, often to his own detriment. He attempted to act before the market settled when offering contracts to free agent Raul Ibanez (in December 2008) and soon-to-be free agent Ryan Howard (in April 2010). The Ibanez contract turned out to be a net loss and the Howard contract actually looks worse now than it did at the time of signing — as hard as that is to believe. Similarly, the Papelbon contract falls into that same group as it is by far the most expensive contract awarded to a reliever thus far. (The second-largest contract belongs to Heath Bell, who signed with the Miami Marlins on a three-year, $27 million deal.)

As it stands now, Madson figures to get significantly less than what was offered by the Phillies, both in terms of years and money. He and agent Scott Boras have to be feeling sour about sticking to their guns in search of a long-term contract like that of Papelbon. With the Red Sox having acquired Bailey, one of the few remaining suitors is off the board meaning that Madson’s leverage is significantly weakened, if not outright obsolete. Madson will likely have to settle for significantly less money and only two or three years — perhaps even less than what Bell got from the Marlins. This, despite the fact that he and Papelbon are comparable in many ways, including age (31) and defense-independent metrics.

When and if Madson signs, his contract will be completely dwarfed by that of Papelbon. It will be then that Amaro realizes his mistake in jumping the market yet again, and the Madson-Boras team will realize their mistake in being inflexible. The lesson, boys and girls, is patience. The losers of the off-season, as Wyers described them, respectively displayed a complete lack of patience, and entirely too much patience. The equilibrium is somewhere in between. Or just roll with a thrift store bullpen.

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26 comments

  1. Dan K.

    December 28, 2011 06:16 PM

    You know, I’ve been thinking. Maybe our stance on RAJ as a GM isn’t all that strong since we inevitably always have to bring up the Howard and Ibanez contracts.

    Now, don’t get me wrong, those are bad contracts. But if that’s all we really have to complain about (that plus Papelbon, most likely), then we’ve got it pretty good. Even the best GMs could use a mulligan every once in a while. Hell, our often-praised former GM Pat Gillick was responsible for Adam freaking Eaton. 3 bad contracts (others are arguable, but they’re fringe-bad at worst) in as many years may seem like a lot, but the percentage of success is actually extremely high.

    In short, it may be time we hopped off the “RAJ is a sub-par GM” bandwagon. Just a thought, though.

  2. Bill Baer

    December 28, 2011 06:19 PM

    I don’t think Amaro is a bad GM overall. He has the payroll to allow him to make these kinds of mistakes in free agency. It’s just that in an ideal scenario, these mistakes wouldn’t happen.

  3. John

    December 28, 2011 06:32 PM

    This offseason has been a tale of two Amaros… the guy who jumped the gun on Papelbon, and the guy who waited out the market to re-sign Rollins. Is it possible Amaro realized his mistake with the Papelbon signing and used the lessons learned in his dealings with Jimmy?

    Nah. Probably not.

  4. Bill Baer

    December 28, 2011 06:35 PM

    Very good point… it seems like that had more to do with Rollins (like Madson) sticking to his guns and seeking a bigger contract.

  5. Bill Petti

    December 28, 2011 06:37 PM

    Generally speaking, players should want to set the market. Teams, not so much. This is a great illustration of that.

  6. Tom G

    December 28, 2011 06:37 PM

    I agree that Ruben overpaid for Papelbon, but the amount the Phillies are overlaying for a closer is probably significantly less than the money Boras has pissed away representing Madson.

  7. Tom G

    December 28, 2011 06:39 PM

    Er, overpaying, not overlaying.

  8. Another John

    December 28, 2011 07:01 PM

    I can imagine a scenario that makes the Pap. signing look a little more logical, if not entirely reasonable. Look at how the Marlins were throwing large contracts around to every big “name” at the winter meetings. If RAJ waits until the meetings or later, the Marlins might be offering 3 years/40 million or 4 and $45 million to Pap. They seem to be looking for the “name” as much as the player, to show how serious they are about moving to Miami. The Marlins would not have gone for Madson for that reason, leaving RAJ to try dealing with Boras for the best remaining option, Madson, and probably for more than he wanted to pay Madson. I’m also guessing that Bell was never considered, for good reason, and that after Lidge, RAJ didn’t want a reclamation project either, like Nathan. I keep reading and hearing quotes about “Mo is the only reliever worth $X million.”. What if Paps is the next Rivera? How many years did it take Mo to become “Mo”?

  9. Dan K.

    December 28, 2011 07:42 PM

    @Bill, fair enough that, ideally, mistakes wouldn’t happen. Just seems we can go overboard in our criticisms of RAJ at times.

