The Third Banana

Good Enough

Jeff Zelevansky/MLB.com

Abolish the MLB Draft!

It doesn't work. It's quite possibly immoral. It's time to replace it.

Let’s conduct a thought experiment. Let’s say you’re a computer whiz. I don’t mean you were able to recover your Word document that one time when your Lenovo crashed — I mean you’re an absolute prodigy in front of a laptop. You taught yourself to code your own website when you were 9 years old. By the time you were 11, you were running a profitable side business consulting on software issues for your parents’ friends. You graduated from high school with straight A’s because you hacked into the system after catching WarGames on late-night TV. 
By the time you finish college, you’ve established a reputation as one of the brightest young minds in the computing industry. Google is interested in hiring you. Bigwigs at Apple have met you on campus for several friendly chats. Facebook follows you constantly — well, they follow everyone constantly, but in your case they’re tracking you with actual human beings. Yahoo sees you as a key piece in their rebuilding strategy. Twitter and LinkedIn have called.

And then, a week after graduation, you get a phone call. Microsoft is on the line — you’re their first-round pick! They’ve made you an offer for a fraction of what your value is worth on the open market. If you don’t agree to their contract, then you can’t work for any other tech company for another year — when some other company will draft you and you’ll go through the same process all over again.

You think Microsoft is terrible at developing programmers and that you won’t learn anything while working there? Tough. You were hoping to settle in Silicon Valley and have no interest in moving to Redmond? Sorry, bub. It was your childhood dream to work for Google?1 Maybe you’ll get to revisit that dream in 10 years, when you’re finally free to work for whoever you want.

Does this sound ridiculous? Congratulations! You’ve picked up on the inherent absurdity of the sports draft.

We accept limitations on the rights of athletes to choose their employers in a way we never would accept on anyone else. We do so because we recognize that sports franchises do not compete with each other the way that companies in other industries do. When eToys.com went bankrupt, it didn’t hurt business at Amazon. But if the Kansas City Royals ceased operations, the New York Yankees would be hurt by the loss of a “competitor” that they have made millions of dollars beating the crap out of.

Like other sports leagues, Major League Baseball is a single entity composed of dozens of competing organizations that need each other to succeed. The health of the league is dependent on the health of each individual organization. Hence, we accept mechanisms that were put in place generations ago to ensure that health by giving the worst franchises a leg up on their opponents in procuring new talent.

Well, that’s the story they want you to believe, anyway.

The reality is that MLB didn’t institute the draft nearly 50 years ago as a way to promote competitive balance. That’s a dandy byproduct of the draft, and one they’ve done their damndest to promote over the years. But the real reason is somewhat different. When the draft was created, Major League Baseball wasn’t concerned so much with extending a hand to the downtrodden teams, but with cutting costs for all of them.

Baseball teams had been trying to lower expenses on player acquisitions for decades before the draft was instituted. These were the days of the reserve clause, a prettied-up term for indentured servitude, when a team owned the rights to a ballplayer from the moment he signed until the moment he retired, and sometimes even after that. The decision to sign his first professional contract represented the only time a player had any real leverage.

Well, that wouldn’t do, so teams tried their best to restrict what little leverage players had. In 1947 MLB instituted the Bonus Rule, which mandated that any amateur player who received a signing bonus of more than $4,000 would be required to stay on his team’s major league roster for two seasons before he could be sent to the minors.

It remains one of the most spiteful, self-destructive rules ever passed by a professional sports league. The rule didn’t even work to limit bonuses — teams still gave out big bonuses to players of particular promise. All it meant was that every player of particular promise was going to sit on a major league bench, his talent withering away for two years before he could be farmed out to start developing that talent, which hopefully had not atrophied by then.

Occasionally a player was so talented that, even in his teenage years, he could hold his own in the majors. Sandy Koufax was put to work by the Brooklyn Dodgers right away, and even at age 19 he didn’t embarrass himself. On the other hand, it would take him seven years to master his control and become Sandy Koufax, and it’s not unreasonable to presume that some time in the minor leagues would have more quickly taught him to throw strikes.

More common was the early experience of Harmon Killebrew, who was 17 when he signed with the Washington Senators in 1954. He got 93 at-bats over the next two years. Killer would bounce between the minors and majors for three more years before finally earning a full-time job in 1959, upon which he promptly led the AL in home runs. Killebrew ended up being the exception, because he made it; we can only wonder how many promising players were permanently damaged by wasting two years of their lives because they agreed to take a team’s money.

Even the teams realized how ineffective the Bonus Rule was, which is why it was rescinded and then reinstated multiple times over the years. Finally, in 1964, a bidding war broke out over University of Wisconsin two-sport start Rick Reichardt. The Los Angeles Angels won the bidding war with a record-breaking $205,000 offer,2 which was just the tip of the iceberg: The 20 major league teams spent more than $7 million combined on signing bonuses for amateur players that year, which was more than they spent on major league salaries. The Powers That Be were finally moved to act.

