Ohlendorf knows Draft value like a science
Righty has system of determining player's return on investment
As the First-Year Player Draft signing deadline approaches and teams try to decide how much they are willing to dole out in bonuses to unsigned Draft picks, there's one Major League player who likely understands the financial risks involved.
It's not because Ross Ohlendorf got some outlandish bonus when he was drafted by the D-backs in 2004 or that he held out as a fourth-round pick. A Princeton graduate with a major in operations research and financial engineering, Ohlendorf looked at the Draft from 1989-93 to determine the value of the top 100 picks based on a return on the investment made by the team that drafted each player.
That return wasn't dependent solely on what was spent on signing bonus; salary also played a part. The Pirates right-hander tracked the progress of each player for a 12-year period, using the sabermetric Win Shares to determine each player's value. Return on the investment was largely figured out by looking at that player's contribution before reaching free agency compared with his salary over that period. Ohlendorf compared salaries for both the players in the study and free agents for those years. Even with some in the study never making the big leagues, Ohlendorf found that the players in his study brought twice the return of investment based on his criteria.
Fast-forward to today and one has to wonder what conclusions Ohlendorf would make. Of course, the soon-to-be 27-year-old is more concerned these days with continuing to establish himself as a big league starter. Part of him wishes he could sit and tinker with his numbers, which included salary figures through the 2005 season, but most of him would rather work on improving his 9-8, 4.43 ERA season to date.
"You could certainly get more out of doing that project for three more years," Ohlendorf said. "It took a long time to put it together. It wouldn't take as much time, but it's been so long since I worked at it. I thought at one point I'd add on to it, but I haven't thought about it recently."
One thing he does recognize is that while salaries had already escalated by the tail end of his study, the bonus boom was just getting started. In today's market, using Ohlendorf's methodology to determine what a player would have to produce on the field to yield a similar return on the investment would be interesting. It begs the question: Can his thesis be flipped to come up with what kind of stat, even in Win Shares, a player from this year's Draft will have to have to make the bonus figures being discussed truly worthwhile?
"You could guess, but you couldn't tell for sure because you don't know how future salary markets would be," Ohlendorf explained. "If free-agent salaries go up, the future will be more valuable. If it goes down, it'll be less valuable because you can sign free agents for less. If you assume it'll stay about the same, you can try to estimate it.
"The best way to estimate would be over the first three years, he'd have to perform about the same as a free-agent contract for three years at whatever his signing bonus is. That'd be the starting point, the easy way to look at it, but it wouldn't be real precise."
Perhaps the exercise wouldn't be scientific or worthy of an addendum to Ohlendorf's thesis, but it's hard to resist picking the right-hander's brain about the player and potential bonus most have talked about this Draft: No. 1 overall pick Stephen Strasburg.
Obviously, the Nationals need to sign their top pick first, but with the large numbers being tossed around -- many feel a record for a draftee signing bonus will be broken -- just what would Strasburg have to do to give Washington a good return on that investment? As a pitcher, Ohlendorf was quick to point out the biggest issue when determining what proper value is for an arm coming out of the Draft.
"There's a big risk, the same risk for signing a free-agent pitcher in that a lot can happen in terms of the player's health in that time," Ohlendorf said. "You might not get anything out of it. For that reason, if you're going to pay that much, you want a decent chance they'll be worth much more than that."
Getting twice the return on an investment would certainly be enticing to those working with a free-market model, especially in today's economy. But Ohlendorf is quick to point out that the Draft, as it it is currently structured, isn't exactly the free market free agency is.
"Strasburg doesn't have much bargaining power because of the Draft system," he said. "A free agent can bargain with other teams, take the best deal out there, have teams compete for him. The Nationals don't have to compete with other teams right now. [His only option is] he can go back into the Draft. Next year, if he does that, it's hard to hold out."
Jonathan Mayo is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.