What I meant with my comment was not to say that people shouldn’t analyze trades at the time or that it can’t be helpful. What I meant to say was that when you trade for an established good player (Edmonds, Rolen, Holliday) the team getting the player has a very good idea of what they are getting, and there is a high probability they the player will play up to his predicted (and past) performance. So the risk of trading for an established player and him falling flat on his face is very low. (I’m just talking about good players here).

However, when dealing with prospects, they have not established their actual value in the majors. So when you have a talent like Wallace, who was probably considered an A- at the time we traded him, his value is completely based on potential in the majors. He has not established himself and therefore no one actually knows what kind of player he will become. Therefore, his risk is significantly greater then the good player you are trading for. And with a prospect like Wallace, his ceiling is much closer to all-star then it is to becoming an MVP one day.
A player like wallace also holds the possibility of stalling on his way to the majors or on his way to becoming a very good major league player.

Therefore, it I believe it is better to trade a prospect like Wallace for an established good player, then to keep him most of the time. Especially when the player is not strong defensively, and blocked in his position in the majors.

In addition, a player like Wallace, who is already older and who’s value comes completely from his ability to hit, if scouts fall out of favor with him, his value to the club can drastically fall in a very short period of time. Law stated this year that Wallace wouldn’t have even made the top 100 list this year had he still qualified.

If we still had Wallace this year do you think we could have traded him for Holliday? I don’t.

Prospects like Rasmus and Miller are different because they have potential to be great, and the cardinals need cheap great players (are at least very very good ones). But when a prospect’s potential is not A+ but merely A-, i think on average it is better to trade him.

It seems obvious that this makes a difference: Just this offseason Cliff Lee and Jake Westbrook both took less money to play in places they liked, while Werth and Crawford got huge dollars from unfamiliar places. Would Holliday have expected a Carl Crawford contract if he hadn’t played with St. Louis?

Billy Beane is this type of guy: He compiles massive amounts of prospect and player value by exploiting inefficiencies in the market and always seeming to get the better “value” in trades, but that doesn’t always net him gains on the field in terms of wins and losses, and I think part of the issue has been the deployment and development of those resources that are acquired.

I think Rui does a good job here of comparing this deal to other deals that have been made in the past couple of years. The findings are pretty clear: Teams “overpay” for veterans pretty frequently in trades. So either they don’t know what they’re doing (market inefficiency) or that’s just the market (Adam Smith). I think there’s a mix of both here, but a third issue that isn’t discussed is that there are certain teams with a “value/win” ratio that is just simply different from others. If the market was perfect, the value/win ratio would be nearly the same for all teams. It clearly isn’t.

Still, I disagree that we overpaid, and I vehemently disagree that this was a bad trade, simply based on the fact that the prospects we gave up do NOT have $28.7M in value TO THE CARDINALS over the next 6 years. We’re determining their market value (what they should be worth to other teams) but we aren’t determining their club value (what their value is to the Cardinals). Those are not the same thing, but this analysis is treating them like they are exactly the same thing.

Key takeaway for me is this:

“what I’ve found is that teams’ current records have zero predictive value of their record five years from now and beyond.”

Yet, in order for Wallace and Co. to have $28.7M in value, we’re projecting THEIR talent out SIX FULL YEARS into the future, and that’s making the reasonable, best-case assumption that those players would be giving that value within the next year. We’re not accounting for the fact that these players might not be in the big leagues until 2-3 years from now or whether the Cardinals have a spot for any of them to play at the MLB level.

Why am I the only one that seems to find this valuation model insane? If this is the best we can do with “provable” data (and by “provable” I’m assuming that Victor Wang’s math, not assumptions, are correct), then we should expect that the evaluation will favor the team getting the prospects around 80-90% of the time for trade deadline deals. I would also guess that this would be the case in all the other major sports as well. Pricing risk is tricky in an open market, even more so in a closed market where human beings are the capital we’re pricing the risk on.

And I’m not saying that the prospects have no value at all, I’m saying that the point of the trade was to improve the team in the short run, so given the time constraints, those prospects have NO VALUE as players to the Cardinal MLB team in 2009. Their value is secondary, in that their future value might entice someone to give up present value that can help the 2009 club within the constrained time period. Which is exactly what happened. Using these time constraints, the only way for the Holliday trade to be a “bust” is for him to have not performed well or gotten injured in the last two months of 2009.

If you’re going to use the future value of those prospects against the present value of the veteran player, you are comparing apples to firetrucks, and you’re throwing out the time constrained portion of the equation. Do the Cardinals make that trade if they were in last place? No, absolutely not. So you have to take that into consideration.

Know what I mean? Nearly every trade you look at is going to favor the team getting prospects, because you always have to overpay in prospect talent to get veteran talent because you’re trading an unproven commodity for a proven commodity. The team getting veterans is taking on more of the risk, therefore, you have to overpay. If you’re a GM and you’re looking to make every trade work out even or in your favor, you’re not going to get any trading done, and the other GM’s are going to talk about you like we all talk about that one douchebag tightwad in our fantasy baseball league who won’t trade with anyone unless he’s getting way more value than he should.

Also, attempting to to value a prospect for 6 full years is the definition of a crapshoot. Half the talent evaluators I read miss about 40% of the time from YEAR TO YEAR. And I’m supposed to believe on someone’s value for the next 6? C’mon — no mathematical model is that good.

I’ve read Victor Wang’s analysis. Can’t argue with the math, can ABSOLUTELY argue with the projected “value” of prospects. If you can’t admit that valuing things this way is flawed, you’re also saying that all baseball GM’s are dumb as a box of rocks. No veteran for prospect trade, under these assumptions, is ever good for the team getting the veteran in terms of “value” because the prospects are always valued for 6 full years. I would also guess that, in hindsight, 90% of the prospects valued this way are actually overvalued as well. There will be exceptions (Hanley Ramirez, to name one, John Smoltz, to name another) but overall I think that veteran for prospect swaps do what they’re intended to do: help one team try to win currently (Red Sox in ’06,’07, Tigers in ’87) while helping the other team acquire pieces to compete in the long run. Calling one of these a “failure” is missing the point of why the deal was made at all.

This analysis overvalues “faberge eggs” in the long run while undervaluing veteran players in the short run.

It’s important to note that Holliday’s projected surplus value over the length of his contract is very small — probably $5-10 million if it’s even positive. The increased likelihood of signing Holliday as a result of the trade is also small — at most it’s 20%. So we’re talking about the difference of about a million or 2 at most. It’s almost negligible. That’s not at all true for the prospects’ values.