One quarter of the way through the 2015 regular season, the Chicago Cubs are projected to reach a location on the win curve that hasn't been achieved since the 2008 juggernaut led the National League with 97 wins. According to both Baseball Prospectus and Fangraphs, the Cubs are projected to win 87 games. Based on the crude measure of their current record, the team is on pace to win 93 games.
Any way you slice it, the Cubs are out of the cellar and continuing their ascent to the top of the standings.
That has one excellent effect: the Cubs get to win lots of games and (hopefully) take part in the postseason again! That's the goal of this whole operation, so let's repeat that to provide for another second or two of celebratory thought: the Cubs and their eminently young roster are on track for postseason contention both this year and into the foreseeable future. My goodness, does that sound wonderful.
There is a drawback, however: the Cubs are about to bid adieu to having their pick of the top handful of amateurs available in the Rule 4 Draft (hereinafter the "Draft"). Unless Major League Baseball lifts the restriction on trading non-Competitive Balance picks, the Cubs won't pick in the top 10 again for (again, hopefully) many years to come.
This reality has two implications. First, the Cubs will need to find elite amateur talent elsewhere, be it later in the Draft, in the international market, via trade, by making aggressive selections in the minor league phase of the Rule 5 draft, or, most likely, some combination of the above.
Second, the Cubs stand to lose a much more valuable Draft pick for signing a marquee free agent than they would have in previous years. Because top 10 picks are protected, had the Cubs signed, for example, Michael Cuddyer this past winter, they would have surrendered the fifth pick in the second round (47th overall) instead of the ninth overall pick. However, when the Mets signed Cuddyer, they surrendered the 15th overall pick.
As a refresher, when a team offers an impending free agent a Qualifying Offer ("QO"), the player can either accept the QO and stay with his previous employer or he can decline the QO, becoming a free agent. If the player becomes a free agent, the signing team must surrender its top available Draft pick while the team who lost the player acquires a compensatory pick after the end of the first round of the Draft.
But that's not the only way to lose a first-round pick. If a team exceeds its Draft Signing Bonus Pool ("SBP") by between 5% and 10%, it surrenders its first-round pick in the following Draft and pays a 75% tax on the overage. If overspending is in the amount of 10%-15%, the team surrenders its subsequent first- and second-round choices and pays a 100% tax on the overage. And if the spending exceeds the SBP by over 15%, the club surrenders its first-round pick in the next two Rule 4 Drafts in addition to the 100% tax on the overage. That final penalty is designed to be especially harsh, requiring teams to project their own success or lack thereof well into the future.
However, as with many well-intentioned systems, there is a perverse incentive in play. In much the same way that the international bonus pool penalties operate for Latino and Asian amateurs, the Draft SBP penalties incentivize teams who exceed their SBP by 15.00001% to instead exceed their SBP by significantly larger margins, much like the Yankees did internationally last summer when they exceeded their international SBP by at least 610%. Not to be outdone, the Red Sox exceeded their own international SBP by at least 1,785% thanks to the Yoan Moncada blockbuster signing that followed a series of smaller, nonetheless SBP-busting signings.
It is well documented that the Cubs employed the same strategy internationally in July 2012 which netted them Eloy Jimenez, Gleyber Torres, Jeferson Mejia, Erling Moreno, Jen-Ho Tseng, and a handful of other less highly touted amateurs. Torres is preparing to ascend top prospect lists this winter and Mejia was the primary return for the Diamondbacks in the deal that sent Miguel Montero to the Cubs. This strategy has been employed -- and worked -- a number of times around baseball in the international amateur marketplace.
But no team has attempted such a strategy with the Draft. Perhaps it's time.
What Scenario Would Drive the Cubs to Take Such a Risky Step?
The ideal scenario for employing this strategy with the Draft would involve a team that wants to acquire premium talent by spending extra cash to buy a premium prep player (or a number of players) out of a college commitment and a team that figures to lose comparatively little in surrendering future top picks.
The Cubs are ascending with an extremely young roster, a core group that should be expected to contend for years. Accordingly, the club figures to draft in the late-teens or the 20s for the foreseeable future.
