Note: while my articles during the offseason will generally coincide or touch on the baseball position of the week, they occasionally will not. This article is one that will not. It will, however, strive to be helpful.
We all value players differently, our teams all have various, differing needs at various times, and yet very few trades get made. If you have been reading The Quinton over the past year, then you know that little makes me sadder than trades that do not get made. Why does this make me sad? Because I want all of you all to improve your teams through trades as much as possible. In general, active teams tend to be the most successful teams, and while a lot of this has to do with effort being correlated to both trade activity and success, it also speaks to the productivity of trades. This is especially true in keeper and dynasty leagues, where trades are often the most impactful way to execute a strategy and change strategic course. So you get it (if not, please take my word for it for the sake of the article), trades matter. That said, players with a wide set of potential outcomes, particularly players with a very negative outcome (such as a player who may or may not be a starter, a player that may or may not sign in specific league for an only-league, players that might not make the opening day roster, etc.), often do not get traded. We will take a look at why this is so and what we can do to take advantage of this untapped market.
Before we get into the why, though, I should clarify which types of players are not being traded as frequently as they should. Example time:
Last year in my NL-only keeper league, an owner made available an $8 Francisco Rodriguez while he was still a free agent. If he signed with an NL team to be the closer he would be quite a value, particularly in a league where the only one un-kept closer was going to be Addison Reed (this was before the Padres traded for Craig Kimbrel). If Rodriguez signed with an AL team or an NL team as non-closer, he would be worth nothing. I could have traded an $11 Chris Owings for Rodriguez, but declined. In hindsight, I obviously should have made this trade, but it was probably a mistake at the time, too, especially given the closer inflation (and given that I did not have a closer) and given that Milwaukee was his most likely landing spot. I assume that many other owners turned down reasonable offers from this owner, too. The cost of this non-trade to me was significant: I ended up winning this league by punting saves, but not making this trade forced me to sell many long-term assets (namely Lucas Giolito, Joc Pederson, Christian Yelich, and my 2016 first-round minor-league draft pick), which significantly hurt my chances of winning this year and in the future.
This is all to say that players that might be worth nothing rarely get traded in fantasy baseball, particularly during the offseason. It is tempting to chalk this lack of trades up to the endowment effect—a term coined by Richard Thaler, which he describes as “the fact that people often demand much more to give up an object than they would be willing to pay to acquire it.” This explanation will not do though, because trades still happen. Put differently, the endowment effect reduces the chances of any trade being made, not a particular type of trade. Instead, the reason potential closers and potential high-upside starters do not get traded is because our offers for those players are bad, because we undervalue those players.
We undervalue these players not because we are incapable of doing the valuation, but rather because our valuation mechanism incorporates regret. My entire league undervalued Francisco Rodriguez as a free agent because, at least to a small extent, we all knew how dumb we would look if we traded him away and got nothing in return. This sounds like defensive decision making because it is defensive decision making.
This is all well and good, but why then are the teams that own these players not also undervaluing these players? Why are they not selling these players for next to nothing because they might otherwise get nothing for them? The answer here is that frame matters. For the owners of these players, the fear is not failing to trade such a player and getting nothing in return; rather, the fear is to trade the player only to see the positive outcome come true (and props to the owner in my league who had seemingly hurdled this decision-making obstacle). While we have probably observed this in our own leagues, we are going to throw this over to Daniel Kahneman, who writes in Thinking, Fast and Slow:
“Richard Thaler’s early classic on consumer behavior included a compelling example, slightly modified in the following question:
You have been exposed to a disease in which if contracted leads to a quick and painless death within a week. The probability that you have the disease is 1/1,000. There is a vaccine that is effective only before any symptoms appear. What is the maximum you would be willing to pay for the vaccine?
Most people are willing to pay a significant but limited amount. Facing the possibility of death is unpleasant, but the risk is small and it seems unreasonable to ruin yourself to avoid it. Now consider a slight variation:
Volunteers are needed for research on the above disease. All that is required is that you expose yourself to a 1-in-1,000 chance of contracting the disease. What is the minimum you would ask to be paid in order to volunteer for this program? (You would not be allowed to purchase the vaccine.)
