Major League Baseball

When does it make sense to 'trade down' in MLB Draft?

Published Jun. 4, 2014 7:24 a.m. ET

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Dave Cameron

When the Marlins traded the 39th overall pick in Thursday's amateur draft to the Pittsburgh Pirates for reliever Bryan Morris, the most common reaction was not that the cheapest organization in baseball was pinching pennies again; it was "wait, MLB teams can trade draft picks?" Unlike in the other major professional sports, MLB has historically not allowed teams to swap draft selections, and only a special subset of draft choices — the ones MLB gives out as Competitive Balance selections, between the first and second rounds — are able to be included in deals now.  When the draft begins on Thursday, there will be no drama as to which team will be making the first overall pick, as the Astros are required to keep that selection for themselves. 

However, because of the way that MLB's suggested signing bonus system works, there actually is a way for teams at the top of the draft to "trade down." Here's how it works.

Each team is assigned a total bonus allocation based on where their selections in the first 10 rounds are placed — teams with higher picks get more money to sign those theoretically better talents — and the total signing bonuses for selections in those first 10 rounds have to be within five percent of that pool allocation if a team wants to avoid some pretty stiff penalties. However, teams are allowed to distribute their pool allocation however they would like, and they can vary a great deal from the recommended bonus for each particular player.

If a team is able to sign a player for significantly less than their slot bonus with a high draft choice, they can then use the money they saved on that pick to take a player who wouldn't sign for the bonus recommended with a later choice. A team that saves money on its top pick can be aggressive in selecting a player who fell through the cracks in the first round, and potentially land a second or even third top talent with their following picks.

Two years ago, the Astros did exactly that, selecting high school shortstop Carlos Correa with the No. 1 overall pick partly due to the fact that he agreed to sign for $4.8 million; $2.4 million shy of the $7.2 million slot recommendation for that pick.

The Astros then turned around and gave an extra $1.25 million to the 41st overall pick — right-handed pitcher Lance McCullers — and an extra $1.5 million to the player they took with the 129th overall pick, infielder Rio Ruiz. Correa was certainly a quality prospect, but in effect, the Astros traded the No. 1 overall pick for the No. 3 or No. 4 overall pick, with the value of upgrading their second- and fourth-round picks into late first-round talents as the reward.

Is this a good strategy, though? Should a team with the best chance to land a superstar really take a lesser talent in order to bolster their secondary selections?

Coming up with a definitive answer is essentially impossible, because the reality is that the best overall player in each draft is not necessarily equivalent in every year.

Some years, there's a Bryce Harper or a Stephen Strasburg to be taken No. 1 overall, but in other years, the top talents are guys like Luke Hochevar or Bryan Bullington. To create a hard-and-fast rule that every team should follow in every type of draft would be foolish, but we can look at historical information about the average returns for the top few picks and draw some general conclusions.

Thanks to Baseball-Reference's handy draft data, we can chart the average career WAR of each of the top 10 selections in modern draft history.  Here's that average career WAR for picks 1-10, since 1965.

No. 1: 18.5 WAR
No. 2: 12.1 WAR
No. 3: 10.1 WAR
No. 4: 11.2 WAR
No. 5: 7.3 WAR
No. 6: 10.2 WAR
No. 7: 6.0 WAR
No. 8: 4.9 WAR
No. 9: 5.3 WAR
No. 10: 9.0 WAR

As we can see, there's a huge gap in return from just moving down just from No. 1 to No. 2, and the back half of the top 10 has produced about 1/3 of the total value of the top overall pick.

Scouting amateur talent is difficult, but some special players make themselves known well in advance, and only the team with the No. 1 pick gets a shot at those generational players. If a team is going to effectively trade out of the top spot, they either need to believe that there is no such premium player in their respective draft, or they have to get a dramatic upgrade with the later picks.

The difference between latter selections is much smaller than the gap between the highest picks, however. For instance, let's look at the second and third picks owned by the Astros this year; No. 37 and No. 42 overall.

Those picks returned 3.6 WAR and 1.5 WAR per draft choice respectively, as even the early second round can be something of a dart-throwing contest for major-lague teams. But as we see from the huge dropoff after the top four, the average first-round pick still only results in something in the 5 to 10 WAR range, and once you get out of the top 10, you're closer to the 5 WAR range for the rest of the first round.

Let's say, hypothetically, that two mid-first round talents were going to fall, each coming from a selection with an average of 5 WAR per pick.

Being able to select those two players, instead of the talents generally available at 37 and 42, would bring the average WAR for the Astros second and third picks up from 5 WAR to 10 WAR. But that gap is smaller than the one we see between the No. 1 pick and even the No. 2 selection, as the talent gaps at the very top end of the draft are much larger than the ones even just a few picks later.

This isn't to say that taking a supposedly worse prospect is always the wrong decision. This year, there is no Harper or Ken Griffey Jr, and the gap between the best players might be smaller than it is in most years.

Additionally, looking only at the average career totals skews things towards the picks that have produced a few great players with long careers, even if those careers didn't all come with the team that originally drafted them.

Diversification lowers a team's risk of getting nothing, so there could be value in selecting multiple players just because it increases a team's chances of landing a quality player, even if it takes away some upside in the process.

This is a complicated calculation, and we cannot say that there is definitively one best way in each draft. But history does show that if a team is going to "trade down" from the top overall pick, they had better be convinced that it's a flatter draft pool than usual, because historically, you're probably not going to get enough value with your second or third selections to make up for the cost of giving up the top spot.

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