The 2016 Cubs starting rotation figures to have four rock solid members already under control in Jon Lester, Jake Arrieta, Jason Hammel, and Kyle Hendricks. However, the fifth rotation job is largely up in the air as Travis Wood appears destined to be non-tendered or traded instead of collecting a $7 million-plus salary in his final arbitration season, Tsuyoshi Wada will be a free agent in his mid-30s with an alarming (and recent) injury history, and prospects including Pierce Johnson, Dallas Beeler, Eric Jokisch, and C.J. Edwards (he's not Carl to me quite yet) appear headed for the bullpen. Thankfully for the Cubs, this winter's free agent class is headlined by aces galore with David Price, Jordan Zimmermann, Johnny Cueto, the struggling Jeff Samardzija, and possibly even Zack Greinke slated to hit the market. Cueto and Samardzija could be traded during the season, thus rendering them ineligible for a QO, but crown jewels Price and Zimmermann both figure to be QO recipients thanks to their key roles on contending teams.
As a result, signing either would cost the Cubs their top available pick in the 2016 Draft... which brings us back around to the 2015 Draft's SBP.
Let's assume, for argument's sake, that the Cubs finish both 2015 and 2016 with the 10th best record in the Majors, leaving them with the 21st pick in the 2016 and 2017 Drafts as a result. If the club signs no free agents who had rejected a QO and never exceeds their Draft SBP by more than 5%, the Cubs keep their full allotment of picks in both drafts.
If, on the other hand, the Cubs sign a QO-rejecting free agent this winter such as Price or Zimmermann while never incurring a pick-related penalty as a result of SBP overspending, the Cubs lose the 21st overall pick in the 2016 Draft, keeping the 21st pick in the 2017 Draft assuming they do not sign another QO-rejecting free agent next winter.
If, in the most extreme scenario, the Cubs explode past their 2015 Draft SBP and sign a QO-rejecting free agent this winter, they would surrender the 21st pick in the 2016 Draft (SBP penalty), their second-round choice in the 2016 Draft (QO penalty), and the 21st pick in the 2017 Draft (SBP penalty). By incurring the penalties together, the additional penalty of performing the second penalty-inducing act is comparatively light. If the Cubs intend to exceed their SBP, the additional penalty for signing Price or Zimmermann is tiny, just the 60th (or so) pick in one draft. If the Cubs intend to sign Price or Zimmermann, the additional penalty for exceeding their SBP is relatively meager, just the 60th (or so) pick in the 2016 Draft and the 21st pick in the 2017 Draft. For the rest of this article, let's assume that the Cubs both exceed their SBP by more than 15% and sign a QO-rejecting free agent this winter.
Does the Additional Talent Infusion Justify the Significant Cost?
Here's the thing: massively overspending in the Draft only makes sense if the player value justifies it. So I thought that we should take a look back at a recent draft class, the 2007 group, to see how overslot draftees performed. In some ways, this comparison is of the apples and oranges variety given that slots were still just recommendations in 2007 unlike the current system. On the other hand, 2007 is more instructive than looking to, say, 2012, because the proposed theory involves the Cubs taking the best value available with every pick, not making selections hampered by the restrictive SBP rules in place.
With that in mind, here is a look at overslot draftees from the first six rounds of the 2007 Draft with the player's approximate slot recommendation included. I say approximate because, despite my efforts, I could not find the actual 2007 slot recommendations for all of these players, so I use surrounding bonuses to determine the approximate slot value for some:
|Round||Overall||Name||Pos.||Bonus||Slot||% over Slot|
Now, the group listed above is by no means a comprehensive study of what you can buy when you go over slot in the MLB Draft nor is it directly applicable to the current Draft rules and restrictions.
Nevertheless, it gives us a sample to envision what overspending might deliver. As with any group of ballplayers, there are some whiffs on the list. I had a difficult time finding any information about Weems and Hildenbrandt other than their terrible statistics, Iorg was a glove-first middle infielder whose bat never developed, and Worthington was a two-sport athlete who ended up on East Carolina's football squad after baseball didn't work out. The other flops on the list -- Brackman, Suttle, Crosby, and McGeary -- are a sobering reminder that the butcher sometimes claims careers as all three pitchers never fully recovered from Tommy John surgery while Suttle missed years of development with debilitating shoulder injuries that sapped his bat.
