Monday, March 07, 2011

BUILDING YOUR AUCTION BUDGET

posted by Scootron

This is the time during my auction prep when I typically begin work on my budgets. On the surface, this might seem a fairly simple matter. You have $260. You need 23 players. Pretty straightforward, right? Maybe not. Planning and executing auction budgets seem to be areas which create problems for even the most experienced owners.

Over the years, I listened to owners lament after their auctions “Man, I got so many guys I didn‘t really want“, or “How did I wind up with so little pitching?” These owners mystify me. How could they be surprised? It’s like going to the grocery store, and then being shocked when you get home and open the shopping bags.

A good owner should have a definite idea what his team will look like coming out of the auction, if not the specific players, at least the type of players. How you can accomplish this feat, and why it is important to do so, deserves to be addressed. Most of what follows will be directed toward owners in redraft leagues, but I will illustrate how the lessons can be applied to keeper leagues as well.

Where to Spend Your Money? There is considerable debate over how one should apportion auction dollars between hitters and pitchers. On the one hand, 14 of our 23 roster spots are hitters, while only nine are pitchers. On the other hand, half the points come from pitching. I have seen guys spend $100 on pitching, and I have seen guys spend only $40 on pitching. I have even seen guys attempt the $9 pitching staff strategy. In my experience, none of those approaches find much success. Neither do gambits like Sweeney and Labadini work against experienced owners, unless the goal is simply to finish in the money,

Two things I keep in mind while building a budget:

1) Hitters are as a rule more reliable than pitchers, and therefore safer investments; and

2) In most leagues, as much as 30% of the pitching value comes from pitchers who were not projected to have value when the year started, and who are not reserve picks or free agents purchased during the season.

These things have led me to conclude that the optimal salary allocation for a 5x5 budgets is 70/30: $182 for offense and $78 for pitching. Some will say that in a 5x5, you should allocate more on the pitching side. As I’ll explain later, this is not necessary, and will weaken your offense to an unacceptable degree.

Building the Budget. Okay, we’ve decided upon a 70/30 split for our auction dollars. What’s next? First we have to make certain that the dollar values we are using are realistic. By that I do not mean only individual player’s values, but the value of the player pool in the aggregate.

The math is simple. Assuming a standard 12-team AL-only league, there are $3120 in auction dollars chasing the available talent ($260 x 12 = $3120). Auctions are a zero sum game, so assuming nobody leaves money on the table, $3120 will be spent for the 276 players who will be rostered. The projected values for the 276 players must necessarily add up to $3120. If our projected dollar values do not reflect 276 players at a total of $3120, our calculations are incorrect.

So, working with the 70/30 split we have decided upon, we must decide how we can best spend our $182 and our $78. This is where the process becomes less science and more art.

Hitters. We know what it will take to compete in each scoring category (see last week’s column), so we have to determine which combination of players will produce the numbers we need. We should probably spend big on a 1B, maybe $25, since they normally produce big power numbers and are easier to replace than are some other positions. We should also consider spending a good bit at 3B, since they can also give you good power numbers. (Some people worry that 3B is a scarce position, but we’ll examine that idea a little later.) In the middle infield, I’ll typically allocate less money per position, maybe $15 each for the 2B and SS. Let’s say $5 for the CI and $5 for the MI.

This leaves the catchers, which is one of the most difficult decisions we have to make. Despite much theorizing to the contrary, position scarcity is not an issue in an auction. In fantasy baseball, it doesn’t matter where our production comes from, so long as it happens. So long as we don’t overspend at any one position (particularly ones imagined to be scarce), there should be no problem finding the hitters we need to stock a solid roster. That is because almost every position player in our playing pool will have a positive value. So long as we are spending our money to maximize that positive value, position doesn’t matter (although 1B and OF are generally easier to replace in the event of injury or sudden lack of effectiveness)
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Catchers present a different problem. In standard leagues, we need two catchers, so in our 12-team AL league, we will go 24 players deep at that position. Unlike OF, there are insufficient catchers with positive value for everyone to have two of them. So we must decide how much of your budget you will dedicate to this difficult position. In my AL-only league, owners tend to overspend for catchers, making it nigh impossible to find a bargain. As a consequence, I‘m usually in the “cheap catcher” school. I budget $1 for each catcher. My goal, however, is to find two catchers who will not hurt me - two catchers whose production won’t be well into the red. We can usually find them, even if we are forced to rely upon backup catchers. So, for purposes of building this budget, let’s say $1 each or a total of $92 so far for our offense.

