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Monday, January 30 2023 @ 09:04 am UTC
Money Talks and . . .   
by Wilbur T. Miller

Dejan Kovacevic ran an interesting article in the Sunday PG. He notes that the Pirates are placing an "internal value" on the free agents they've attempted to sign and have refused to go above that value. The approach: "A dollar value for a player is formulated by the baseball staff based on market and performance analysis, and a contract agreement is reached only if the terms do not exceed that value."

This is a troublesome concept. It hasn't hurt anything this winter, because the free agents they've pursued all . . . uh . . . suck, but this same "internal value" concept has come up in other contexts, like Latin America. Huntington has used it in dismissing the importance of being willing to pay six-figure bonuses in the Dominican Republic.

The problem is that this concept has nothing to do with market prices. The Pirates aren't the only team bidding and can't just ignore what other teams are doing. If you set your "internal value" below what the others are willing to pay, you'll just come up short every time and end up with no talent. Getting "value" out of your expenditures doesn't mean anything if you're not getting any quality. It's like getting a good price on a lemon of a used car. What good does that do?

This concept is really just an extension of Frank Coonelly's arguments in favor of bonus slotting. Coonelly argued in a Sports Illustrated article that slotting made sense for teams because a draftee simply isn't worth more than slot money, if that, because of the risk involved.

In his argument, however, Coonelly ignored the way markets operate. Market prices aren't determined solely by the quality and risk of the commodity. They're also a function of supply. A team like the Pirates, mired in failure due to a lack of talent, has to find that talent somewhere. They aren't able to compete for veteran talent due to the expense. If the only way they can, for example, acquire one of the impact bats they so desperately need is to pay Matt Wieters a $6M bonus, then the choice isn't simply whether Wieters is somehow "worth" $6M. The real choice is whether the team will even try to compete, or instead will simply give up trying to get the talent it needs.

Coonelly's slotting system is a good example of what could happen to the Pirates. Teams like the Yankees, Red Sox and Tigers have simply ignored the slotting system. The result has been that top talents like Rick Porcello and Joba Chamberlain have become available to already-strong franchises, which is not how the draft is supposed to work. Sad sack teams like the Pirates have been increasingly disqualifying themselves from pursuing top talent to follow the slotting system, ignoring the fact that other teams are willing to pay premiums for that talent. Ignoring what other teams are paying in every talent market will have disastrous results. The Pirates will simply be opting out of the search for the best talent and the losing will continue.

Latin America presents the same problem as the slotting system. If the market price for an impact talent is in six figures and the Pirates set their "internal value" below that amount, they're effectively deciding not to compete for Latin American talent. The only way the decision can work out is if the other 29 teams are simply incompetent. How likely is it that the Pirates are the only team that knows what they're doing? Rene Gayo has said repeatedly that the Pirates don't have to pay six figure bonuses to find talent, but he's been on the job for four years and has made little headway so far in turning their Latin scouting program around. And the problem isn't that he hasn't had enough time--other teams, including the Reds and Nationals recently, have turned around moribund or even non-existent Latin scouting programs in a fraction of that amount of time.

We don't know yet just how far the Pirates will carry this concept of "internal value." There hasn't been a draft since the change in management and the Latin "signing season" is in the summer. Fancy concepts can't, however, change the fact that, if the Pirates aren't willing to pay market prices for talent somewhere along the line, they're simply never going to have enough to compete. In the end, it'll just be a more sophisticated-sounding way to be cheap.

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