Surplus Farm System Values

Beyond the Box Score has calculated surplus values for the NL Central farm systems. You can read more about surplus farm system values at The Hardball Times. Not surprisingly, the Cubs fare poorly in this analysis – their farm system has a surplus value of $57.6 million. The Brewers, meanwhile, do the best, at $99.7 million, and the Cards are second at $98.7.

I don’t have any issues with the calculation, although what it really does is attempt to quantify the Baseball America prospect rankings in terms of cash, and it doesn’t come as much of a surprise that BA doesn’t think highly of the Cubs farm system. But I find the piece’s conclusion a little bit questionable:

Concluding, the Cubs had better win now while they are in “win now” mode. While they look to be in position to do so for the next few years, the Reds, Brewers and Cardinals are all pumping impressive talent up the pipeline, and the Pirates can’t help but to slowly but surely improve under Neal Huntington’s watch.

The Cubs are not going to win the division or win 97 games every year. But if they’re spending like they should, and like they can afford to, they really ought to be a contender every season. They failed to produce an all-star position player between Joe Girardi and Geovany Soto, but they don’t need to rely on production from the farm system as much as those other teams.

If I understand this calculation, this is the value of these prospects over the life of their contracts. From Victor Wang, who wrote the original Harball Times piece:

To estimate a prospect’s monetary savings to his team, I estimated what a prospect makes in his first six years before free agency versus what a team would need to spend to acquire the prospect’s production on the free-agent market. The cost for 1 WAB in the free-agent market for the 2007 offseason was estimated to be $4.88 million, using 10% annual inflation applied to financial data from the 2006 offseason taken from Dave Studeman’s Win Shares article from the Hardball Times Baseball Annual 2007. I converted the savings a team gets over a prospect’s first six years into a present-value figure, divided that present-value sum by $4.88 million to convert the savings into WAB, and then added the prospect’s DWAB to his WAB earned from savings to come up with his total value.

So the Cardinals and Brewers farm systems are worth $40 million more than the Cubs’. And that $40 million in value will be realized over six seasons. So to make that up, the Cubs will need to spend about $7 million (present value) more than those teams each season. They ought to be able to manage that. Should the Cubs work on building a better farm system? Of course. But they’re in a position to make up for the inadequacies of their farm system by spending on free agents.

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1 Comment

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One response to “Surplus Farm System Values

  1. You make an excellent point that has been overlooked by many who call themselves analysts as well as many fans: the Cubs aren’t going to win 97 every year and probably not 97 in 2009 either. Just because they don’t win that many doesn’t mean the team got worse though. For some reason people don’t understand that.

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