In the outfield, We are usually best off spreading our money around. Typically I’ll go with something like $30, $25, $20, $10, and $4 for the five outfield spot, and then $1 for DH/UT. I like to leave that position open for the end game. Since it is a utility spot, you can take the best offensive player available, regardless of position. That makes $90 for OF and DH/UT. Altogether, our offensive budget now looks like this:

C $1
C $1
1B $25
2B $15
3B $25
SS $15
CI $5
MI $5
OF $30
OF $25
OF $20
OF $10
OF $4
UT $1

TOTAL: $182

Tweaking the Basic Budget. By this point in our auction prep (whether redraft or keeper league), we have an accurate picture of the specific players who will be available for purchase. We have the template for our budget, so we can begin tweaking it to match up with the actual player population. Let’s say there are several 1B we wish to target, but we don’t think we can get one of them for our allotted $25. We simply bump our 1B slot up to $30 and our 3B slot down to $20. This will allow us to acquire the player we need without abandoning our budgetary plan.

Say we need more money for a 2B or SS, and that the most expensive OF we like has a value of $20-$25. We can just shift some OF dollars up to the infield positions. If our particular league has a tendency to overvalue or undervalue any particular position, we can tweak accordingly. Eventually our auction budget will resemble the original template, fine tuned to reflect player availability, league tendencies, etc.

Pitchers. How about our $78 pitching budget? We can start out with a template which looks something like this:

P $20
P $12
P $8
P $7
P $5
P $2
P $2
P $8
P $14

TOTAL: $78

Two things should be very obvious. First, we’re not going to get Felix Hernandez or Roy Halladay. Second, we’re not going to get one of the big name closers. But, that’s fine for us. Recall our assumptions regarding pitching. Even the best pitchers are not always reliable, and this holds especially true for closers. who sometimes have a tenuous hold on their jobs. Moreover, we are mindful of the potential for value in those pitchers who are not purchased in the auction.

Armed with this knowledge, we find a good starter to fill our $20 roster slot and serve as our anchor. If we happen to save a couple of dollars, we’ll increase our $12 starter slot to a $14 slot. We’ll look for starting pitchers (whether five, six or seven total) who have outstanding skills, but maybe lack the hype or the big names. In our remaining slots, we’ll try to cobble together some saves. We might actually get a real closer with our $14 slot, if the cards fall right or if we are in a mixed 5x5 league where some owners undervalue closers. Then we’ll look to fill out our roster with other relievers who have outstanding skills, and, ideally, a chance of stepping into the closer role at some point.

Last year, in my AL-only league, I was able to pick up Jose Valverde for only $14, since he was something of a question mark to AL-league owners. I also gambled by picking up a cheap Kevin Gregg. He was also coming over from the NL, and was serving as a setup man for Jason Frasor, who I considered to be a weak closer. In mid-April, Gregg took the closer job. My third reliever was Brandon League, who is usually available in the end game, usually undervalued and usually returns a nice profit.

We might decide to tweak this budget template as well as well. We may want a more expensive anchor for our rotation, or we may feel the need to buy a more solid closer. We may even decide to punt saves (although I would advise against that, for the reasons set forth in last week’s article.) So long as we know what pitchers are out there, and which ones we can reasonably expect to buy for the money we have allocated, we should be in good shape

Keeper Leagues. For keeper leagues, the process is not difficult. We simply pencil our frozen players into our budget form, placing them in the slot which that most accurately reflects their actual value. For example, if we have a $25 outfielder frozen at $12, then we put that outfielder in the $25 slot. We then take the savings we have accumulated from these frozen players, and use them to upgrade the other positions. This means we can target a $25 shortstop instead of being limited to a $15 player. On the pitching side, we do the same. We pencil in our freezes, and spread the savings among the other pitching slots. Now we put our new budget to work.

Using our Budget in Preparation for the Auction. As I mentioned last week, I don’t do practice auctions. I look at the results from other auctions, such as Tout Wars, but I rely more upon my predictions of what my league will likely pay for various players. Then I do an exercise in which I build roster after roster based upon the budget I have crafted, learning which combination of players will give me the statistics I’ll need to compete. Here’s how that works:

If we have done our draft prep properly to this point, we will have a list of all players likely to be purchased at the auction, and the projected dollar values of those players. Then we think in terms of what prices these players will actually bring in the auction. There will be some guys we believe will be overpriced at the auction, meaning they will go for more than they are worth. On the other hand, there will be players we believe will go for less than their actual value. These players will become targets for us, as will some players who may go for full price, but who we believe will meet expectations and remain healthy.

