The diminished costs of a short-term rebuild

Recent trades by the Padres and free-agent signings by the White Sox push them closer to contending positions. At minimum, they generate excitement for the coming year and put those teams on a more even footing with the juggernauts of their respective divisions (the Dodgers and Tigers, in particular). But whereas these moves have been widely praised, they run against the old idea of a competitive cycle, defined by windows of contention sandwiched by periods of rebuilding.

In both cases, the moves significantly improve the teams without putting them anywhere close to parity with the top tier of their leagues. The Padres might be greatly improved, but they stand little chance against the wealthy, well-run machine that is the Dodgers. Likewise, the White Sox find themselves in a competitive division opposite the still-formidable Tigers, not to mention the recently World Series-bound Royals. At least for this coming year, according to the best information we have, both Friars and Sox alike must pray for a wild- card berth and hope that the variance of the playoffs can do the work of delivering them a championship.

In this light, the moves that have upgraded the Padres and White Sox do not seem overly useful to their hopes of reaching the World Series. But making these moves still more questionable, they might come at the cost of long-term contention. Conventional wisdom suggests that these teams should be in the midst of deep rebuilds, selling their stars for draft picks and younger, cost-controlled assets. This conventional strategy is embodied in the Astros organization, which has suffered through several 100-loss seasons, but as a result picked up high draft picks that now appear to be developing into stars. In contrast, by winning a bit more now, both the Padres and White Sox will be sacrificing draft position, and thereby losing substantial value for very little realistic chance at contention. Draft position is thought to be of the utmost importance because of work (originally done by Sky Andrecheck) that shows a very severe dropoff in expected value between the highest draft picks and the remainder of the first round.

This graph charts the average lifetime WAR, our overall measure of player value, against the pick at which each player was drafted (1980-present). As you come down from the top five, the expected value swings downward very quickly. A small gain in wins for the Padres might translate into dropping from a top-five pick, and the attendant average WAR/$, into a much less fortuitous perch in the middle of the round. To give you an idea of how significant a loss that is, consider that Sky'€™s model projects the first five picks of the draft to produce some 7.7 WAR during their years of team control, or almost double the next five picks' average of 4.1 WAR.

But there might be more to the Padres'€™ strategy than meets the eye. A series of factors combine to reduce the utility of hard, Astros-style competitive cycles, and might shift the optimal approach toward more shallow windows of rebuilding. I will highlight several of these factors here, the sum of which conspires to make the Padres'€™ and White Sox'€™s short-term plans more wise than initially imagined.

Let'€™s start with the foundation of the idea of deep rebuilds, the WAR/pick graph. I showed this graph above, but let'€™s look at it in a slightly different way, including all of the players, instead of just the averages for each pick.

Here, each dot is a single player, their horizontal position corresponding to their draft position, and their vertical position corresponding to their lifetime WAR. Suddenly, the obvious pattern is hidden behind a swarm of variation. Whereas the average drops off dramatically, curving toward nothing, the variance at each pick remains tremendous across the curve. By this I mean that no pick, no matter how high, is ever guaranteed. The realistic floor of nearly every pick is no value at all. Conversely, the ceiling is almost always a potential star.

In short, whereas there is a significant pattern that relates draft position to likely future value, it is a weak relationship that holds only in the aggregate. For those versed in statistics, pick number explains only about 3% of the variation in lifetime WAR. In other words, any given pick can diverge strongly from the pattern, and the different abilities of the front office to evaluate talent could entirely swamp the expected loss in WAR that arises from the Padres'€™ window of pseudo-contention.

Above and beyond the variance of the WAR/pick graph, there is some evidence to suggest that the shape of the curve is itself changing over time. In a 2014 update of Andrecheck'€™s work, Matt Murphy found that the slope of the curve that relates WAR to draft picks is becoming shallower in recent history, which suggests that the loss in value caused by contention is a less significant detriment. Remember that Andrecheck'€™s work put the gap between top five and the next five at 3.6 WAR. Murphy'€™s update, in the more recent window of 1990-2005, shows that gap shrinking to only 2.4 WAR, a 33% decrease. Given that Padres GM A.J. Preller and White Sox GM Rick Hahn are planning for the future, they might foresee this curve becoming shallower still, thereby discounting the loss even further. We have reason to believe that as front offices employ ever-more advanced analytics to become adept at separating the wheat from the chaff, the shape of the curve ought to become more linear and less exponential, more like a gentle incline than a drastic cliff.

Another fact to consider is Preller'€™s own background, which is primarily in international scouting with the Texas Rangers. Jon Daniels and Preller built the 2011-2014 Texas Rangers'€™ excellent farm systems and rosters substantially on the back of the international market (note, for example, Yu Darvish and Jurickson Profar). Preller was hired, at least in part, because he is known as an exceptional international talent evaluator with a scouting background. Because most international prospects are not governed by the draft, if Preller looks to acquire players internationally, his draft picks might be devalued in comparison to that less regulated market. The Padres' ownership or front office might rightly appraise Preller'€™s international scouting acumen as able to make up for whatever value is lost from moving down in the draft order.

While Hahn does not possess the international scouting pedigree of Preller, the White Sox as an organization have a decent record of finding big league players from Cuba and elsewhere. Going forward, international operations are an area of emphasis for the Sox. Having harvested Alexei Ramirez and, more recently, Jose Abreu, the White Sox might see themselves as well-positioned to make greater inroads into Latin America, where markets new and old are beginning to emerge as significant sources of talent.

Finally, I want to highlight a sea change that has occurred in MLB'€™s entire competitive environment as a result of the addition of the second wild card. As Dave Cameron has noted, the second wild card opens the door to a new set of lower-tier contenders, inducing middling teams to take a shot, no matter how poor their odds. Combined with MLB'€™s increasing parity, we are seeing a bevy of seemingly mediocre teams not only making the postseason, but engaging in significant playoff runs. Look no further than this year'€™s championship contenders, the Giants and Royals, neither of which was a world-beater in the regular season. As the gap between the top-tier teams and the wild-card contenders shrinks, the value of mediocrity grows. A team that can sneak into the playoffs, provided it can make some noise once there, has a decent shot of making the World Series, thanks to the tremendous randomness of the postseason.

Each of these factors might be small or uncertain individually, but I think combined they constitute solid evidence that deep rebuilds are less valuable, perhaps especially to these two teams. Even so, there are significant differences between the Padres and White Sox.

Whereas small-market teams like the Padres are more dependent on getting cost-controlled players (primarily via the draft), the White Sox can afford to buy a good portion of their wins at the market rate thanks to their historically heftier payroll. The Sox are also seemingly closer to contention to begin with, controlling quality young players like Abreu and Chris Sale, and being confronted by less able, older opponents in the Tigers. Even so, perhaps the Padres feel that they will be better able to make up for this gap through Preller’s talent evaluation abilities. Lewie Pollis recently wrote about how team owners might be tempted to hire the GM who promises to return their team to contention the fastest.

Preller might well embody this pattern, but he might also have noticed a combination of factors that devalue the whole idea of the boom-bust competitive cycle, complete with its intense, multi-year, basement-dwelling rebuilding. The Astros, who pursued this more traditional strategy instead, might have built themselves a better foundation for long-term contention, but it came at great cost to their organization, both in terms of dollars and fans.

Instead of top-five draft picks, Preller and Hahn might be attempting a return to competitiveness via mid-round selections and the international market, banking on their own front office’s scouting abilities and a novel playoff format that rewards mediocrity. 

The White Sox and Padres are eschewing the traditional rebuilding route, instead choosing to deal prospects for major-league talent. And they might be wise to do so.