What in the world did Billy Beane just do?

Sure, on the surface, the signing of Yoenis Cespedes by the Oakland A’s seems absurd. Why would the rebuilding A’s want an expensive import like Cespedes? How did the destitute A’s even land him? But if you dig a bit deeper, it actually makes quite a bit of sense. Let’s back up a few months.

Everything lines up. All three of those trades accomplished the same goal—trading away valuable established players for a larger quantity of younger and cheaper guys. Billy Beane took a look at his roster and realized that the franchise as-is didn’t have a playoff contender in it. Tear down now, build for later.

So how in the world does a free agent splash like Yoenis Cespedes fit that plan?

Well, it doesn’t, really. All indications by Billy Beane and owner Lew Wolff are that if a new ballpark is going to come at all, it will likely be sometime around 2015—or even the year after. Clearly, management would love to draw in new fans by having a good, exciting team when the new ballpark opens, so it makes sense that Beane is timing this rebuild to line up in that time frame, four or five years from now.

But, well… Cespedes was handed a four-year contract. It doesn’t take a mathematician to see that, unless Cespedes is extended, he won’t be able to play for the A’s in the new ballpark for very long, if at all. So what was the point?

Let me put this line of questioning on hold for a second. I’ll come back to it. Forget about the rebuilding cycle or a new ballpark or anything. In a vacuum, is $36 million over four years for Yoenis Cespedes a good financial investment?

Jim Callis of Baseball America estimated that Cespedes would “wind up just outside of the top 10″ on his list of top overall prospects. Kevin Goldstein of Baseball Prospectus slotted Cespedes in at 20. John Sickels of Minor League Ball estimated that he’d be the ninth-best hitting prospect (not overall, but just among hitters). A few years back, Victor Wang did a lot of great work into prospect valuation, and he found that hitters ranked in the 11-25 overall bracket are worth an average of 1.32 Wins Above Bench (WAB) per year. After adjusting the baseline to replacement level and after assuming an average free agent rate of $5 million per win, I get an expected value of $36.3 million over the life of the contract. Cespedes’ actual contract pays out $36 million over the four years. The expected value is a rough estimate, but it seems to be right in line with the ink on the page.

But is the market rate enough? The A’s are a cash-strapped franchise, and to succeed, they need to get more wins than their payroll would purchase at the average market price. So, again, what was the point?

Here’s the kicker. There’s a pretty big difference between Cespedes and most other free agents.

With most free agents, a team can fairly accurately guess what level of production it’ll get. Sure, every once in a while you find a gem like Lance Berkman or a stinker like Adam Dunn, but for the most part, free agents are generally known quantities. Cespedes isn’t that. The safe bet is that he could average two WAR per year. But he could easily bust and be worth nothing at all, or he could be a perennial All-Star.

No one really knows how he’ll hit in professional baseball here in the U.S. Compared to most free agents in baseball, the variance on the set of his expected outcomes is enormous.

Which brings me back to the point I started with. Thanks to the rebuilding, the A’s had a bit of cash to throw around. Last year, owner Wolff admitted that the team had a hilariously tiny $370,000 profit (not even one minimum salary player!). This was with a payroll that sat at $67 million to open the year. Before the Cespedes signing, the A’s had pared their 2012 payroll down by $10 to $20 million. Beane made a calculated risk in a non-contending year—if Cespedes busts, the A’s lose only money. That money would have either sat around as zeroes in a bank account or been used to pay cheap veterans in a non-contending year. If Cespedes hits well, the A’s will have a valuable player on their hands. It’s all of the upside of a wild card, with very little of the risk.

Sure, with this contract, Cespedes may not be around when the A’s hit their new ballpark stride. But if Cespedes turns into the player the A’s hope he can be, they’ll have first dibs on extending him with the money from the new ballpark, should that come to pass. If not, hey, at least Billy Beane’s made the A’s more interesting—for the time being.

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  1. Adrian said...

    Speaking strictly as an A’s fan, I hope Cespedes turns out to be a very good (I dare not say great) hitter that I can enjoy watching for the next four years.  It’s been far too long since the A’s had a legitimate, middle-of-the-order hitter.  Willingham was ok, and Holliday got hot right before he was traded that half a year, but really, not since 2006 Frank Thomas have the A’s had a guy you just wanted to watch hit.  Please, oh please, Cespedes, be a hitter baby…

  2. tscutty said...

    I think Beane’s thinking if he is a success, he will be turned around before Year 3 for another couple of prospects who will be ready by 2015. And maybe they also have someone to put fannies in the seats this year.

  3. Steve Treder said...

    “How is the latino population in Oakland?”

    Very large (although larger in the South Bay than in Oakland per se), but almost none of it is Cuban.

  4. Jeff said...

    Think you hit the nail on the head here:
    “If not, hey, at least Billy Beane’s made the A’s more interesting—for the time being. “

    This winter was a huge bummer for us A’s fans. Our 3 All-Stars and most popular players all traded away (not that we arent used to it by now but still), and still no sign of a new ballpark. But with this signing, Beane is at least doing SOMETHING to make the team competitive.

  5. Hecubot said...

    Beane never said he was going to tank for the next three years – people just presumed that was part of the rebuild.

    I think the A’s will come close to their win total of last year with the new players, and they’ll have more offensive upside, and a deeper farm. That’s better than treading water with all-star pitchers who were never going to have a decent offense behind them.

    I think there’s also some pressure to meet some minimum payroll threshold, which is why the A’s spent a chunk of money on Ben Sheets a couple years ago, and a couple expensive free agent bullpen arms in Fuentes and Balfour last year.

    Finally, I think Beane also has people from the marketing department begging him for something they can sell.