    @Another John, the odds of there being another Mo so soon are ridiculous, but if I had to pick someone from the current crop of MLB relievers, I’d say it’s probably Papelbon. That being said, I wouldn’t have given Mo the money we gave Papelbon if it were my decision. But I just think relievers as a whole are being vastly overvalued in this day and age. It strikes me as odd that people tend to forget that the vast majority of relievers are relievers because they weren’t good enough to be starters. And yet some relievers make more money than some starters. It’s baffling.

  10. hk

    December 28, 2011 08:50 PM

    @ Dan K.,

    Don’t forget to add RAJ giving 2 years to Jamie Moyer after the 2008 season to the bad signings.

  11. hk

    December 28, 2011 09:07 PM

    While I’ve been as big a critic of RAJ as anyone (well, except Phillie697), I don’t agree with Wyers point about the Phils being losers in free agency. Yes, they overpaid for Papelbon (a slight upgrade over Madson), but it didn’t take the Andrew Bailey trade for us to know that. Outside of the Papelbon signing, they got Rollins to return for below what most perceived as market value and made a few potentially good value signings in Thome and Willis (if he’s correctly). All in all, I’d give RAJ a C for this off-season.

  12. derekcarstairs

    December 28, 2011 10:06 PM

    All GMs make mistakes. The good GMs like Pat Gillick recognize their mistakes and are able to minimize the damage. Gillick was able to do this, in part, by not making long-term commitments to players.

    Amaro’s big mistake has been the Howard deal. If Amaro were to acknowledge the mistake and cut his loss by unloading Howard in the next couple of years, then he will have learned a valuable lesson from Gillick on how to be a successful GM.

  13. Nik

    December 28, 2011 10:10 PM

    Oh yeah, can’t get enough of the beating the dead horse articles. Lets see how much the Phillies ‘lose’ when Bailey’s elbow blows up again and the SAWX are crying for a reliable closer.

  14. Frank K

    December 29, 2011 07:36 AM

    Madson should have known better than to get in bed with Boras. T’was a meager Christmas in the Madson household. He can thank Scrooge Boras and then look forward to signing a one-year contract somewhere for $5 million…maybe Boston, maybe here.

  15. Drew

    December 29, 2011 08:01 AM

    IMO, Raj isn’t exactly the best strategist when it comes to dealing with contracts and free agents. He often jumps the gun (as Bill mentioned above) despite the fact that it’s often not his dominant strategy (for you game theory nuts). The bigger problem is the Phillies’ perception of Amaro. I’ve often read Montgomery bringing up “Stanford” as one of the explanations of why Amaro would be a good GM – or that he brings business or management acumen along with clubhouse credibility. But in reality, he’s really not a “business” savvy person, and is more of a traditional clubhouse baseball guy. Sure, he has the education, but I can state clearly that not all Ivy or Stanford graduates would make good GMs. For example, Paul DePodesta is a Harvard grad and was far from a good GM. And as long as the Phillies perceive Amaro as having a Jon Daniels- or Andrew Bailey-like business mind, he’s going to get continued support despite such absurd aforementioned contracts.

  16. hk

    December 29, 2011 09:29 AM

    @ Frank K,

    Why the Boras hate?

    @ Drew,

    What was it about DePodesta’s short tenure as GM of the Dodgers that leads you to qualify him as a “far from good” GM? The LoDuca for Penny trade was a huge win for LA and I believe his free agent signings of Derek Lowe, JD Drew and Jeff Kent all worked well for LA on a production vs. cost basis.

  17. Bob

    December 29, 2011 09:30 AM

    Ryan Howard’s contract is the worst contract in baseball history.

  18. Jeff

    December 29, 2011 11:43 AM

    “When and if Madson signs, his contract will be completely dwarfed by that of Papelbon. It will be then that Amaro realizes his mistake in jumping the market yet again.”

    I wouldn’t hold my breath. Amaro has done this enough times in enough different years to demonstrate this is his MO. The only way Amaro will figure this out is if enough of these market-setting contracts flop. Even then, maybe.

  19. Drew

    December 29, 2011 01:11 PM

    @hk, my apologies.

    My description of DePodesta was a bit too harsh. He was actually not too bad; perhaps my sentiment was more a result of my disappointment that he never developed into an elite GM (i.e. Friedman). I am a Harvard grad and obviously a sabermetrics fan, and wanted him to succeed.

  20. hk

    December 29, 2011 01:41 PM

    @ Drew,

    No apology necessary. I think DePodesta may have been on the way to a very successful stint as GM until McCourt bought the team and started the franchise on the slow path down to its current depths.

  21. Phils_Goodman

    December 29, 2011 05:15 PM

    “Madson and the Phillies reportedly agreed to a four-year, $44 million deal. For a still-unknown reason, the Madson deal fell through, allowing the Phillies to pursue Papelbon.”

