Yoan Moncada and a Silly Amount of Money

So now that Yasmany Tomas has signed a contract, the next big unknown is Cuban teenager Yoan Moncada.  Moncada is praised for his bat and his ability to play anywhere on the diamond defensively outside of shortstop and catcher (he is currently a shortstop, but no one seems optimistic he can stick there).  Many have postulated that if he was in the 2015 MLB Draft he would be in contention for the #1 overall pick.  This is going to spark a bidding war that we have not seen in a while, and one Phillies fans hope their team weighs into.

Contract Structure

First let’s talk about the contract. Unlike Tomas, Moncada’s contract must be a minor league deal with a straight bonus and then he enters into the normal salary system.  This means he is subject to the international bonus rules with the following penalties:

• The team signing Moncada cannot sign an international free agent to contract greater than $300,000 for two seasons
• Any amount over the bonus pool will be subject to a 100% tax which will be paid to MLB

There won’t be an opportunity for a team to add in an opt out or other weird contract stipulations.  It also means that Moncada will eventually have his salary decided in arbitration which will be paid in addition to the signing bonus.

What Are You Buying

I have not seen Moncada, so I won’t say how good he is or his risk for this exercise, instead I am going to use the nebulous #1 overall pick label.  Moncada is a very good talent, but he is not being lauded as a generational talent like an Alex Rodriguez, so lets say he optimistically has a career on par with one of the very good HS #1 overall picks.  For this exercise I have used 3 test cases of well regarded picks that worked out in Justin Upton, Adrian Gonzalez, and Joe Mauer.  Conveniently these three also give a nice set of careers to work with for this next park in estimating out his salary over this time as they have average 3, 4, and 5 WAR a year respectively over their team controlled years.  What I am going to do now is use these estimates and Fangraphs overall $/WAR of $5.5M to look at what the first 6 years of Moncada’s career will buy.  For this exercise I have put the WAR as an ever increasing value each year based on the fact that in arb they are likely to be paid for past performance even if it did not occur during that year.

As we can see, even outside the massive bonus, a team is going to be outlaying a lot for Moncada (and getting their money’s worth).  We can also see that if we applied a straight $/WAR to these, a team is making back a ton of value in the arb and team control part of signing a player like Moncada.

The Bonus

But now back to the bonus.  The bonus by its nature puts all of the risk on the team because they have committed the money upfront with no guarantees of future success, but lets assume that any team giving the bonus has assumed this risk and is willing to take it.  Lets also assume that the team doesn’t really care how much is going to the player and how much is going to MLB, for them this is a single large outlay of money.  So lets explore what a bonus would look like if a team just wanted to break even on their projections.  In this case we take the cost of team control years (from above), calculate the $ value of the contract (I will do it with both the MLB wide $5.5M from earlier and a FA $/WAR in this case $7M), and then subtract those to find the breakeven value.  Additionally, the number that seems to be thrown around on the high end for Moncada is a $40M bonus, which would mean a total payment of $80M, so we will use that to see what return on investment exists at that cost.

*The reasoning behind using the two different $/WAR calculations is that they imply two different connotations.  In this case view the MLB $/WAR as total budget allocation, essentially what would this money produce if spend to pay and retain players throughout their baseball cycle.  The FA $/WAR is the allocation needed to directly buy the same value directly in free agency.

We can see that we have two near breakeven points, and they correspond to different philosophies.  The first is with our Upton model (3 WAR/yr average), and here we can see that if we view that $80M payment as money we would have spent in free agency to replace that value.  We hit the other point in our Gonzalez model, where we see that a $80M bonus for Moncada would be close to the equivalency of spending that money across your organization (which might not actually be practical).  Essentially, Moncada is going to get paid near breakeven value to a successful #1 overall pick.  If he exceeds that there is a lot of value there, if he does not, there is a lot of room for lost value, which is why we will drift away form $/WAR.

Opportunity Cost:

There is always an alternative to signing Moncada, with the most basic being the owners just pocketing the money as profit.  But two others are out there if a team wants to consider their alternatives.  The first we have already discussed and calculated, and that is spending in free agency.  We can see that spending in free agency is a better investment if you think Moncada will be a 3 WAR or fewer player a year over the life of his contract.  If you think he is better than that, you are better off investing in Moncada.

The other missed opportunity is saying that rather than spend on Moncada you are just going to spend all that money internationally with the penalty anyway.  So what does $40M buy you in Latin America?  For that $40M, you could buy every member of Baseball America’s Top 30 International prospects (a task the Yankees got 33% completed).  No one on the market has Moncada’s upside, but that is a lot of potential and safety in numbers that could be bought for the same cost.  Either way, you remove yourself from the international market for the next two seasons (although the ability to trade slots lessens that blow).

So What Does This All Mean

It is fantasy numbers.  There are likely better and safer ways to spend the money than on Mocada (if all the bonus speculation is true).  But in Moncada you are buying a singular player, and for those where money doesn’t matter, that transcends $/WAR and efficiency.  Given that, it would seem those teams in on Moncada fall into two categories.  Teams that have a ton of disposable income running out of things to spend it on and those teams where money doesn’t matter to ownership.  Teams with payrolls near the luxury tax paying the tax on Moncada’s contract makes sense, because their FA costs are higher due to the luxury tax.  Unfortunately for Phillies fans, this is where we would want our ideal ownership to be, but they have never shown the indication that they would spend in this way.  More likely we see a team like the Yankees, Cubs, Red Sox, or Dodgers win this bidding war because they have more money than anyone else and are willing to spend it.  I would expect the bonus here to just be crazy and help pave the way for international spending reform.