Though the rule 4 amateur draft may not receive as much national publicity as, say, the NFL variety, its importance is certainly understood in baseball circles. In an age where massive payroll disparities exist between franchises, the easiest way for financially-challenged teams – like the San Diego Padres — to compete is to out-draft, and out-develop, the big spenders.

Developing home grown talent is vital because a players first six years are spent under team control, at a tremendously discounted rate. Let us take, for example, an average player and estimate how much surplus value he’ll accrue in his first six years under team-control:

Year WAR Est. Salary FA Salary Surplus Value
2012 2 WAR $.4M $9M $8.6M
2013 2 $.5M $10M $9.5M
2014 2 $.6M $11M $10.4M
2015 2 $4.8M $12M $7.2M
2016 2 $7.8M $13M $5.2M
2017 2 $11.2M $14M $2.8M
Total 12 $25.3M $69M $43.7

To clarify, we have an average (2 WAR) player. His Free Agent salary is estimated by multiplying his WAR by the marginal value of a win (~$4.5M in 2012 and escalating $.5M each year). His actual salary is estimated by near-minimum totals for his first three years, and then using the 40%-60%-80% scale, which models how much arbitration-eligible players are paid, when compared to their FA value.

So, if a team can draft and develop an average player, not at all a superstar, it is looking at $40+ million in surplus value over the players first six years – in other words, a tremendous asset to the organization. This is a player that will provide three years of average play for peanuts, and then another three years of average play at 60% of his market value. Overall, this club gets $69 million worth of production for $25.3 million. Add in a signing bonus, minor league salaries, and some developmental fees, and you’re still looking at a great value.

If a team can draft a star player like Evan Longoria, well, it is that much better off. Longoria has already netted the Rays some $50+ million in surplus value in his first two seasons. The Rays went on to sign Longoria to an extension that could be worth $44 million over nine years. They have their cornerstone player locked up at a very reasonable price, thanks to the draft and MLB’s salary dynamics.

Dollars and sense

The draft might sound perfect for its efforts in leveling the playing field between big market and small market franchises. That is its intent, but there is at least one small problem. There is no slot-requirement, and some players that may be top talents are bypassed by small market teams because of signability issues – teams are concerned that, after drafting the player, they won’t be able to sign him to a deal.

A good example is the 2007 draft. Back in the infancy of this blog, as Rick Porcello continued to go unselected (due to aforementioned $ concerns, not talent) , I was hoping the Padres would pick him at #23. The Padres passed, taking Nick Schmidt, who signed at estimated slot money — $1.26 million. Porcello fell into the hands of the Tigers five picks later, who signed for $3.58 million — $2.4 million above slot-recommendation.

Of course, I understood that the Padres were unlikely to take Porcello. After all, they weren’t the only team that passed on him, and they didn’t exactly have that kind of money to throw at a prep pitcher – even, a very good one. However, my theory went that, yes, they would be spending a few million dollars more than desired, but the potential value Porcello could provide later on would be well worth it.

Porcello debuted with the Tigers last year and, conveniently for this article, delivered a league-average season (1.9 WAR). He was worth approximately $8 million in surplus value. He has struggled a bit this season, but his peripheral numbers actually look fine (sans the K-rate), and the Tigers have a solid pitcher locked up under team-control.

It doesn’t work like that every time, kid

The draft is an inherently risky process. Trying to evaluate young players and project what they will become in four or five years is both art and science – and a lot of headaches. Sure, there’s a correlation between draft slot and WAR, but it isn’t a great one. There are no-brainers (A-Rod, Longoria, Strasburg), but there are also countless busts (ie, no-brainers that didn’t work out). The obligatory Matt Bush mentioned comes now.

The Padres may very well have thrown $3.6 million Rich Porcello’s way, if they knew exactly how he was going to develop. But, perhaps their analysis concluded that there was, maybe, a 40% or 50% chance that he wouldn’t give them any MLB value. In the end, maybe he was too risky. Nobody wants $3.6 million to go to waste, especially when there are plenty of other attractive options to choose from.

The draft is critical for all teams. But if the Padres – and other small-mid-level market teams – want to compete, it is almost essential that they draft and develop well. Producing home grown players would give the Padres a (cheap) core to build around, allowing them to add to it with some good trade acquisitions and solid free agent signings. The past era of Padres baseball has been filled with a mixed bag of drafts – some good, a lot not so good. But overall, they missed out too many times when they had a plethora of high picks.

It is critical that this regime not only evaluate talent well, but also not be afraid to spend the extra dollar. If the Padres are confident in their ability to evaluate a draft class – and they should be, with all the brainpower in the front office – then they shouldn’t be worried about spending that extra money. In the long run, it will be money well spent.