A discussion on inflation

[TranaGreg]

... and well, that's not good because you won't spend all of your money and your team will be bad. ...

Thanks, I was thinking along these lines & couldn't articulate it well. Money management - maximizing the value of ALL of your $260 - is an equally important concept.

[Ken]

This is part of the tricky part about inflation and why following the numbers is foolish.

Definitely disagree. I am a numbers person and I've been extremely successful. Now, like real baseball, it is a combination of numbers and other analysis, but numbers is my base. 70/30 on the numbers side.

The other part is, as others have noted, that inflation is not spread equally. The top players more or less suck up all the inflation; all of the values are at $20 and under players; hell in many leagues, most $5 and under guys all go for a buck.

I agree with this

Therefore, if you chase value and refuse to overpay past what the overall inflation numbers says to do, you will end up without any top players and well, that's not good because you won't spend all of your money and your team will be bad.

Wait, that's where we differ. You don't have to "refuse" to overpay. You can still watch auction dynamics and determine the right place to get in. If it moves you can adjust. If you are watching the numbers correctly you'll see this coming.

I think this is well enough known, but there is no way to put it in a formula, so it is hard to do anything about it scientifically; you just have to go by guy.

That's not correct at all. You can definitely look at your auctions history and see where the inflation goes and put it on a curve and use that in your valuations as well if you are interested in that level of detail.

[ssmallz]

This is part of the tricky part about inflation and why following the numbers is foolish. The other part is, as others have noted, that inflation is not spread equally. The top players more or less suck up all the inflation; all of the values are at $20 and under players; hell in many leagues, most $5 and under guys all go for a buck. Therefore, if you chase value and refuse to overpay past what the overall inflation numbers says to do, you will end up without any top players and well, that's not good because you won't spend all of your money and your team will be bad. I think this is well enough known, but there is no way to put it in a formula, so it is hard to do anything about it scientifically; you just have to go by guy.

This is simply not true for all auctions. In my home league, high priced stars regularly go under inflated value while the mid priced guys get inflated way too much. While I agree that you need to get involved with bidding otherwise you'll be left with too much money, if stars are going off the board $5-10 over the inflated price there is no need to feel pressured to buy them. If this is happening in your auction it means that mid priced guys will be better values and you should be able to spend enough of your budget on mid priced guys that you won't have too much left over for end game. The important thing to note is how much inflation you will expect, the rest is just figuring out what the room will do with the extra $$.

[cavebird]

This is simply not true for all auctions. In my home league, high priced stars regularly go under inflated value while the mid priced guys get inflated way too much. While I agree that you need to get involved with bidding otherwise you'll be left with too much money, if stars are going off the board $5-10 over the inflated price there is no need to feel pressured to buy them. If this is happening in your auction it means that mid priced guys will be better values and you should be able to spend enough of your budget on mid priced guys that you won't have too much left over for end game. The important thing to note is how much inflation you will expect, the rest is just figuring out what the room will do with the extra $$.

Interesting, that is not my experience. In my league, high priced and medium priced guys both get over-inflated and everyone under $10 (except that random guy with helium who goes for $20) goes for next to nothing---especially in pitching. Sometimes mid-tier hitters go for inflated value or a little bit less, and I always try to jump in then (but, of course, it only takes two to kill that, lol), but with pitchers, especially starters it is hell. But leagues are different.

[cavebird]

Definitely disagree. I am a numbers person and I've been extremely successful. Now, like real baseball, it is a combination of numbers and other analysis, but numbers is my base. 70/30 on the numbers side.

I have found that in the past 5-10 years, 3/4 of the league has a program that calculates inflation for them, so everyone has the numbers. The question is where you disagree on projections and where you overpay---overpaying for Verlander worked last year; for Sale, not so much. Hell, I got what the numbers said was a great bargain on Justin Upton last year and he he messed up his foot the next day. Still, with everyone having the numbers, the team with easily the best keeper list, despite a poor auction ($20 Nick Pivetta, lol) still won.

Wait, that's where we differ. You don't have to "refuse" to overpay. You can still watch auction dynamics and determine the right place to get in. If it moves you can adjust. If you are watching the numbers correctly you'll see this coming.

Actually, I think we are agreeing here more than disagreeing. Of course, you have to determine when to get in, but that's not necessarily a numbers game. Getting in involves tossing the guys you want instead of the guys you think will get big bids, etc. You definitely have to strike when the iron is hot, but I think this is as much gut as pure numbers. If the numbers say to get a guy but you think he won't meet his projections (unless you do your own projections for everyone, you'll disagree with plenty of the projections in whatever program you use), getting in when the numbers say so is not so good. I guess you could call that numbers, but I call it gut. Hell, I weigh 297 lbs---I must think with my gut, lol. (For some reason I keep typoing gut as guy. No idea why. Well, other than keyboard placement.)

That's not correct at all. You can definitely look at your auctions history and see where the inflation goes and put it on a curve and use that in your valuations as well if you are interested in that level of detail.

