Can you really play it safe?

It’s well established that humans are poor at assessing risk; we constantly think actions that are, statistically-speaking, quite dangerous are safe and that acts that are actually quite safe to be dangerous. To borrow example from the Steves of Freakonomics, if your household has both a gun and a swimming pool, it is far more likely a child will die in the pool than by the gun.

In Ben Pritchett’s recent column about Mike Stanton, he mentioned the following:

According to the 2012 Baseball Forecaster, 80 percent of all players that will yield first-round value are found in the first four rounds of drafts. Less than half of the players drafted in the first round actually yield first-round value…Assuming that just five players picked in the first round actually retain first-round value, that leaves ten draft positions available to be filled by players drafted in the next three rounds. Using the 80 percent success rate discovered by the Forecaster guys, that means only seven of the remaining 45 possible players will deliver first-round-caliber stats.

This comment led to a brief discussion in the comment section about “playing it safe” when drafting. Commenter Simon, posed the question:

Perhaps one way of looking at the Baseball Forecaster stats suggests that playing safe in the first 4 rounds is not really the exact science we all like to think it is!?

Ben agreed, responding thusly,

Playing it safe is all relative. There’s really no such thing as safe in this crazy game we play. I would say there are players that can hurt you more than others, but that’s honestly relative as well.

I had actually been having a few thoughts of my own on this line and I want to offer some insights on this issue.

I don’t want to bog you down with more sob stories about my teams, but long story short, some of you might remember that I’m the proud keeper league owner of both Ryan Braun and Ryan Howard. Yeah, well, my fifth keeper in that league also happened to be Victor Martinez.

Basically, I was asking myself whether I could find five players on my roster reasonably capable of putting up first-through-fifth-round value in light of this most recent blow. And, my answer was yes. Troy Tulowitzki, Nelson Cruz, Jered Weaver, Drew Stubbs, and a partial season from Howard or Braun could conceivably yield value congruent with the rounds in which I was to keep those players. It’s not the most likely scenario, but it is certainly possible.

Every year, stud players suffer injury, players who were expected to make a leap flop, players written off as mediocre surge, outlying BABIPs, strand rates, or RBI opportunities lead to good players having fantastic seasons and great players merely having good seasons. Stuff happens.

In one respect, I agree with Ben and Simon, but at the same time it isn’t nearly that simple, though I’m not implying either of them made such the claim. When you are assembling a fantasy team you are accruing a portfolio of assets. These assets have different levels of risk and ranges of projected performance—in addition to injury risk. Some players have a history of less variance in performance, while others have higher ceilings, lower floors and less stability.

When you’re making your first four picks—and the rest of them—you are creating a complex matrix of probabilities, and not everybody builds their team the same way. As is the case with individual players, some teams embrace wider variance in performance with a boom-or-bust strategy while others focus on building a team to be “in the hunt” and then hoping to make a few key moves from there.

When advocates of early-round conservatism preach their philosophy, they are simply saying they prefer to take the known B+ student instead of the prodigy who also has a history of not showing up to class. The idea that more than half of the top 15 players each season will emerge from picks 16 to 60 is only tangentially relevant to the counterargument of early-round conservatism.

The reason why expanding your appetite to take on variance works so well in the later rounds is that the opportunity cost of a botched pick gets progressively lower throughout the draft/auction. Therefore, the relative value of a home run pick is also greater.

Selecting a player at pick 40 who winds up having top-15 value does not guarantee that I will have gotten value from the top end of my draft (though getting one top-75 player past round 20 pretty much ensures I got value from the bottom of my draft). I could easily botch a second pick as significantly as I profited on the first.

The underlying premise of early-round conservatism is that your top picks are not when you should be looking for value because with the opportunity for value comes added risk. And since the risk quotient for each pick/buy increases by almost unilaterally by nature as the player pool gets thinner, adding risk at the top of the draft can lead to compiling a team that is excessively volatile.

Early-round conservatives don’t contest the idea that there is a degree of risk with every player and that, anecdotally, allegedly safe top-round picks bust every year. However, the issue is about risk management: How much of your bankroll do you want to bet on the first few hands of the night? Do you want to throw away the pair of queens to chase the flush? Owners must make these decisions on their own and in consideration of their own preferred strategies and the settings of their particular league.

Here are two final thoughts. First, if you have a strong feeling about a player that you think is based on sound reasoning, act on it. You shouldn’t be unwilling to take a risk in the early rounds if it is one you believe in, but there are times when risks seem unnecessary. Stephen Strasburg could have a better season than Clayton Kershaw next year, but what sort of premium would you have to pay above Strasburg’s “normal” price to take him ahead of Kershaw, and what would be gained over Kershaw if he hit his 95th percentile season and Kershaw his 88th? Simply, is the risk worth the reward?

Second, at certain times, it may make sense to embrace the added risk in the grand scheme of things. The best players in the league have the lowest chance of busting, not just the highest chances of excelling. I’m reluctant, still, to trade Tulo to fortify the back end of my keeper roster because if I exchange Tulo for two lesser players in the 35-50 range, I’m also taking on additional risk.

