Playing Devil’s Advocate Part II: The Economics of the Packers Trading Up

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Let’s play devil’s advocate one more time and look at why the Packers should trade up in the NFL draft.  This time I will be looking purely at the economics of the draft.  The classic example that Packer fans love in the 2005 NFL draft where Alex Smith was given the biggest rookie contract of all time at that point with $45.9 million deal with $24 million guaranteed while Aaron Rodgers only commanded a $7.7 million deal (less than Smith’s guaranteed contract) with $5.4 million guaranteed.  I’m not going to go in the relative value of Smith vs. Rodgers as players (as countless writers including myself have beaten the topic to death) but the take home message is that the Packers couldn’t lose economically: if Rodgers is the next Bart Starr, then they’ve got him at a discount for the first 5 years, if he’s decent the Packers paid a fair market value for him and if he’s a bust they can cut Rodgers without much penalty.  Smith on the other hand had to succeed; it was the only way to justify his massive contract.

The other important point was that the most effective draft pick is in the middle of the second round, which is where the talent of a player cost the least amount of money compared to the talent available.  Simply in terms of the Packers, if you get a Greg Jennings, Nick Collins or Jordy Nelson, then great since you’ve got a star at a fraction of the cost of the 1st round pick.  On the other hand, if you draft a Brian Brohm or Pat Lee, no big deal, you didn’t have all that much invested in them so they can be cut without ruining your salary cap.  A good comparison is between Mike Neal and Justin Harrell.  General manager Ted Thompson was essentially forced to find some value in Harrell due to his draft status as a 1st round pick and thus kept him on the roster even though he was always hurt.  Neal on the other hand as a 2nd round draft pick wasn’t a very risky investment, and in light of his injury concerns and his drug suspension, news is already out that the Packers could cut Neal rather than hold him on the roster.  If anyone plays Texas hold’em, it’s akin to staying in a game not based on the strength of your hand (which is what you want) but due to the amount of money you’ve already invested.

However, one thing has radically changed the landscape of the NFL from when I originally wrote the article in April, 2010.  That one thing is the new CBA deal and more specifically the rookie salary cap.  For instance, let’s take a look at the 2012 salary of Sam Bradford, the very last 1st overall draft pick to benefit from the old CBA:

 

Name

Contract

Drew Brees

$15,760,000

Michael Vick

$12,500,000

Sam Bradford

$12,000,000

Matt Ryan

$11,500,000

Matthew Stafford

$11,500,000

The list above shows the 2012 salary of Bradford and the two quarterbacks above and below him as a comparison.  You could make the argument that Bradford isn’t as good as any of the listed quarterbacks and definitely isn’t better than Aaron Rodgers, who isn’t even on the list.  I would even argue that Bradford, Ryan and Stafford all shouldn’t be in the same tier of quarterbacks as Vick and Brees and their contracts are only so ridiculously high due to the being very high draft picks during the old CBA.

Now let’s take a look at the 2012 contract of Cam Newton, the very first player of the new CBA

Name

Contract

Jason Campbell

$1,500,000

Sage Rosenfels

$1,450,000

Cam Newton

$1,376,159

John Beck

$1,300,000

Drew Stanton

$1,250,000

 

I could make the argument that Netwon is probably worth more as a player than the other 4 quarterbacks combined and its also interesting to note is that Newton is the only starter and the other 4 quarterbacks are making back-up money.  Simply put the new CBA made 1st round picks cheap.

To put it another way, in 2010 the 28th overall pick was defensive end Jared Odrick, who signed a $13 million, $7 million guaranteed contract.  Last year, Jake Locker (a quarterback no less), was drafted with the 8th overall pick,only signed a $12 million dollar contract.  Essentially it’s the same money overall (aside from Locker’s contract being fully guaranteed, though that’s nothing in comparison with Bradford’s $50 million guaranteed) but a full 20 picks (and presumably 20 players) better.

So what does this all mean for Ted Thompson?  It means that Thompson could trade up and draft 8th overall and only have to offer a contract worth the 28th selection in previous years.  This means that the balance between the risks of signing a bust versus the reward of drafting a star player has now shifted back into the 1st round, where it should be.  Does this mean Thompson will be trading up?  I can’t imagine having all 12 draft picks make the roster so using some of those picks to move up makes a lot of sense to me.  I frankly have no idea what goes on in Thompsons mind (if I did, I’d be a pretty good GM), I’m sure Thompson is aware that trading back might not be the most efficient method in the draft anymore but it remains to be seen whether or not Thompson has it in him to so drastically change what has worked for him for so many years.  Some old habits die hard, but hopefully Thompson realizes that the new CBA means a brand new environment for front offices and evolves with the game.