    This version of events is highly suspect. According to Jim Salisbury, the Phillies were pursuing Pabelbon and Madson all along, with one or the other reported at a the “top of the list” at one point or another.

    Even as many sources were reporting the agreement on the 4/44 deal, Salisbury said that Pabelbon always remained in the picture, and was even emerging as the Phillies true #1 option at that time (clearly contradicting the story that the RAJ had come to an agreement with Boras/Madson). Salisbury reported that while “sources close to the pitcher” were saying that the 4/44 deal had been agreed to with the Front Office pending owner approval, the Phillies always disputed this (as well as reports that Montgomery over-ruled Amaro on the Madson deal).

    Given the fact that Pabelbon signed with the Phillies days later, this would seem to vindicate Salisbury’s scoop that the Phillies were negotiating with Pabelbon all along and were never in an agreement with Madson “pending owner approval.” In hindsight, I think that narrative can be discarded as discredited disinformation.

    @ Another John, Dan K.

    Since he entered the league, Pabelbon is the only reliever with a significant track-record who compares to Rivera. Per fangraphs custom player report:

    tinyurl.com/Papel-Mo

  22. Dan K.

    December 30, 2011 08:58 AM

    @Phils_Goodman, which is why I’d pick Papelbon. Even being eerily similar, though, there are some key differences. Papelbon is better at getting the K, but Mo is at least slightly better in mostly every other category, and that adds up. His biggest advantage, in my opinion, is that he keeps the ball on the ground, though. Looking at the batted ball splits, it’s blatantly obvious which pitcher I would rather have.

    Still, it’s never bad to have the second best player at a certain position, which is certainly where Papelbon falls. But, again, I wouldn’t have even offered his contract to Mo, so there’s that.

  23. Phils_Goodman

    December 30, 2011 11:12 PM

    “Mo is at least slightly better in mostly every other category, and that adds up. His biggest advantage, in my opinion, is that he keeps the ball on the ground, though. Looking at the batted ball splits, it’s blatantly obvious which pitcher I would rather have.”

    As I see it, Rivera’s decisive advantage over Pabelbon is BABIP and BABIP alone.

    Rivera’s FIP- is 57, Pabelbon’s is 58. Both allow roughly 6.5% HR/FB. And Pabelbon’s flyball ways have only resulted in only an additional 1.3 HR per 65 innings.

    The batted ball type run estimators can’t tease out a notable difference, either. Rivera has a 2.52 tERA and 2.49 SIERA to Pabelbon’s 2.76 tERA and 2.51 SIERA.

    This is not to suggest that Rivera’s edge in BABIP skill isn’t real. He has posted better BABIPs than Pabelpon in 5 out of their 7 concurrent seasons, including the last 4 in a row.

    But the real advantage is in a .257 BABIP vs a .275 BABIP. Those marks in large part explain why Rivera has a .62 FIP-ERA differential, compared to .27 for Pabelbon.

  24. Dan K.

    December 31, 2011 10:18 AM

    The argument is that Papelbon could be the next Mo, and a big part of what makes Mo who he is is that he’s been consistent and effective into his 40s. Papelbon is most certainly effective right now, and it’s entirely possible that he will be in his 40s, but his batted ball splits don’t reassure me that he will be. Papelbon is effective largely because he can make hitters swing and miss with the best of them. However, if he doesn’t make them K, his batted ball profile is worrying. 44.1% FB, 36.6% GB, 19.4% LD. Are they terrible? By no means, but when you compare them to Mo’s (30.3% FB, 52.5% GB, 17.1% LD over the same time period) you see the difference in the pitchers. When Mo doesn’t get a K, you’re still not likely to be doing much damage. If Papelbon doesn’t get the K, there’s a much higher chance you’re doing damage.

    To illustrate my point, from 2005-2011 Papelbon faced 1729 batters, 322 of them got hits (18.62%), and 31 of those hits were homeruns (1.79%). Mo, over that same span of time, faced 1873 batters, 354 of them got hits (18.90%), and only 25 of those hits were homeruns (1.33%). And, for what it’s worth, Papelbon gave up 111 ER to Mo’s 101. That’s what makes me doubt Papelbon is the next Mo. As long as he’s striking people out, Papelbon is as good as anyone… but when he’s not, he’s in trouble. If he starts to lose his ability to generate swing-and-misses, he’ll start to become ineffective. That’s never something Mo has had an issue with, which is why he’s Mo.

    I will say that this is all speculation at this point and, again, I have zero problems with Papelbon. Both he and Mo are elite and any team is fortunate to have either one of them. Time will tell if Papelbon is the next Mo, I just have my doubts.

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