Atlanta's Gambling Strategy and Portfolio Risk Minimization

Thinking about the Atlanta draft strategy, I realized that I might have posted the following thoughts on a discussion board but not here, and a search on my blog didn't yield anything interesting other than the search function does not allow the use of the "AND" operand.

Another interesting aspect of the Brave's draft strategy, besides drafting local players, is that they also focus on High School players to a great extent. I haven't read that book on the Braves scouts and their farm system, so perhaps I'm repeating something from there, but I posted (probably on McCovey Chronicles) that successful teams who draft in the later part of the draft (i.e. the non protected draft picks) probably improve their chances at finding a star player vs. just a good or useful player by drafting High School players. I think it works in two ways.

Don't Search for the Quarter Under the Streetlamp

First, there is a self selection/separation that occurs when players go to college. The better ones do well and get drafted by the protected picks (for those who don't recall, I did a study on draft picks that found that after somewhere among the protected picks, the odds of finding even a useful player goes down greatly and good teams always get an unprotected pick) and thus it is much harder for successful teams drafting lower in the draft to find even a useful player by drafting college players, let alone a star player, the odds are greatly against that even for the early unprotected picks.

However, for High School players, while the odds of a big payoff for a team is much lower than a college player who has proven himself, he still has the potential for becoming a star baseball player, presuming the scouts can recognize the skills properly and the team can pay enough/talk them into signing with them instead of going to school.

It is like that old joke about a guy looking for his lost quarter and when the guy helping him ask him where he lost it, he points in the dark and says "over there but the lights better under the lamppost". Searching among the college players is like looking under the lamppost with every other team when you don't have a protected draft pick (and even 11-15 isn't that good either, it is best 1-5 and still better 6-10, but falls off greatly after that, if my memory serves). High School players can still be that diamond in the rough, if your scouts can recognize the raw talent and mental maturity well enough.

Portfolio Diversification of Risk

Unfortunately, I don't recall the correct term for this in investment circles but the second reason it works is because of the properties of how diversification reduces the overall risk for a given investment return, even if you have a portfolio of highly risky investments - that is what made Michael Milken the millionaire (billionaire?) that he is today, applying that principle to junk bonds. Thus, if you draft consistently over time, looking for high potential ballplayers but with the large risk that most will fail, over time you maximize the likelihood that you do find that high potential star ballplayer. I think that is how Atlanta finds their stars in their system.

As people learn in intro business stat classes, any particular investment might have a large risk component, a wide standard deviation that is, but when you diversify your investment portfolio with a large number of these type of risky investments, you reduce the overall risk of your portfolio, particularly the more random the risk is. Thus if you invest in one coin toss, you have a 50% chance of a complete loss, but if you invest in two coin tosses, you only have a 25% chance of a complete loss, 50% of breaking even, 25% chance of two wins, so your risk of losing everything goes down a lot.

However, in the case of drafting ballplayers, you are talking more like lottery level of odds against you winning than a 50-50 coin toss. I think focusing on college players gets you a distribution where you are maximizing the likelihood of finding a useful and perhaps good player, but you greatly reduce the odds of getting a star player (higher bell curve), whereas focusing on high school players gets you a much wider distribution (i.e. greater risk, flatter bell curve) but still leaves you with the greater possibility of finding a star player than you would just drafting college players. And given Atlanta's success at doing this, perhaps it improves their chances of also finding good and useful players, who are also necessary components for any successful team.

Old Man River

But this requires consistent execution of the strategy as well as proper and accurate scouting. And the Braves appear to be doing both, if not to perfection, to very good effect. They had a big crop of players come through for them last season and just used another in the offseason (Marte) to obtain a needed player. They just keep rolling along.

Atlanta is Machiavellian, But in a Good Way

Amazingly enough, this thought started out with an article about the Sharks signing Cheecho and Nabakov to long term contracts. Nabakov has an interesting no trade clause: it depends on his performance during the season for it to vest for the next season. So that got me thinking that this might be a good way to motivate players in baseball as well, to get that extra incentive to do well each year - that is one of my pet peeves about sports contracts, how do you motivate a player after you sign him to a guaranteed long term contract, there are so many examples just locally of players who regressed after signing the big contract, like Moonman Minton, or who would be career average but then do very well in his free agent year, then regress, like Robby Thompson, Dana Stubblefield, Billy Owens, Erick Dampier, or who just sign the contract and never fulfill the potential, like Joe Barry Carroll, Russell Cross, Chris Washburn, Joe Smith, James Owen, JJ Stokes. Not that a no-trade clause is the end all and be all, but it would be an additional twist.

