A discussion on inflation

[Ken]

I've read numerous articles on calculating inflation, primarily aimed at those who are new to auction leagues (specifically keeper leagues).

I believe all of them are fundamentally wrong. And I believe I'm right. I know that's extremely naive of me.

Out of curiosity though, before I tell you my ideas, what's yours. How do you calculate inflation?

For the purposes of simplicity lets take the assumption that every team will end up paying the same inflation at auction (which, if you buy expensive assets early, and then wait back for deals, on average, you do). And lets use a round number. Say 25%.

You have 3 potential keepers. Which one is more valuable?

Player X is on a $1 contract and you believe he's worth $30
Player Y is on a $8 contract and you believe he's worth $35
Player Z is on a $14 contract and you believe he's worth $40.

**Note, set aside generalities and recommendations and anecdotes, I'm interested in your objective approach, formulas, etc. I'm not interested in strategies like stars and scrubs discussions, or patterns you follow, etc.

How do you personally calculate which one is worth the most of those 3, in the abstract?

I have my way, which I believe to be correct, but you tell me how you do it first.

[DMT]

At 25% inflation, player X cost at auction = $37.50, Y = $43.25, Z = $50. So given the savings is nearly identical for all three players I'd keep Z.

[The Feral Slasher]

In general i think inflation is more pronounced for the upper tier guys. By a standard inflation calc they all look somewhat equivalent. So i would tend to keep the most valuable player ($40). However, in your example all of them are upper tier performers and it would depend on some other factors, like age and injury risk. Good question and i am curious to see other opinions. They are all geeat keepera and i would test the trade market if i couldnt keep them all

[Sour Masher]

Here is my approach: maximize the total value/production of my roster. To do this, we would need to compare what the value we keep is plus the value of the inflation adjusted dollars in the auction for each player, normalized for the maximum value player. In your example, the maximum value you are buying is Player Z, for $40, so that is the baseline:

Player Z=$40 plus what $26 in auction money nets you, with a 25% inflation, gets you another $20 in value, so $60 total value for $40=+$20
Player Y=$35 plus what $32 in auction money gets you, 25% inflation, $24 in value, so $59 total value for $40=+$19
Player X-$30 plus what $39 auction money gets you, 25% inflation, $29 value, so $59 total value for $40=+$19

So, by a small margin, player Z is the choice, and even if it were a tie, I keep the guy who is worth the most, because the highest value players are the toughest to replace, and inflation most often happens more in the top tier than in the other tiers.

ETA: Actually, that is not always true--I often don't go just with the math. I sometimes like a player more for age or upside, or because I need that position filled and the auction is light on that kind of player, or I am very broke and want to have more fun in the auction, etc. So, really, these are so close, with other factors in play, none of these are necessarily the wrong choice. But in the abstract, without other factors in play, player Z has the slight edge.

[GwynnInTheHall]

Do you include the Flippin Factor?

IE All Astros go for additional dollars or two...…...

[Ken]

At 25% inflation, player X cost at auction = $37.50, Y = $43.25, Z = $50. So given the savings is nearly identical for all three players I'd keep Z.

For simply comparing the 3 players in a vacuum your methodology works, but I don't think it correctly scales the results.

Also I agree with you on the "since they are nearly identical" portion, but I was looking for a purely formulaic approach (which I do not use purely, but for the purposes of demonstration).

I think there's an easier way to look at this, I think we always look at it backwards.

[The Feral Slasher]

For simply comparing the 3 players in a vacuum your methodology works, but I don't think it correctly scales the results.

Also I agree with you on the "since they are nearly identical" portion, but I was looking for a purely formulaic approach (which I do not use purely, but for the purposes of demonstration).

I think there's an easier way to look at this, I think we always look at it backwards.

I disagree

[Ken]

In general i think inflation is more pronounced for the upper tier guys. By a standard inflation calc they all look somewhat equivalent. So i would tend to keep the most valuable player ($40). However, in your example all of them are upper tier performers and it would depend on some other factors, like age and injury risk. Good question and i am curious to see other opinions. They are all geeat keepera and i would test the trade market if i couldnt keep them all

You are cheating, I was asking about formulas jerk

[Ken]

Here is my approach: maximize the total value/production of my roster. To do this, we would need to compare what the value we keep is plus the value of the inflation adjusted dollars in the auction for each player, normalized for the maximum value player. In your example, the maximum value you are buying is Player Z, for $40, so that is the baseline:

Player Z=$40 plus what $26 in auction money nets you, with a 25% inflation, gets you another $20 in value, so $60 total value for $40=+$20
Player Y=$35 plus what $32 in auction money gets you, 25% inflation, $24 in value, so $59 total value for $40=+$19
Player X-$30 plus what $39 auction money gets you, 25% inflation, $29 value, so $59 total value for $40=+$19

So, by a small margin, player Z is the choice, and even if it were a tie, I keep the guy who is worth the most, because the highest value players are the toughest to replace, and inflation most often happens more in the top tier than in the other tiers.

ETA: Actually, that is not always true--I often don't go just with the math. I sometimes like a player more for age or upside, or because I need that position filled and the auction is light on that kind of player, or I am very broke and want to have more fun in the auction, etc. So, really, these are so close, with other factors in play, none of these are necessarily the wrong choice. But in the abstract, without other factors in play, player Z has the slight edge.

I think your methodology is actually correct, but in this case the decimals are wrong (not that that level precision is important here...).

I also think there is a much easier way to go about it that answers the same question in the same way you are doing it but in 1 step rather than several.