There’s some probability that Stubbs reaches his full potential and has breakout year. There’s also a very high probability Tulo is one of those top 15 players. If I exchange that probability for a marginally increased probability out of Stubbs and a second player with similar probability at being top 50 (and a lesser probability of being top 10), in a very important way, I’m actually adding more risk to my portfolio. I would need one of my players to overperform to get my one top-15 player, and there would still be considerable risk that my back-end keepers don’t earn their draft price.

To switch sports for the closing analogy, I don’t want to pass up an open foul-line jumper for the chance to take two contested three-pointers. But, in the right context, a three-pointer can be a pretty sound percentage play as well.

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Comments

  1. Brad Johnson said...

    I take it this is not one of those leagues where keeping fewer players than the maximum results in an early round pick.

    I hate when keepers are costless.

  2. Ben Pritchett said...

    So Derek, it sounds I’m a day trader, and you’re a mutual fund. We can both make money but in different ways.

    A conservatist plays not to fail. A liberal player plays to win. Both strategies are almost personality based, and both have merit. I’m getting giddy just beginning to have these strategy discussions.

    By the way, I loved the Freakonomics example. There’s another book called Outliers I hear is great but haven’t gotten the chance to read it yet.

    It’s funny how real world examples can always be related back to fantasy baseball and can actually influence the way you play.

  3. Brad Johnson said...

    Playing not to fail makes it very hard to win. You’re essentially counting on every other team to fail more than you.

    Poker always has really good analogies for fantasy baseball. It’s usually better to be aggressive than passive. In poker, I drift between the two strategies because sometimes I find myself in over my head. I’m the kind of poker player who’s played 10s or 100s of thousands of hands and yet I’m probably within $50 of even for my career. (Part of that is playing micro-blinds online). When over my head, I switch to passive mode until I learn the players.

    I’ve yet to find myself in over my head in fantasy baseball. I’ve employed an aggressive approach over the last 3 years and have seen great success including 3 first place finishes in 2011 (out of 4 leagues).

    Prior to 2009, I definitely employed a risk averse approach. My highest ranking was 3 of 14 in a fairly weak league. Since changing my strategy in ‘09 I have finished first in five out of ten leagues, second in two others, third, fifth (THT league last year), and 14th (dead last).

    That last place finish is a great example of aggression/risk seeking behavior backfiring. I drafted Josh Hamilton and Grady Sizemore with my top 2 picks in ‘09. Both posted lost seasons and I flailed around trying to save my team for most of the season. By flailing, I took a probably mid-pack roster back to last place. But why settle for 6th? It’s the same as 14th in the end.

  4. Brad Johnson said...

    Well, I’ll take 2nd too. That’s usually a 3.5x return on the buy in. And 3rd’s sometime a 1x return.

    So my philosophy is money or bust. Of course I easily could have hit 3rd in the THT league last year and over played my hand down the stretch.

  5. Derek Ambrosino said...

    Brad,

    I think poker analogies are apt too, but here would be mine. Building a fantasy team and playing out the season is like being a part of a larger tournament style. You can be aggressive from jump and try to be the chip leader as the pool thing, but I’d rather hang around and make sure I’m consistently in the mix when the field starts to slim down to those who are going to be “in the money.” Then, it’s time to (generally) gradually ramp up your aggressiveness (as most others tend to get tighter).

    It doesn’t make sense to me to consistently be aggressive in the opening rounds because the risk is at least as large as the opportunity, and over time you’re likely to give back what you win by playing that way. …In poker or fantasy baseball, some element of luck is involved. At some point you kind have to throw yourself at the mercy of the winds of fortune – if those winds only have to carry you the last mile, or gust every once in a while to save you from your demise, then there’s a decent chance of them working out in your favor. The more you rely on them though, the more you cede control of the situation.

  6. Derek Ambrosino said...

    Ben,

    I actually think Freakonomics is overrated as a book. I find the podcast entertaining though, and somewhat educational as well. Largely, it’s a mix of basic economics and pop sociology – that sounds like I’m dismissing it, but I love that blend.

    Outliers is quite good too – all of Gladwell’s work is, IMO – but it’s very much the same recipe. Pop sociology mixed with some fairly basic other academic discipline and great story telling.

    I remember I saw Gladwell speak about Outliers at the New Yorker festival prior to its release. My friend and I showed up early to get tickets – we missed the online presale the day before and the venue only withheld a very few to be sold on location, day-of. We didn’t really have much to do to kill the time between getting the tickets and going to the show, so we found the nearest bar. The bar was offering some weird boilermaker Guiness + shot of Jameson special or something. …We were the only dudes showing up to a Malcolm Gladwell lecture at like 1:30 in the afternoon completely freaking hammered. …He told the Aviance airlines story though (for those of you who read the book) and it was pretty freaking dope.

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