That thought led me to think about how Atlanta likes to draft local kids, because they - like Barry Bonds - might be motivated to do well for their boyhood team. That's when it hit me: that is one of the tenets of Machiavelli, that a mercenary army is not ideal, you want a citizen army. And Atlanta's draft strategy essentially encapsulates that with their policy to draft local kids. That also makes sense in that the player will have some emotional investment, being a fan when younger, so they won't be as demanding for a bonus or salary, at least in the early years, because they will get emotional value playing for "their" team. And they will be internally motivated to do well for their boyhood team.

And I was looking through the 2005 Media Guide and the Giants have been drafting or obtaining local people - not sure what a significant proportion is, just that there has been a number of local players: Foppert, Tyler Walker, Kevin Frandsen, Nate Schierholtz, Mike Mooney, Erick Threets, Julian Benevidez, Nick Conte, Brian Stirm. Plus one or two Sacramentoans.

Todd Greene, Hitting Machine?

The Giants signed Todd Greene to a minor league contract after the 'Dres signed Piazza and Greene asked them to release him from his minor league deal with them. The Giants website touted Greene's HR hitting of the past few years, citing a homer every 17 AB. This would suggest to fans that he is a great power hitting catcher.

Whoa there Nelly! What they forgot to mention is that for the past few years, Greene's home team have had home parks which are so skewed that fantasy baseball advisors had to have a separate category for when teams are playing there: he had two seasons with Texas, then two with D'Rockies. So the better indicator of his HR hitting prowess is not his overall numbers but his numbers on the road.

From ESPN's 3-year data, here is his splits:

Home - .285/.319/.519/.838 with 13 HR in 260 AB or 20 AB per HR
Away - .226/.256/.414/.670 with 14 HR in 266 AB or 19 AB per HR

Wow, so his power does seem legit, he hit for the same power on the road as he did in his homer-homes!

So I wondered how that differs from his career. From Yahoo's career data, here is his splits:

Home - .246/.287/.456/.743 with 35 HR in 678 AB or 19 AB per HR
Away - .250/.274/.436/.710 with 34 HR in 736 AB or 22 AB per HR

Because he has played with so many teams, his home numbers are blended, so it is not a surprise that the numbers end up pretty close to each other. As his body matured (i.e. as he started packing on the weight that most mid to late 30-year-olds do), his power has picked up, though it appears his hitting has gotten worse, when comparing the Away figures. But the HR power is definitely legit, both recent and over his career.

Matheny hit .242/.295/.406/.701 overall in 2005 with 13 HR in 443 AB or 34 AB/HR. Here are his splits:

Home - .254/.293/.446/.739 with 8 HR in 213 AB or 27 AB/HR
Away - .230/.296/.370/.666 with 5 HR in 230 AB or 46 AB/HR

So Greene appears to be an upgrade in terms of HR power, but walks much less, so his OPS appears to be in the same ballpark as Matheny, when comparing Away figures. Based on the valuation of OBP being around 1.8 times the value of SLG, Matheny is the more valuable run producer, overall. In addition, Matheny would appear to have an advantage with his much better home stats, but Greene has hit well in limited action in AT&T/SBC/PBP (someone suggested calling it "The Bell" and it has a nice ring to it, so I might start using that):

SBC Park - .333/.375/.733/1.108 with 2 HR in 15 AB in 5 games there during his career.