As you might expect, the fee that volunteers set is far higher than the price they were willing to pay for the vaccine. Thaler reported informally that a typical ratio in about 50-to-1.”
While our fantasy trades are far less important than living, the point here is that odds are never just odds; responsibility and the way we frame decisions matter immensely when it comes to valuations. Moreover, if all of us are undervaluing these players, then demand for these players is going to be low. In other words, these are often the kind of players we want to trade for—players who can be acquired a fair value. If the owners of these players, though, are only trying to “win the trade” or eliminate all risk on their side, then these trades might not be as appetizing as theorized. However, if we are able to find trade partners that are able to frame their decisions without consideration of factors such as regret and responsibility, then we have increased our chances of improving our team.
Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011. Print.
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First example: Take vaccine, zero percent chance of getting Sudden Death Syndrome.
Don't take vaccine, 0.1% chance of getting SDS.
Second example: Don't volunteer, zero percent chance of getting SDS.
Volunteer: 0.1% chance.
There's *no* practical difference here. It's action vs. inaction, yes, but whatever 0.1% of your life value is is the right answer. It's possible to logically end up slightly different because of decreasing marginal utility of money, but there's no way that difference should be this severe.
Looked at from the perspective of what is lost, there is no difference. Looked at from the perspective of what is gained, there is a massive difference.
First example: Take vaccine = gain certainty that you don't die. Don't take vaccine = .1% chance of dying.
Second example: Don't volunteer = gain absolutely nothing. Volunteer = .1% chance of dying.
These are not even close to identical choices. Like you said, whatever 0.1% of your life value is the "right" answer. To put it in monetary terms, this is essentially the same as saying to someone: "I'll give you one dollar to do nothing, or I'll give you whatever amount of money you want to take this poison that gives you a 1-in-1000 chance of dying." Do you really think that the average response would be only $50?
I don't think that this experiment shows what Thaler thinks it shows. I don't disagree that the endowment effect is a real thing, just that this experiment is flawed.
All of this underscores the point made in the article as it applies to fantasy baseball (and other life decisions), particularly this: "the way we frame decisions matter(s) immensely when it comes to valuations."
I only bring up this aside because I find Kahneman's book and thinking about these things fascinating.
Thaler's experiment doesn't reveal anything about consumer behavior, but rather how much people value being alive. To demonstrate further, imagine if the odds in the experiment were extremely different. Make the experiment a game of Russian roulette.
First example: You are forced to play, so have a 1-in-6 chance of dying when you pull the trigger, but you are given the chance to pay any amount of money to get out of the game. Is it reasonable to assume that most people would give a large amount of money, if not everything they own, close to it?
Second example: You have the option to enter the game of Russian roulette in exchange for a sum of money. The results of this comparison wouldn't even be measurable, let alone as little as 50-to-1, because I imagine there would be many people (myself included) who would not accept any amount of money to take that risk.
The range of responses in the first example is limited to the amount of money a person has available to them and the second example has no limit whatsoever, so naturally the responses would be extremely lopsided, even though the choices are mathematically identical.
Now, go the other way using Thaler's experiment, but change the chance to 1-in-10,000,000.
First example: The range of responses would be from nothing to some small amount, maybe how much a person has in his pocket.
Second example: The range of responses would be from nothing to some other small amount, but still probably a little higher than the first because there is still a chance, however small, that you may no longer exist if you perform the experiment. A 50-to-1 difference might be surprisingly high in this case; this would be a more interesting experiment.
All three of these experiments (Thaler's actual and my two hypotheticals) have equal mathematical odds, but wildly different results.
I agree with Thaler and Kahneman and Ariely that people generally and frequently don't make rational economic decisions, but the results of this particular experiment are, in fact, rational. Despite what actuarial tables say, a person's complex and interconnected existence cannot be reduced to a mathematical equivalency measured in currency.
My only contention here is that Thaler's experiment cannot be applied to consumer behavior because it is not about consumer behavior - it is about life and death. If he wanted to make the experiment about behavioral economics, then he should have at least made the chances of death several orders of magnitude smaller, or just made the damn thing about a lottery ticket instead.