[The Feral Slasher]

You are cheating, I was asking about formulas jerk

I'm the Feral Slasher, of course I'm a jerk

[Sour Masher]

I think your methodology is actually correct, but in this case the decimals are wrong (not that that level precision is important here...).

I also think there is a much easier way to go about it that answers the same question in the same way you are doing it but in 1 step rather than several.

Well then, I eagerly await the reveal--you will save me time before I submit keepers .

ETA: And I see my math error now. I just multiplied auction money by .75, but that is not how I should have gotten to 25% inflation. I was rushing things and goofed.

[Sour Masher]

Related to this discussion, I assume I am not alone in starting my game plan each year by looking at what stats a championship team has at the end of the year and trying my best to match or exceed those stats with my projected stats. I always am aiming for that mark and trying to figure out how to get there with the roster and resources I have. I didn't always do this, but once I started, I started winning much more.

[Ken]

Sour Masher, you hit on one of the key components that most people skip, which is considering the relative $'s not spent and nuking them for inflation.

But we can do that in a general formula, and it turns out some of the numbers cancel out.

Let's take a step back away from the problem for a second. What we really care is total value... at the end of the auction. Let's start by looking at what we would have if we don't keep anyone.

$260 (or placeholder, it works for any total budget) / (1 + inflation/100)
So we are talking about 260/1.25 here = $208. If you don't do anything with keepers that is your base.

And the key is your total EV if you keep a player, vs if you do not.

Lets say I keep player Z. Reminder Player Z is on a $14 contract and you believe he's worth $40.

So I will have my $40 of value, and then I will have ($260 - $14) remaining. But that remaining auction money will be worth less due to inflation. Specifically 25% less. (one interesting nugget here, is that we are seeing that the more a keeper COSTS, the less I'll be subject to inflation during the auction - this is counter intiutive in the general sense - we all want our keepers to be cheap - but in fact when comparing two keepers we need to keep in mind that the more expensive a keeper is, the less money I will have left at auction - which sounds like a bad thing, but that means I'll have less money that is subject to inflation!)

So my EV for keeping player Z is $40 + ($260 - $14) / 1.25 = $40 + $246/1.25 = $236.8. In other words, if I keep player Z and no other keepers, my expectation should be to come out of the auction with $236.8 of total value (which is not good, I want more than $260!)

The "keeper value" of player Z is the $236.8 EV - my base $208 = $28.80 ******** Note, this is the value correctly scaled that we should use when comparing the values of different players. It's truly the net profitability of keeping this player.


So, Sour Masher, at this point you are thinking, "but you said I'd answer in 1 step, and you took more steps than I did".

... but there's a trick. Let's change our values into variables and look at the total equation.

Lets call our price too keep the player (in this case $14) X
Lets call our valuation of the player (in this case $40) Y
And lets call our total budget (normally $260) Z
And lets call our inflation (our example was 25) i

The specific numbers don't matter. This formula works in all cases.

Above we said our base was 260/1.25. That is Z / (1 + i/100).
And we said our EV for our whole team was 40 + (260-14)/1.25 => in the general sense Y + (Z - X) / (1 + i/100)

And our "keeper value" which is the number we care about, is simply the difference in those two numbers.

[Y + (Z - X) / (1 + i/100)] - [Z / (1 + i/100)]

This simplifies down to:

Y - X/(1 + i/100)

40 - 14/1.25 = 28.80

So all I'm doing is taking my valuation, and subtracting the keeper PRICE of the player divided by inflation.

Everyone thinks you multiply the value by inflation (I used to think this too).

Nope.

We divide the price by inflation to get our true valuation.

Player X = 30 - 1/1.25 = 29.20
Player Y = 35 - 8/1.25 = 28.60
Player Z = 40 - 14/1.25 = 28.80

Surprise! Player X is the answer.

I picked examples that were really close so that I would not get generic answers (Feral!), and in this real scenario I'd obviously go with Player Z. Our valuations are not precise enough to go down to decimals like this.

But the takeaway here is a) surprise, the answer is Player X which no one got correct. b) there's a really simple solution to the question and c) use your inflation to reduce your PRICE not to increase your VALUATION!

Value minus (Price over inflation).

That's it. That's all you have to do. It takes everything into consideration and gives you that true "keeper value" that we are always looking for when comparing keepers at different price points. (Obviously positional needs, and contract - a/b/c/z - matter too, but that's not what I was trying to compare here).

Anyway, I hope this was as surprising to you guys as it was to me when I came across it!

Let me know if you disagree with anything here.

[Ken]

One quick addendum.

If I have setup my numbers correctly, I can just take the base ($208 with 25% inflation for example) and add up all my keepers (keeper net value -> again, this is just value minus price over inflation for each) to get a total value.

That total value is my total EV. It's what I expect to have in terms of value coming out of the auction.

Then, after the auction I can simply add up all of my values (forget prices). It should come out near that EV number I was expecting. If the total of all my acquired values is higher than my EV, that means I beat inflation, and did well in my auction. If it is lower, that means I paid more in inflation than my average competitor and I need to improve my auction strategies.

[Sour Masher]

I will need to fully digest this, but if this all adds up, this is really cool. My sleepy brain won't accept the bottom line can be this simple, but I'm sure my less sleep brain will look at your steps and realize it is. Thanks for sharing, Ken!

ETA: Next up, come up with an equally simple way to calculate the initial player values based on projected stats. How do you currently do that? I rely on other resources, but I suspect you do it yourself?