I would have preferred to have picked up a lefty hitting catcher, especially since Greene will get a $700K contract if he makes the major league roster, if I had my druthers (Fick got $850K). It looks like Greene's main value is his ability to hit the homer off the bench plus play C to give Matheny a rest; don't know how good his defense is. Matheny clearly tired out by season's end, in particular the last two months, so he could help there:

OPS by month: .765 (April); .727; .760; .733; .699; .560 (Sept)

That could be because by then Yorvit was traded and Haad was the backup and Alou rode the horse to exhaustion:

Games played/AB by month: 19/69 (April); 22/70; 21/64; 21/77; 24/78; 26/84

As we can see, his games played and AB went up a lot in the last 2-3 months. Hopefully Greene will be able to take up that slack. Greene has been good for 100-200 AB per year, 35-60 games per year, so that should help Matheny out, including the times he gets PHed for by another batter on the bench, whether Bonds, Alou, Finley, or Sweeney, among the main choices.

Side Notes

The D-gers signed Takashi Saito, a 35-year-old reliever, from Japan's Central League. I wonder if this means that it was Sheriff Ned who engineered the trade to bring Shinjo to the Giants. I still like Shinjo, I can still remember that throw he made, barehanded, from CF after the RF flubbed it, it is the Willie Mays World Series throw for this recent generation of Giants fans.

He was just totally misused and abused by Dusty Baker: he should not have been leading off and neither should he have been batting 8th. He was a decent 6/7 hitter, which was the way he was used in Japan and how he viewed himself and how his stats looked like, even 5th would have been better than 1st or 8th. Throughout his brief MLB career, he hit very decently in the 5/6/7 spot, but just horrible anywhere else in the lineup that he got a lot of ABs in. He hit .277/.322/.423/.745 with 36 AB/HR. That is not bad given his superlative defense in CF and compared to what we got from Grissom, who costed us probably about twice what we could have signed Shinjo to (he got a $1M from the Mets after leaving us): .281/.316/.441/.756 with 29 AB/HR.

With that extra money, we could have done a number of things: up the contract offer to Maddux; not have to sign Tucker early to avoid paying a bonus to 1st round draft pick; signed a better relief/starting pitcher during the offseason so that we didn't need to trade prospects away to get Wayne Franklin et al; kept Tim Worrell instead of letting him go, which probably would have allowed us to keep Jerome Williams instead of trading him away to get relief help; lots of stuff...

Follow-up on Venezuelan Connection: I realized that my 2005 Media Guide would have been helpful as well. Didn't miss any other prospects from there, but missed some major leaguers, Yorvit Torrealba also came from there, and, of course Edgardo Alfonzo is from there as well.

Interesting thing was that I found out that there is also a number of Canadians, eh!, in the farm system. Most Giants fans know about Chris Begg, who was on the Canadian Olympic team, but there were a few other players who were born in Canada that I found in that book (not sure if all still on team for 2006): Aaron Hornostaj, Ryan McGovern, Brooks McNiven, Brent Swanson.

The Felipe Alou Added Value

Note: My posts will be shorter and spur of the moment than usual for a while, though I have some longer pieces that I will eventually finish up. And I will use this as my soapbox/therapy session every so often.

I heard something interesting on KNBR today. Dave Fleming was guest hosting on the Razor and Mr. T show and he mentioned during the Omar Vizquel interview that Felipe Alou had told him, as good and well known as the Dominican Republic is for developing top players, that in 15 years Venezuela will be the leader in that. Omar then responded that it's more like 5 years.

I don't know all the home countries of our prospects, but I do know that Pablo Sandoval, one of our top position prospects, is from Venezuela. Not as high a prospect, but also calling Venezuela their home country (researched from affiliates in 2005 via The Baseball Cube, not sure if all were retained for 2006) are Eliezer Alfonzo, Julio Cordido, Oscar Montero, Jesus Reina, Alex Requena, Guillermo Rodriguez, and Carlos Valderrama. I would say that Alfonzo and Reina probably have the most chance of making the majors of the bunch, though Reina's stats looks like Threets, so he has a lot to learn still: high K but very high BB as well.

Don't know where Curacao fits in but two prospects who got on the top prospect radar in 2005 were Shairon Martis and Sharlon Shoop. While Martis did great last year, Shoop right now have the makings of another Johnny LeMaster: all field, no hit. But he's still young, just 18 last season, so hopefully he will fill out over the years and get some pop to his bat.

Anyway, that was one thing the Giants got Felipe for, to help with the farm system after he retires as manager, so hopefully he is right and we get some more good ones like Sandoval.