In 1965, Major League Baseball got rid of the Bonus Rule and held its first amateur draft. The Kansas City A’s used the first pick to select Rick Monday, who would go on to play 19 years in the majors. Monday, who had no leverage to sign with any other team, had no choice but to agree to a signing bonus of $104,000. The new system was intended to lower signing bonuses paid to players, and it worked. In fact, no amateur player exceeded Reichardt’s signing bonus for 24 years, until 1988, when the no. 1 overall pick, Andy Benes, was able to snooker the San Diego Padres out of $235,000.3

The dam finally burst in the early 1990s because agents like Scott Boras insisted that their clients were worth significantly more money. The top signing bonus jumped more than 500 percent in three years; in 1991 the no. 1 overall pick, Brien Taylor, got $1.55 million from the New York Yankees when they took his threat to go to college seriously. By 1995, every first-round pick signed for at least $500,000, and eight players signed for $1 million.

But the sudden increase in signing bonuses didn’t mean that the draft was no longer suppressing costs — it just meant that owners had finally realized the value of top draft picks. And then in 1996, we finally found out how much a draft pick could be worth.

While no. 1 overall pick Kris Benson signed for $2 million, Boras found a loophole in MLB’s rules that allowed four first-round picks to be declared free agents, free to sign with any team.4 One of them was no. 2 overall pick Travis Lee. He signed with the Arizona Diamondbacks — for $10.2 million. The other three guys got $10 million (Matt White), $6.075 million (John Patterson), and $3 million (Bobby Seay). If there was any doubt before that the draft suppressed signing bonuses, there wasn’t anymore.

The problem in proposing an alternative to the draft is that, as much as it limits the rights of baseball players to earn what the market will bear, it’s hard to deny that the draft has also improved competitive balance by giving the worst teams first crack at the best new talent. Truly terrible teams have virtually disappeared from the baseball landscape. If we ignore expansion teams, in the 48 years from 1917 to 1964, 30 teams lost more than two-thirds of their games in a season. In the 48 years from 1965 to 2012 — the draft era — just three teams have done the same.5 The incidence of truly terrible teams has declined 90 percent, even though there are nearly twice as many teams today as there were 60 years ago.

So the draft, as constituted, saves teams a ton of money (which benefits the owners) and improves parity in the game (which benefits everyone else). If we’re going to replace the draft with something better, it has to accomplish the former or the owners will never agree to do it, and it has to accomplish the latter or there’s no point.

Fortunately, just such a replacement exists, and it would be a relative breeze to set up.

We’re not going to keep you in suspense any longer. The draft alternative we’re proposing is very simple:

1. Assign every team a spending cap. (This limits costs, which will please owners.)

2. Allot the spending cap for each team based on where they finished in the standings the year before, allowing the worst teams to spend more in the draft than the best teams. (This helps maintain competitive balance.)

3. Let the free market reign.

This is not a radical concept. It’s not even a particularly new one; David Rawnsley, then a writer for Baseball America and now the VP of player personnel for Perfect Game, suggested it more than a decade ago. But it’s an idea whose time has come.

First off, think of the benefits.

From a player’s perspective: You have the right to choose your employer. That’s a pretty basic right enjoyed by almost all Americans, but one that has been denied pro athletes for too long. You grew up a Cubs fan and it would be a dream come true to sign with your hometown team? Give them a hometown discount, and it just might happen. Parents retiring to Arizona? Maybe you’ll take a second look at what the Diamondbacks have to offer. You love the beach and warm weather? You can take the offer from the San Diego Padres, even if other teams are willing to pay more. (Also, hope you enjoy minor league pit stops in Fort Wayne, San Antonio, and Tucson!)

On a less whimsical note, if you’re a top collegiate hitter and the Seattle Mariners sidle up to you with truckloads of cash, would you sign? Or would you take a look at what’s happened to Jesus Montero, Dustin Ackley, and Justin Smoak, and take less money to sign with an organization that has a proven track record of turning minor league hitting prospects into major league hitters? If you’re a pitcher, would you sign with the Kansas City Royals, who haven’t drafted a pitcher who has made even one start in the majors this year since 2004?

In the current system, if you get drafted by a team whose developmental philosophy is diametrically opposed to your own, you have no recourse other than sitting out a year — or, in the case of a high school player headed to college, three years. This isn’t a theoretical issue. The long-tossing revolution, in which pitchers train by throwing a ball 300 feet or even farther, has swept through the game over the past five to 10 years, with many first-round picks swearing by the training method as a way to keep their arms healthy. Meanwhile, more than a few major league teams were extremely skeptical of the new trend — they’ve almost all come around now — and forbade their pitchers from long-tossing.