Making these judgments is generally easier in a league you have played in before, but you can still have a good idea who will be overpriced or under priced based upon hype, team he plays for, etc. For example, Mo Rivera will go for more than Joakim Soria in a lot of leagues, but for the money I would take Soria every time.

Now, having determined those players likely to be overpriced and those likely to be undervalued, and having targeted certain players as potentially good investments, we must identify players a) who are acceptable to us targets, and b) who are likely to be purchased for an amount close to what we have budgeted. In the AL we can forget about Felix Hernandez and Jon Lester, but we very well might land Max Scherzer, Jeremy Hellickson, or Brandon Morrow as our $20 anchor. We continue matching groups of players with each of our budget slots…ideally five or six possibilities at each position…and then do the same with the pitchers. We should consider contingencies as well. If we are shut out on our choices for 2B, can we make up for it by upgrading our SS or MI selections.

The Hard Part. Once we have generated a pool of targeted players for each roster spot, as well as alternatives based upon potentially adverse auction dynamics, we begin to put together different rosters based upon our target player pools and our budget. We tinker with them a bit. We imagine that we get Adrian Beltre early in the auction for only $20 of our $25 budget. We move that extra $5 to 1B, and now we are in the Adrian Gonzalez sweepstakes. We go through this process numerous times, imagining the various scenarios likely to unfold at the auction.

Each time we put together such a practice roster, we calculate the statistics the players would likely produce, based upon our projections. Then we compare those numbers against what it will take for us to compete.

This work is admittedly tedious. I used to do it on paper with a calculator. Now, I can do run these auction scenarios and statistical results using my draft software program. It calculates everything for me, and I can run a dozen different rosters in a couple of hours.

The point of this exercise is not just to get us used to working within our budget; we also become more adept at adapting to changing circumstances and adjusting our budget on the fly when necessary…saving a couple of bucks here and re-allocating it to another slot, or paying a few extra dollars to get someone we need and adjusting one or more slots accordingly. Most importantly, it gives us a realistic idea of how far our money will go and what kind of team we can put together. There is a very good chance, of course, the roster we wind up purchasing at auction will be better than our practice rosters, since there will undoubtedly be be a few bargains that fall our way.

Working the Budget in the Auction. The big day is here, and we’re ready for it. As we expected, the big names are getting tossed out early, and the bidding for them is hot and heavy. What should be be looking for?

One of three things will likely be happening: a) people will be very aggressive, all pumped up and overpaying, in which case we’ll sit back and let them overspend for a while, knowing the bargains will come later; b) owners will be more passive, meaning players could go under value, in which case we’ll wade in and start buying; or c) players will go for about what we think they are worth, in which case we will patiently and calmly execute our budget strategy. And patience is vitally important if we are to get the most out of our hard work and preparation. There have been auctions in which I didn’t buy a player in the first hour or more, only to buy six or seven in one round of nominations.

There shouldn’t be many circumstances in which we will bid substantially more for a player than we have budgeted. If we believe that Carl Crawford is absolutely crucial to our success in 2011, we should already have created a $40 budget slot for him. But, if we get carried away and spend $42 for Crawford when our budget for that slot was only $20, we likely will have caused problems executing the remainder of our budget plan. That’s where the discipline comes in.

On the other hand, what if we have $1 budgeted for a catcher, and we find Mike Napoli about to go for the bargain price of $6? Of course, we have to jump in and get him at $7 if we can. This is where the flexibility comes in. We don’t have to pass up a bargain just because it exceeds our slot allocation, so long as we find a way to allocate other budget dollars around to make up for it.

So, discipline and flexibility are the keys. We don’t want to find ourselves with $60 left late in the auction and nobody to spend it on. Likewise, we don’t want to find ourselves with $8 to spend and eight players to buy. I’ve seen people wind up in both situations, and it isn’t pretty.

Somebody may point out that in keeper leagues, it may be necessary to jump out early and make sure we get our fair share of the valuable players available. This is certainly true, but in a keeper league we will have factored the other owners’ projected freeze lists into our budget planning, and we will know who will be likely be available and have a sound idea of what it should take to acquire them. Then, after the final freeze date, we will have fine-tuned our budget and projections to account for any freezes we didn’t anticipate.