The rest of that list, however, is truly impressive. Wieters and Porcello are both above-average regulars, Borbon has spent a few years in the Majors, Ramirez looks like an excellent bullpen piece, Romine should spend a few years in the Majors as a backup catcher, McFarland has been a very strong LOOGY, Arrieta has been an ace for a year now, Middlebrooks has been a starter for a couple of years, and Rizzo is a star. This group has an absurdly high rate of making it to the Majors and a much-higher-than-average rate of success in The Show when compared to other players drafted in similar spots. Given the additional financial commitment, that shouldn't come as a surprise. Yet it does suggest that overspending doesn't just result in spending more cash: it also results in acquiring more useful talent.
Ah, But What About the Cash?
The cash component of overspending does require further examination. If the Cubs spend, for example, $15 million on signing bonuses that count against their SBP for their 2015 Draft class, they would exceed their SBP by $7,763,900. This would result in a tax of $7,763,900. For previous Drafts, I have assumed that the Cubs signed approximately half of their draftees in rounds 11-40 for the $100,000 maximum amount that does not count against their SBP. Accordingly, for illustrative purposes, an additional $1,500,000 would be spent. Put together, the total 2015 Draft class expenditure would be approximately $24,263,900 with $16,500,000 of it being spent on actual bonuses and the remainder paid in tax.
While the loss of high Draft picks chops out a path to cheap talent, it also saves a few million dollars for future budgets. The 21st pick in the 2015 Draft comes with a slot value of $2,184,200. If we expect 3% growth each year and that the Cubs will exceed their SBPs by 5% in 2016 and 2017, the team would save approximately $2,362,212 on their 2016 first-round pick and $1,075,876 on their 2016 second-round pick for a total of $3,438,088 in 2016. The savings from the 2017 first-round pick would be $2,433,079 for a total savings of $5,871,167 over the two years.
The 21st largest SBP this year is $6,591,300. If we again assume 3% growth in each of the next two years, the Cubs would expect to have SBPs of $6,789,039 and $6,992,710 respectively before removing their top two picks in 2016 and their top pick in 2017. After their removal therefrom, the Cubs would be left with a total SBP of $3,514,669 in 2016 and $4,675,492 in 2017. Assuming a 5% overage in spending, the Cubs would spend $8,190,161 in their SBPs over those two years. If we assume again that the Cubs sign half of their remaining draftees to the maximum bonus that doesn't count against the SBP ($100,000 each), they'd spend an additional $3 million total over 2016 and 2017 for total Draft spending of $11,190,161 combined.
Taken together, the hypothetical significant overspending in 2015 and the reduced spending in 2016 and 2017 would result in approximately $35,454,061 on total draft spending over those three years, an average of $11,818,020 per year. While such a figure may seem quite high, the Cubs are coming from a place where this has been largely the norm. In the four drafts since the Cubs made the disastrous decision to go way underslot with Hayden Simpson in 2010, the Cubs have spent an average of $11,747,156 per Draft using the same assumptions as above.
So How Exactly Might the Cubs Utilize Their Extra Amateur Bonus Cash?
Obviously there are a multitude of different avenues to spending $15 million on draftees despite having just one choice in each round. The Cubs could go for a gaggle of high-ceiling players in early rounds, spending just under slot at $2.9 million on the ninth overall pick ($3,351,000 slot) before dropping $1.5 million each on their next eight picks and exactly $100,000 or less on their remaining signees. Let's call this the "Kyle Schwarber and 8x Dylan Cease" plan.
Or the Cubs could go for depth, grabbing some underslot talent during the first few rounds, spending approximately $4 million on their first five picks ($2.2539 million under slot), and then drafting two dozen $500,000 talents the rest of the way expecting to sign about 20 of them. Let's call this the "Floors Are Better Than Ceilings" plan.
Or the club could split the difference, treating the first ten rounds as they normally would by spending exactly to their SBP, then drafting 30 premium high schoolers and telling them that the first seven to accept a $1 million bonus get to keep it while the others can go fulfill their college commitments. We'll call this "The Old Switcheroo" plan as the draft strategy appears normal before going out to left field.
Regardless of the particular drafting strategy, some team is going to go well over their SBP in a Draft in the coming years. I'd love to see the Cubs push the envelope here, especially if the front office has a big free agent fish in their sights this coming winter.
What do you think? Would you like to see the front office take the plunge? And if so, which plan would you endorse?