It became such an issue that two years ago, Trevor Bauer and Dylan Bundy — both pitchers who would be top-five picks in the draft — publicly stated that if any team wasn’t willing to let them long-toss, that team shouldn’t draft them. In the end, Bauer and Bundy landed with teams who were willing to let them long-toss and the sport avoided an embarrassing standoff. But the potential for this kind of conflict is always there when the teams that draft players hold all the leverage. And with very limited exceptions, draft picks can’t be traded, which prevents a resolution along the lines of John Elway getting traded to the Denver Broncos or Eli Manning to the New York Giants.

In the current draft system, a player has absolutely no say in his place of employment for roughly a decade — by which point the vast majority of draft picks have already left or been cut from the game. Eliminate the draft, and you give players at least one moment in their lives as professional ballplayers in which they have control of their career. On moral grounds alone, that justifies the switch.

But as beneficial as abolishing the draft would be for players, it would have benefits for teams as well. In a draftless system, every team would at least theoretically have a crack at signing every player. Right now, if there’s a specific player that your organization is absolutely in love with, you might not even get a chance to talk to him because you have the 13th pick in the draft and the team that drafts 11th fancies him too. Abolish the draft, and suddenly every player in the pool becomes accessible, so long as you’re willing to accept the consequences of having less money to sign everyone else.

Furthermore, making amateur talent a free-for-all allows teams to try radically different strategies that aren’t feasible today. Your research department thinks you’ll get a better rate of return by signing 20 guys for $400,000 each than by blowing half your budget on a single player? That’s something you can do if the draft is abolished. Conversely, if there’s one elite prospect who your organization is certain will be a star? In the current system, if you don’t hold a top draft pick, you’ve got no shot. But eliminate the draft, and if you’re willing to blow your entire budget on a single player, you just might.

In a system where every player is a free agent and every team is free to sign him, there’s no need for the draft shenanigans that happen every year. Never again will Scott Boras need to manipulate the draft to allow his client to sign with the team that will give him the most money — now he’s free to negotiate with all 30 teams at once. You claim your client is a special, once-in-a-generation talent? Let the market decide.

And in a system where every team has access to every player, luck becomes subordinate to competence. Right now, if there are three consensus franchise talents and you’re drafting fourth, you’re out of luck. In a draft-free system, you make your own luck. Smart teams will find new inefficiencies to exploit. The A’s have found three since you started reading this.

When Rawnsley first proposed this idea around the turn of the century, it was such a radical revision of the existing system that it was more of an idea bubble than a true proposal. But changes in the new collective bargaining agreement make the notion of abolishing the draft less far-fetched.

For one thing, the new CBA placed a spending cap on all 30 teams in the draft. Every draft pick has been assigned a slot price, with the amount dropping with every pick. Teams are not required to spend all their slot money on that specific player; they can move the money around, getting one player to agree to take less than slot and then transferring the savings to another player. So prior to the draft, every team knows exactly how much money they can spend — the Astros, drafting first this year, have a bonus pool of $11,698,800, while the Nationals, drafting last, can spend $2,737,200.

Teams are permitted to exceed their cap, but the penalties for exceeding it by more than 5 percent are so onerous that no team did so last season. Even the Pittsburgh Pirates, who drafted Mark Appel no. 8 overall, refused to break the cap in order to sign him, and Appel returned to Stanford; he may be drafted first overall tonight.

So if the Astros have their bonus pool, and the Nationals have their bonus pool, what’s the point of having a draft in the first place? In exchange for making the cap completely unbreakable — which will save the owners a little cash — eliminate the middleman. The Astros have their signing cap, the Nationals have theirs. Gentlemen, start your engines.

In a sense, the Astros are already operating under a draft-free system. Last season, they had the first pick in the draft, but they elected to take Carlos Correa, who was not considered the best available, because Correa was willing to sign for a well-below-slot bonus of $4.5 million. This freed up millions of dollars for the Astros to use on other players, and they spent much of that excess on Lance McCullers, a high school right-hander who fell in the draft because of his bonus demands. Correa and McCullers are both top prospects today — and tonight, it’s quite possible that the Astros will do the same thing again, using the no. 1 overall pick on a player, like UNC third baseman Colin Moran, who isn’t the best available but who is a top-five talent willing to accept a below-slot deal, thus allowing the Astros to draft and sign more top prospects later in the draft.

The Astros can use this tactic because, holding the first pick, they can launch their plot without being subject to the whims of other teams. Eliminate the draft and every team will be able to strategize this way.

The draft is also used as a mechanism to punish or reward teams who are active in free agency — teams that sign a premier free agent lose a draft pick, while the team that loses the free agent gains a draft pick in compensation. There’s no reason that compensation system can’t be tailored to a draft-free system in which bonus pool dollars would substitute for draft picks.