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Thomas Hobbes is a staff writer for Jersey Al’s AllGreenBayPackers.com.

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  • ThomasMagnumPI

    One thing that must come into consideration is that the salary cap hit of cutting a player varies depending on the contract’s structure. If there is a cap hit that a team takes by cutting a player then I agree with your analysis for the most part (the poker example aside), as a team is somewhat forced to carry a player like Harrel in hopes that he will be able to contribute. This is because cutting that player has a cost (the cap hit).

    Contrast this to a contract whereby the team takes no cap hit by cutting a player. What has been “paid” for a player (previous salary and draft position) has zero bearing on a team’s decision of whether to keep or cut that player. This is because a team is able to “cut it’s losses” by releasing the player with no negative ramifications as long as there is no salary cap hit associated with doing so.

    I do agree, however, that with the new CBA 1st round draft picks are more valuable because the cost of signing the high draft picks has fallen so precipitously. This does not necessarily mean that trading up in the draft is now the preferred strategy, although it has become much more attractive than in the past.

    As a footnote–the poker example reaches a completely incorrect conclusion. The EV of folding a hand is zero, regardless of how much money a player has contributed to the pot. Likewise, the EV of cutting a player is zero, assuming that there is no salary cap hit associated with cutting the player. However, the EV of continuing with a poker hand may easily be negative and thus folding would be the more profitable decision (or less unprofitable if you prefer). Similarly, keeping a player on the roster that has no chance to contribute can also be a negative ev decision because he ties up a roster spot that could otherwise be used for a better player/prospect and the bust also requires a salary.

    • Thomas Hobbes

      My understanding of poker was that your betting strategy was dependent on pot odds ; so for instance if you have a great hand pre-flop and bet most of your money and the flop misses you completely, it still makes sense to stay in the game since if you if you don’t win your chances of winning in the future are so significantly decreased (due to the lack of money) that you should actually stay in the game.

      Going back to the football contracts, I agree that the salary cap hit is really the foundation of my argument, and I definitely should have made that more clear. But in reality, draft position is a very strongly correlated with a players salary cap number, 1st round draft picks used to have outrageous salary cap numbers to the point where teams could cut players even if they wanted to (my feeling is that the Raiders would have cut JaMarcus Russell way sooner than they did if they could have)

      • ThomasMagnumPI

        I totally agree with the second paragraph. Also, let’s not forget that from the human-nature perspective, admitting that a first round draft pick is a complete bust is a tough pill to swallow. Some GMs never admit it, and all of them probably hang on to “their guys” a bit longer than they should.

        As far as the poker goes–I think that you are using the word “game” in two different senses. In the first instance, I think you mean that it might make sense to stay in the “hand” because the pot is very big, even though you have a small chance of winning. This may be true, as long as the decision is +EV (you are getting laid the correct price).

        When you talk about not having enough money to continue in the game, this is a totally different concept than continuing with insufficient pot odds. Basically, you would make -EV decision (continuing with hands that do not have the correct pot odds or implied odds) only if winning the pot gives you the opportunity to make more money later (significantly higher chance of winning the tournament or much more profitable decisions in subsequent hands).

        Basically, you continue with a hand, even though it sucks, because it sucks less than folding. If you fold, you have such a small chance of winning a tournament because you have no chips left–not because you put lots of chips in the last pot. If you continue in the hand, get lucky, and win the pot, now you have a much higher chance of winning the tournament. I think this is what you’re getting at with the poker reference.

        Keeping Justin Harrel sucked, but TT decided that it sucked less than cutting him (because of the cap hit associated with cutting him.) There was a chance that he got healthy and became a solid starter, even though it was a long shot.
        Keeping him around only to crush Packer fans’ hearts year after year, sucked less than the cost of cutting him loose. Let’s just hope that Mike Neal is different.