    And it looks like they’re paying Cespedes about exactly what he’s worth, with a chance that he could bust out.

    The A’s have had a very difficult time attracting premium free agents to their ballpark – Beltre took less money and went to the Rangers. So they have to do something to augment their offense.

    I, for one, am looking forward to seeing Cespedes and Choice hit back to back next year.

  6. Dan Lependorf said...


    I don’t think anyone actually comes out and says “hey, we’re tanking for the next few years”. It’s more of an accepted consequence of trades and rebuilds. But I do agree with you that I think between Parker, Peacock, and Milone, the A’s could surprise people and not be as crappy as others think. Those three young MLB-ready pitchers aren’t full replacements for the guys the A’s lost, but they’re not too far off.

    And as far as Choice, I’d be shocked if he got any time in the Majors in 2012 aside from a few PAs in September. He’s yet to play in AA, and the step from A+ to AA is quite a jump, especially for someone with strikeout issues like Choice.

  7. Brad Johnson said...

    My first reaction was that the A’s were hoping they could trade him for a major prospect in a year. If he hits his upside (obviously a big IF), they will have a Jose Bautista quality contract on a franchise changing talent.

    If it doesn’t work out, his athleticism is expected to give him a 1 WAR or higher floor. Obviously, they can’t trade that and it certainly isn’t a good return on their money, but it’s not a total loss.

  8. Jeff said...

    I know the Forbes article you are referring to and have heard this same issue brought up before. The $370K that Wolffe is referring to is the actual profit that the team made in 2011. That is before the revenue sharing money came through. And the 2010 Forbes article you are referring to takes into account the revenue sharing dollars. So that is why there is a HUGE difference in numbers.

  9. Ken said...

    Of course, it’s still a mystery as to why Beane decided to make those trades early in the offseason, when Cahill/Gonzalez/Bailey each would have had much more value around the trading deadline.

  10. Brad Johnson said...

    I’m not sure it’s a mystery at all. Those are all guys who could break or struggle suddenly. He got pretty decent talent for those guys. Maybe he could have gotten a couple higher ceiling guys at the deadline, or maybe his players would have been less valuable.

  11. obsessivegiantscompulsive said...

    $370K profit?  Boy, the A’s bookkeeping has to be one of the most twisted in the majors, and I’ve read that they are plenty twisted in general, running huge profits that dissipate into nothing at the bottom line because of fancy depreciation rules and such. 

    According to Forbes, the A’s had Operating Income (EBITDA) of $23.2M in 2010.  That was among the highest in the majors in 2010, even though they were a small revenue team.  They were 26th in revenues, but 11th in OI (EBITDA).

    They have been running OI in the $15-25M range (roughly $20M) from 2005-2010, according to Forbes, so I would not be surprised if their 2011 numbers were also in that same range.

  12. gdc said...

    Even if he is a top 20 prospect that should not automatically be a starting job.  Possibly they find it better to break him in AAA with Crisp in CF and trade Crisp if Cespedes is ready and can play CF.  Commenters on other threads seem to forget the A’s were in on Chapman also, it may be a bit of a Pittsburgh situation where premium FA’s are not interested and they have to get the marginals like Matsui or foreign players like Cespedes (or the Japanese pitcher they posted but didnt’ sign last year).

  13. obsessivegiantscompulsive said...

    You make it seem so easy, but he’s risking $36M, not pocket payroll change, say, the $7M salary this season or average of $9M per season.  Cespedes has to at least be roughly average or at worse just under, if he is to retain any value or at worse as a trading piece because no other team would take on his salary AND give the A’s a good prospect in a trade otherwise.

  14. Dan Lependorf said...


    Here’s the problem with the Forbes estimates—they’re exactly that, estimates. Forbes doesn’t have access to the actual books, so take it all with a grain of salt. And for what it’s worth, I’ve never heard of a baseball team talk about the Forbes estimates in a good light. They could be blowing smoke, of course, but it’s worth keeping a healthy skepticism about it in mind.

  15. Rob Rutherford said...

    I hate it when people claim that Oakland only gets players just to trade them away for more. The reality is that this is a business, and every player can be traded, no matter the team. Also, with a poor farm system entering the end of last season, they needed to make moves. If Cole, Peacock, Parker and Milone are better than both overrated starters they traded, then they obviously did well. Add in the hitting they got and those were great deals

  16. obsessivegiantscompulsive said...

    Well, that’s pretty wacky accounting right there, actual profit always includes all revenues streams, and revenue sharing money is part of that.  Unless he’s saying that he’s giving up his revenue sharing, then quoting profits before revenue sharing does not make any sense other than that he wants to give the appearance of poverty when he’s actually raking in the dough.

    I understand estimates.  Heck, all the WAR numbers being thrown around here and other places are all estimates too until our metrics on defense is such that competing systems are close in agreement on the defensive worth of a player.  That has bothered me a bit because of the definitive statements being made using WAR, then that is made even worse by calculating $ value produced by that WAR production. 

    And until WAR is able to accurately credit pitchers like Matt Cain and Barry Zito who are able to keep their BABIP below league average significantly, WAR is missing significant production for some players who would look great instead of merely good or so-so.

    Estimates give us something to talk about.  I realize that these estimates are not totally accurate.  However, financial statements have made it into public before, giving him examples to model off of, and the author has been doing this for over a dozen years now, meaning that he probably has had people leak to him actual financial statements that helps guide him, as well as other local and national media contract information.

    Given the roughly breakeven profit admission by Wolfe, it appears accurate to say that the A’s have been pulling in EBITDA of over $20M at least in 2011, because I know their revenue sharing amount is over $20M (don’t recall exact number) and that is money that goes straight to the bottom line since there is no other bookkeeping related to that revenue stream.

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