One of the biggest frustrations with the current system — for fans and many MLB front offices — is the limitation placed on trading draft picks. As the NFL and NBA have shown, the ability to trade draft picks adds intrigue and exposure to the draft, while granting teams the flexibility to acquire the talent they covet. Major League Baseball finally got around to dipping its toes in the water of draft pick trades, as the new CBA allows teams to trade certain “competitive balance” draft picks during carefully defined windows in the sport’s calendar. But in a draft-free world, you don’t have to worry about this issue. Instead, you can allow teams to trade bonus pool dollars. Now, if a contender wants to trade for Player X from a rebuilding squad in July, if they can’t agree on a prospect, they can just come to terms on a dollar figure in the subsequent draft.

It would be harder to make the case to abolish the draft if the draft were working — if the best players get picked first and on down the line. But it hasn’t worked that way in at least a quarter century. Prior to the new CBA, some of the most highly regarded (and expensive) talents would tumble down the draft until they fell to a team willing to meet their demands, whether it was Rick Ankiel in 1997 ($2.5 million, drafted no. 72 overall) or Rick Porcello in 2006 ($7 million major league contract, drafted no. 27 overall). The new CBA limits that, but it has introduced new and unanticipated consequences. Last season, many teams elected to blow most of their bonus pool money on their first couple picks, then draft lightly regarded college seniors who would agree to minuscule bonuses. Maybe it’s less broken than before, but when a team drafts a virtual unknown in the fourth round and signs him for $5,000 — as the Blue Jays did last year with Tucker Donahue — the draft is still broken.

So blow it up. Give teams the freedom to make an offer to every player, and give players the freedom to accept any offer.

The irony is that Major League Baseball already has this system in place — a system in which teams are allowed to sign any amateur player they want within the constraints of a bonus cap, and the players are allowed to sign with any team they want. It’s just that this system applies only to international talent.

As part of the new CBA, last year every team was capped6 at spending $2.9 million on international amateur talent, exempting players from certain Asian markets and Cuban defectors over the age of 23. The world did not end. The highest signing bonus was doled out by the New York Mets to Amed Rosario, a 16-year-old shortstop from the Dominican Republic, who received $1.75 million. Nine other players got seven-figure bonuses. The Yankees chose to spend $2.75 million on three players, leaving almost nothing for anyone else. Meanwhile, 16 teams elected to spread their money around, not spending even $600,000 on a single player. Different strokes for different folks.

This year, each team’s international signing cap will be determined by where they finished in the standings last season. The Astros can spend up to $4,943,700; the Nationals can spend only $1,846,900. Other than the signing cap, once the signing season opens on July 2, there are no restrictions. Teams can even trade bonus dollars.

This is exactly the system we’re advocating for Americans and Canadians subject to the draft. IT ALREADY EXISTS. But only for foreign ballplayers.

Major League Baseball, bless its heart, is trying to synchronize the two systems. Only instead of synchronizing things by eliminating the draft for domestic players, naturally, they’re trying to institute a draft on international players.

It’s difficult to articulate just how horrible this idea is; it’s almost as bad as the Bonus Rule. Latin America is the Wild West of amateur baseball; signing a player frequently means dealing with the buscones who trained him since he was 11 years old and get a cut of his bonus, then waiting months for the player’s date of birth and identity to be confirmed by the commissioner’s office. Throughout this process, corruption — even, occasionally, among employees of the major league teams — is rampant. Virtually every scout in Latin America thinks implementing a draft there will be a disaster.

Put it this way: If a draft is implemented, it’s just a matter of time before two teams wind up accidentally drafting the same player, listed under two different names.

If implementing an international draft would save teams money, at least you could justify it in pure Machiavellian terms. But now that a signing cap is in place, a draft wouldn’t even do that. The high priority placed on this by the commissioner’s office is bizarre.

The good news is that MLB can’t implement an international draft without the cooperation of the players’ union, and last week the MLBPA vetoed the idea. (This, after more than 150 Latin American players on major league rosters signed a petition expressing their opposition to an international draft.) There’s a good chance the specter of an international draft won’t be brought up again until the next CBA is negotiated, by which time Selig is likely to have retired,7 and with any luck his successor won’t have the same zeal for the draft.

We can only hope that, instead of trying to expand the draft, the next commissioner will take a good, hard look at whether the draft is necessary at all. Because it’s not. The draft is an idea whose time has passed. A signing cap would limit costs and improve competitive balance while offering amateur players the freedom to choose their employer. It would also inject an added dose of intrigue and strategy to the game.

It’s time to ditch the draft. The game of baseball will be better for it.

Filed Under: MLB, Replace, Sports

rany_jazayerli_2

Rany Jazayerli runs the Rany on the Royals website. He is one of the founders of Baseball Prospectus, and works as a dermatologist in suburban Chicago.

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