        • Thomas Hobbes

          Well the whole point is that Mike Neal isn’t going to last like Justin Harrell because his contract isn’t going to force Thompson to keep him just because of the economics. Neal signed a 4-year $2.95 million contract, so he could be cut tomorrow without much loss economically to the Packers. If Neal sticks with the Packers its because they still see potential/depth/etc in him and not just his massive contract.

  • http://grizzlymitch@bresnan.net montanacheezhead

    Thompson is a smart guy. He traded down to get Jordy Nelson which was a surprise to all of us. We can only be so lucky. We need pass rush and a safety and I would use all 12 selections to fill those two or three spots.

    • Bubbaloo

      Montanacheezhead, I kinda agree, kinda not! I’m all for using picks to trade up, and I’ve been crying out for it on this site. Now, if we can get 3 or 4 impact guys with those 12 picks that’s great, unfortunately guys like Neal are also a part of those early rounds, so it’s always a gamble. The other thing is, with the “New” value of “High Pick-Less Money” from the new CBA, that makes trading away a 2nd or Next Year’s 1st or 2nd an expensive proposition from a business standpoint as you’ll need to keep more expensive veterans to fill those spots. A gamble!
      To me, this year it’s almost a necessity to trade up and get 2 impact players on “D” before Woodson and Pickett are done and gone.
      And for the record, I WANT your neighbor, McCLELLIN!

      • http://grizzlymitch@bresnan.net montanacheezhead

        We have a great player right here in Montana and would be a great packer. Trumaine Johnson CB. He is a three time ALL American. He is real big, real fast and real mean. He is pure shutdown and would look great in the green and gold. Looks like the 2nd round for him. I am with you on the Boise State guy.

        • http://allgbp.com Jersey Al

          I like him for the packers… have picked him in some mock drafts.

    • Thomas Hobbes

      What would you do with 4 safeties? Realistically the Packers only have 3 on the active roster. Keep in mind if Collins comes back, safety becomes less of an important need. I think center, running back, quarterback, cornerback and nose tackle are all logical picks for the later rounds as well.

  • wim

    on the D side of the ball especially in the line there are so many intangibles that i almost always feel that thompson’s usual way of stockpiling picks and hope one of them meets the bill or surprises you, kind of the monkeys at the typewriter view, is the way to go. but then hobbes is also right: it just got a whole lot cheaper to trade up. but then consider ron wolfe who seemed to be a genius from round 3 on and be no better than average or below at the one and two slots.

    • Thomas Hobbes

      Well it goes back to quality vs. quantity. If you draft 12 players, for sure not all 12 are going to make the team, so in essence you’ve wasted those picks. Maybe by using a couple of picks and moving up you get a better player and in essence use your draft picks more effectively.

  • Ron LC

    Tough to mix economics with personal potential. The heman element in personnel evaluation is falible and difficult to quantify.

    Definetly brings a unique view to draft day transactions, however. Good article Thomas!

    • Thomas Hobbes

      Thanks, I intentionally focused only on money for this article. I would argue that as a cornerback, Charles Woodson makes far too much money, but as a veteran leader of the defense and secondary I would say that he makes about the right amount. So it’s not all just about money, but in terms of the draft, for the longest time no team wanted to trade up into the top 15 picks just because of the ridiculous amounts of money needed to sign that player. That all changed with the new CBA with Atlanta trading away everything for Julio Jones and the Redskins trading even more than everything for the presumable RGIII. So trading up is definitely more of an option now

      • ThomasMagnumPI

        Thank goodness for the new CBA! I’m glad you mentioned Julio Jones and RGLLL. It sure took lots of Trade Chart points to move up to grab those guys! At least teams are now willing to make those type of moves.

        Couldn’t it be argued that with the new CBA, the top picks have now become MORE valuable than they had been in the past? Because of the rookie pay scale, teams that have the top picks are able to trade them more easily to teams that are presumably already facing some amount of cap pressure (the better teams draft later in part because they have better players–players that command higher salaries and are very important to team success). Shouldn’t this create a bit of a seller’s market, as the pool of potential buyers of the high draft picks has expanded?

        This article sure has prompted lots of discussion–nice work!

        • Thomas Hobbes

          That was the point I was trying to make, especially if you can find a player that can succeed immediately (for instance Matt Ryan) then you can get a star player for a fraction of the cost (of course Ryan was drafted during the old CBA, but let’s say a Matt Ryan-like player). As for it being a seller’s market, I think that only exists if the draft is rich with good players. For instance, I highly doubt the Rams would have gotten such a good deal from the Redskins if: 1. the Colts had won 1 more game and didn’t have the 1st overall pick 2. there weren’t 2 “can’t miss” quarterbacks and 3. if the Redskins had been less crazy in the past and didn’t end up in this mess.

