(*) MASTER NOTES: Toutflation, 2018
Mar 24 2018
On the weekend, I was part of the 2018 Tout Wars AL-only auction, held Saturday, March 24 in the locker room of the Staten Island Yankees. My experience leads me to conclude that I need to change my thinking about using “inflation”—or, more precisely, “disinflation”—in auction tactics.
What inflation is—and isn’t
Inflation means the buying power of the league's salary money has declined as a result of players being bought (or, more commonly, kept) below value. With more money in the system than stats to buy, each stat costs a little more, and so player costs rise.
In Roto, the inflation formula for a league is:
(League salary cap total-stats value bought) --------------------------------------------- (League Salary cap total-League salary spent)
Suppose a standard 12-team league. After the first couple of rounds, the owners have spent $600 to buy players whose projected stats are worth 400. Thus:
($3,120-$400) $2,720 ------------- = ------ = 1.079 = 7.9% inflation ($3,120-$600) $2,520
In this example, we would expect the price of each remaining player to be about 8% higher than “list price” because of the inflation.
Contrary to what we often read or hear, “inflation” is not synonymous with "overpaying," as in "there was a lot of inflation in the top hitters" because their prices were higher than expected. But owners paying more than value for players is not inflation. It’s just the owner’s choosing to overpay. Ironically, overpaying is the source of “disinflation,” exactly the opposite phenomenon. Disinflation is an decrease in prices because there is less money in the system than goods to buy.
Using the previous example, but reversing the spending and the values bought:
($3,120-$600) $2,520 ------------- = ------ = 0.927 = 7.2% disinflation ($3,120-$400) $2,720
In this example, the overpaying has led to disinflation, which should reduce the prices of the remaining players by about 7%.
What happened in Tout and the problem
In the early going, the dollars were flying around, especially on hitters, like the Touts had all been taken over by the ghost of George Steinbrenner. Mike Trout went for a Tout-AL record $53. Giancarlo Stanton went for $39; Mookie Betts for $37; Aaron Judge for $34; Dee Gordon for $33; Josh Donaldson for $32; Manny Machado and Carlos Correa for $32 to the same owner; Francisco Lindor for $31; and José Ramírez for $30. In all, 20 hitters went for $25 or more, racking up $82 in total overpay.
With all this apparent overspending, my RotoLab draft software showed just what I expected: the hitter pool was rapidly disinflating, making each remaining unspent dollar more and more valuable. In the circumstance, I waited for my unspent dollars to become more and more valuable. With hitter disinflation eventually running at 25%, I thought I would be able to swoop in and buy a $30 hitter for $23, a $25 hitter for $19, a $20 hitter for $15, a $15 hitter for $11, and so on. Economic theory said so.
At that point, reality stuffed a dirty sock into economic theory’s mouth.
The central paradox
In “real” inflation, the economic system has essentially unlimited money and unlimited goods. Inflation is calculated in a macro way, using huge baskets of goods across a wide range of uses.
Unfortunately, the roto auction is not a macro event. It is a micro event, with peculiarities that diminish how well we can apply inflation theory. The amount of money is finite, and so is the universe of “goods”—the stats we’re buying. The overspending was not only diminishing the supply of money—it was also diminishing the supply of projected stats. Also, the "money," unlike in the real world, has no value if unspent.
Remember, according to the theory, with 25% disinflation, I should have been able to buy a $30 hitter for $23. But there weren’t any $30 hitters left to buy. Nor were there $25 hitters. Nor even many $20 hitters.
In the first break, HQ GM Brent Hershey came up to me and asked, “Are you planning on buying any hitters?” I wondered if he thought I might be trying some kind of radical plan, a reverse Labadini. I did have a hitter—I had bought Mitch Garver for $3—but I saw Brent's point.
As the French philosopher and mathematician Blaise Pascal, who developed probability theory and other mathematical advances, once elegantly observed, “Sacré bleu!”
The response
When the auction resumed, I started buying any hitter with a redeeming quality—and contrary to the economic theory, I was not underpaying. I was still overpaying, as many of the other Touts were apparently planning on going early and often into dollar days.
I spent $135 on $110 worth of offensive “core”—Russell Martin ($14), Justin Smoak ($19), Marwin Gonzalez ($20), Yoán Moncada ($23), Adam Jones ($21), Avisaíl García ($18) and, sadly, Jorge Polanco ($20). Those seven hitters added up to $25 of overpayment, about $3.50 each. To make matters worse, I found out later that about 15 minutes after I bought Polanco, who wasn’t on my target list, he was suspended for 80 games for a PED violation.
At the same time, though, I figured that with all the money going to hitters, there had to be pitcher values coming. So I pivoted from my planned 70-30 split to something closer 50/50 (I ended up at about 55/45). Sure enough, I piled up bargains like I was shopping at Target on Black Friday, and all the pitchers were flat-screen TVs. I bought starters Masahiro Tanaka ($17), Gerrit Cole ($23), Mike Clevinger ($10), Marco Estrada ($11), Jake Odorizzi ($8) Drew Pomeranz ($10) and Josh Tomlin ($2). Every starter except Cole was bought under-value, and I turned a $28 profit overall.
The top three closers—Kimbrel, Osuna and Chapman—had gone into the $20s, but I targeted and got two closers (Ken Giles and Fernando Rodney, so maybe more like one-and-a-half), and a middle guy with saves potential (Addison Reed, protection for Rodney) for a total of $30.
So I bought seven starters and three relievers, so you don't have to be Blaise Pascal to figure out that I bought 10 pitchers in all. Tout-AL plays with a “swingman” rule allowing the 23rd player on a roster to be a hitter or a pitcher.
I also targeted potential SBs in the remaining hitter pool, spending just $7 to acquire 64 pSB—Tyler Wade (13 pSB), Jacoby Ellsbury (15), JaCoby Jones (15) and Rajai Davis (21).
When the auction was over, my RotoLab draft software gave me 54 out of the available 60 points. Offensively, just 20 projected points, including nine in SB. That said, 74 points could be a money finish. And since quite a few Touts left the table with skimpy pitching, I might be able to trade from what shapes up as a surplus of wins and strikeouts. In fact, when I got back to the hotel, I already had a trade offer, looking to send me offensive help for one of my many workable starters.
Conclusion
In all, it was a challenging and interesting draft. As noted, I should be pretty competitive, assuming the pitchers pitch to expectations and don’t get hurt. I don’t like pitchers because of the injury risk, and notwithstanding the analyses that hitters are increasingly approaching pitcher-injury risk levels, I’d still rather have hitters.
An important takeaway for me was that I need to do some cipherin’ to better understand and react to valuation challenges that arise from disinflation. In hindsight, for instance, I wish I’d anted up early for a top OBP guy with a little power. On the other hand, all the big-OBP guys went for way more than I believe they can possibly earn, which seems to suggest that buying them at draft is not sound practice.
We shall see!
I’d be curious to capture some of the wisdom of the crowd, so please comment below or in the Subscriber Forums (I’m starting a thread there) how you’ve handled the disinflation caused by rampant overbidding in your auctions, whether this year or in past seasons.
Good luck in your remaining drafts and auctions!
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