An Actual Keeper League Budget. The $182/$78 budget we worked through above is the actual budget I will use in my upcoming AL-only 5x5 Ultra redraft auction. In addition, I will use a similar budget in my 15-team mixed keeper league. Based upon my current plans for freezes, that keeper league budget will look like this:

C $4
C $4
1B $40
2B $15
3B (frozen $5)
SS (frozen $1)
CI $25
MI $5
OF $35
OF (frozen $33)
OF (frozen $6)
OF (frozen $4)
OF (frozen $3)
UT $2

P $20
P (frozen $5)
P (frozen $2)
P $20
P $15
P $10
P $2
P (frozen $1)
P (frozen $3)

This budget uses the same 70/30 split between hitters and pitchers. As you can see, the relatively low prices of my keepers allows me to allocate substantially more money for the players I will be purchasing. Of course, the specifics of this budget may have to be fine-tuned once final freeze lists are announced.

Inflation in this keeper league will be fairly high. Accordingly, it is important that I find some way to pay less than the inflated prices for the players I want. Otherwise, the profit I have built into my keepers will dissolve.

Let's Do the Twist. I have been using this budget approach since 1991, in keeper leagues and redraft leagues, but with a tactic that I haven’t seen the experts suggest. It may seem counter-intuitive, given what we have talked about so far, but it has worked well for me. If you take little else from this article, you may want to remember this little twist:

Conventional strategy and tactics for using a budget system as I have described ($182/$78) assume that I will actually spend $182 on offense and $78 on pitching. The assumption is that if I save $3 on a starting pitcher, I will add that money to another pitching slot. However, I do it differently, and for a reason.

If I save money on a pitcher, I don’t spread those extra dollars among the other pitching slots. Instead, I move that money to the offensive side of the ledger. Ideally, I will be able to spend at least $200 total on my offense. This strategy is justified by the fact that hitting is more reliable than pitching, and the fact that there is usually a large amount of pitching value left in the player pool after the auction.

Whether we tap into that extra pitching value by a reserve draft or by free agent pickups, it is usually much easier to bolster our pitching after the auction than to improve our offense. And the stronger our offense, the more options we have for improvement through trades and other in-season management techniques.

Well, there is this week’s article. I don’t expect that readers will rush out and copy the approach that I use. But I hope that it did give you some insights as to how you can use a budget to give yourself a competitive edge…and also explain why some of your fellow owners are pulling their hair out after the auction.

Good luck, and have fun.

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4 Comments:

Blogger jeff said...

Nice work, was an excellent read. Going for the championship this year in my 5x5 AL Only keeper league this year! Rusty Kuntz all the way.


Best,
Jeff

Tuesday, March 8, 2011 at 12:15:00 AM EST  
Blogger Jon Williams said...

Another great piece! I use a very similar method in my keeper leagues. One difference you may find interesting is that I do not slot my pitching budget. I usually fail to accurately predict what various pitchers will go for in my leagues so I stopped trying so hard. I budget $75 out of a $265 total (also a ten pitcher league)which with my freezes is usually enough to get five solid starters and speculate on saves. Hitting prices are more predictable so my budget is more specific. But again I use different divides. I budget for corner infielders (1B,3B,CR) middle infielders, outfielders and catchers rather than each slot. I find it gives me a greater ability to Improvise. In my keeper leagues pricing is weird, a top pitcher could go for $35 one season and $45 the next. Just my overshare.

Tuesday, March 8, 2011 at 4:06:00 AM EST  
Blogger Scootron said...

Jon, an owner with your experience can be much less detailed in the budget, and just keep track of pitching in his/her head. I think less experienced or less disciplined owners can benefit from the structure.

Perhaps the most utility of the budget process can come from those steps that I describe as taking place before the auction. This work lets owners have a realistic idea who they can purchase without getting into money trouble. The most valuable part might be the process of putting together roster after roster, seeing which ones help the most.

My teams usually don't look really strong after the auction. Referring to my winning squads of 2008 and 2010, another owner said they were the worst teams he had ever seen win. There usually won't be a lot of stars, just a bunch of blue collar guys who get the job done.

It was a pretty fun piece to write, even though it came out longer than I had originally planned. But it is a fairly complicated process. The fortunate owners like yourself can do a lot of it by instinct and without writing everything down. I still need the reminders to keep me from getting over-extended or (even worse) wait too long to start spending my money.

Tuesday, March 8, 2011 at 12:56:00 PM EST  
Blogger mike said...

Thanks for the great fantasy advice. I tend to go 70/30 as well and it usually works out fine.

The league I'm in has been together for more than 20 years! It's a NL only league with now 11 teams. We are looking for a 12th team to participate. The entry fee is 150 credits and there are transaction fees. It's a very competitive league with a variety of obsessions. We gather in upstate NY, but have done drafts for out-of-towners using Skype. If you are interested in more information, you can email Mike at voltaic1@gmail.com.

Wednesday, March 9, 2011 at 1:19:00 PM EST  

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