  • Yoop

    I think any team trading away the picks the Skins did for one player is a HUGE mistake.
    But you also have to look at how a team operates.
    Are they a draft and develop team like the Packers and Steelers that lets players go sooner then some think they should to get that younger player playing time.
    Or like the Skins that have spent hundreds of millions trying to get that FA mix that never seems to work.

    I’m all for moving up in the draft for the right price.
    I thought TT paid to much to move up for Matthews had it not turned out as it it did many would be calling it a BAD move.
    And I wanted them to pick Matthews.

    It is all about short term against long term investment. A player that takes multiple HIGH draft picks and multiple year high draft picks to draft will hurt a team if they are good or not.

    You only have to look at the Packers drafting at the end by Wolf and under Mike Sherman as an example.

    Those high draft picks are then ones that should make up the core of your team. If you don’t have them your team will die, some time a slow death sometimes right out of the box.

    • ThomasMagnumPI

      Moving up in the draft does not necessarily mean moving up in the 1st round.

      For example, GB could trade picks 28 and 122 for MIA’s picks 42 and 72 (late 1st and 4th round for early 2nd and 3rd). Or, maybe ATL wants to get back into the late 1st round for an OT and will trade pick 55 and 2013 1st round pick to do it. Or what if TB wants back into the late 1st round to grab a RB ahead of the Giants and GB gets pick 36 and 68 for 28 and 90? What about trading the Eagles picks 28, 90 and 123 for picks 46 and 51?

      These are all examples of what Thomas was proposing–using some of the later draft picks as bargaining chips to move up in the earlier rounds. Personally, if there is not some amazing value to be had at 28, I would like to see one of the above scenarios play out and watch the Packers select a player like Shea McClellin early in the 2nd round.

    • Thomas Hobbes

      I’m not saying that Thompson is going to jump back into the first (I don’t think he has enough ammo for that unless he goes into next year’s draft as well), but moving up in the same round can be very beneficial, again especially considering there is no way that Thompson is going to be able to keep all 12 draft picks on the roster. Finally, I think it definitely depends on the player, a quarterback makes so much of a difference that it might be worth it, would you trade 3 1st round draft picks for Aaron Rodgers, Tom Brady or Peyton Manning? I definitely would, of course that’s with hindsight being 20/20, but the Redskins are crazy and they must think that RGIII is the next for sure Joe Montana or something

      • ThomasMagnumPI

        I agree–a franchise QB is just so very important, just the high chance that RGIII is that guy for the ‘skins makes their trade much more reasonable. I don’t think there is THAT GUY in the draft for GB, but I think there all multiple opportunities for them to move up to get impact players in the 2nd-4th rounds.

  • PackersRS

    Great post man. I was still under the assumption that the top picks were still pretty expensive, so I wasn’t very fond of moving up, but after reading your piece I’d be ok with it.

    • Thomas Hobbes

      Now the only problem with trading up (specifically in the 1st round) is the massive amount of draft picks you have to give up, which is tied to the desperation of front offices themselves. I have a feeling that it will only get worse if owners let front offices continue; for instance if RGIII is a complete bust, Shanahan isn’t going to have to worry about not having a 1st rounder for the next 2 years because he’s not going to be in Washington.

      • PackersRS

        I did the math, using the trading chart that’s available everywhere (don’t know if it’s outdated), and the result was that trading our 1st, 2nd and 3rd could net a move to the 12th pick.

        If the right guy (Ingram) falls, I’m on board with that.

        • Thomas Hobbes

          I’m almost positive at this point no team uses the “trade chart” that’s available online, that was created by the Cowboys in the 90’s and let them “steal” picks by knowing what the relative value for each pick was. It’s not perfect and I’d be willing to bet that each team has their own calculated trade chart by now. What I meant by trading back up into the 1st was having two 1st round draft picks like Raji-Matthews in 09. In terms of sheer numbers of draft picks Thompson might be able to pull it off, but realistically I don’t think he has the ammo.

          • PackersRS

            It’s possible with future picks only… And I sincerily doubt TT will ever do that.

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