I think that's debatable, although "auctions" instead of "auction's" is clearly not correct at all. The problem is that some leagues have inflation going in different ways in different years. Our league is very keeper dependent. For example, this year we have a guy with easily the best keeper list I have seen in 16 years in the league. He has no starting pitchers at all (we have 6 SP, 5 RP, 13 hitters) and needs maybe 4-5 hitters at auction depending on whether he keeps a close-call keeper or two. That will probably shift the inflation even further to the pitching side than the hitting side. Other random events can change inflation that has nothing to do with league history, too. For example, with that top keeper list leading to more money spent on pitching (in particular top tier starters) math would say that pitching would be more inflated than last year when this wasn't the same. But last year had a weird wrinkle. One guy in the league with one or two keepers (Garrett Hampson, locked in lineup all year, lol) and tons of auction cash (we are $300 budget) had to draft by phone because he works in electric line repair and there had been tornadoes in the midwest right before the draft and he was up there working on that. He didn't want to get the plunger (yes, we have a "trophy" for last place), so he executed a "pitchers and pinch-runners strategy. He spent over $240 out of $300 on pitching. Somehow managed to finish 5th out of 16---the last money slot, despite being last in runs, RBI's, and HR (a whopping total of 153---in the year of the juiced ball when HR records fell everywhere) and managed to pick up some keepers in dump trades at the deadline because he was so far ahead in the pitching categories. That skewed wildly what the numbers would have said where the inflation was going. And it happened because of natural disasters a week or so before the auction. Numbers can't predict that.

And he didn't make the strategy up---someone finished 5th several years ago with the same strategy. But nobody else has ever tried it. No way to know in advance if anyone will this year. We lost a player last year and have replaced him. Our rules have new teams as expansion teams with no keepers at all. If the new guy (who knows someone in the league who could tell him about the strategy) wants to have a chance at the money in his first year with an ability to do dump trades to get better for the next year (everyone needs pitching with our roster rules) he could do it. Or he might not. Numbers can't predict that.

A different year, one guy tried the streaming one dollar starters all year strategy (tank ERA and WHIP) and that skewed the inflation completely differently. That hasn't been tried in a while, but could be tried again. Nothing numbers can predict from league history. The historical numbers will put the inflation in the middle from the average of both types of years. That's unlikely to be correct (I recall an old science teacher's joke about averages being iffy by a duck hunting reference with two shots equal distance on each side of the duck with the duck being dead on the average.)

[The Feral Slasher]

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.

So if I multiply each of the player values by 1.25 and subtract the salary, I get player X as well. That's how I compare players. In fact this method to compare players will always yield the same comparative results as what you describe above. It's just showing values in Inflated terms, rather than actual value.

[Ken]

So if I multiply each of the player values by 1.25 and subtract the salary, I get player X as well. That's how I compare players. In fact this method to compare players will always yield the same comparative results as what you describe above. It's just showing values in Inflated terms, rather than actual value.

Right, that's what I said early on in response to DMT that his method of just multiplying would give the correct results but it is not scaled correctly to the actual profitability of the player to your bottom line.

[Ken]

The problem is that some leagues have inflation going in different ways in different years. Our league is very keeper dependent. For example, this year we have a guy with easily the best keeper list I have seen in 16 years in the league. He has no starting pitchers at all (we have 6 SP, 5 RP, 13 hitters) and needs maybe 4-5 hitters at auction depending on whether he keeps a close-call keeper or two. That will probably shift the inflation even further to the pitching side than the hitting side. Other random events can change inflation that has nothing to do with league history, too. For example, with that top keeper list leading to more money spent on pitching (in particular top tier starters) math would say that pitching would be more inflated than last year when this wasn't the same. But last year had a weird wrinkle. One guy in the league with one or two keepers (Garrett Hampson, locked in lineup all year, lol) and tons of auction cash (we are $300 budget) had to draft by phone because he works in electric line repair and there had been tornadoes in the midwest right before the draft and he was up there working on that. He didn't want to get the plunger (yes, we have a "trophy" for last place), so he executed a "pitchers and pinch-runners strategy. He spent over $240 out of $300 on pitching. Somehow managed to finish 5th out of 16---the last money slot, despite being last in runs, RBI's, and HR (a whopping total of 153---in the year of the juiced ball when HR records fell everywhere) and managed to pick up some keepers in dump trades at the deadline because he was so far ahead in the pitching categories. That skewed wildly what the numbers would have said where the inflation was going. And it happened because of natural disasters a week or so before the auction. Numbers can't predict that.

And he didn't make the strategy up---someone finished 5th several years ago with the same strategy. But nobody else has ever tried it. No way to know in advance if anyone will this year. We lost a player last year and have replaced him. Our rules have new teams as expansion teams with no keepers at all. If the new guy (who knows someone in the league who could tell him about the strategy) wants to have a chance at the money in his first year with an ability to do dump trades to get better for the next year (everyone needs pitching with our roster rules) he could do it. Or he might not. Numbers can't predict that.

A different year, one guy tried the streaming one dollar starters all year strategy (tank ERA and WHIP) and that skewed the inflation completely differently. That hasn't been tried in a while, but could be tried again. Nothing numbers can predict from league history. The historical numbers will put the inflation in the middle from the average of both types of years. That's unlikely to be correct (I recall an old science teacher's joke about averages being iffy by a duck hunting reference with two shots equal distance on each side of the duck with the duck being dead on the average.)

I'm confused - your examples aren't inflation based.

You are describing stars and scrubs or a pitcher heavy strategy.

Inflation is literally the increase in price due to the abundance of dollars available in the auction due to discounted prices on keepers.

You are confusing "inflated" prices - i.e. higher than they should be due to the strategy of a particular individual in your league valuing certain players or categories or strategies higher than typical, with actual inflation - the increase in prices simply due to more $s available from keeper discounts.

Those aren't the same thing and should not be mixed.

[The Feral Slasher]

Right, that's what I said early on in response to DMT that his method of just multiplying would give the correct results but it is not scaled correctly to the actual profitability of the player to your bottom line.

ahhh...didn't read every post.

[cavebird]

I'm confused - your examples aren't inflation based.

You are describing stars and scrubs or a pitcher heavy strategy.

Inflation is literally the increase in price due to the abundance of dollars available in the auction due to discounted prices on keepers.

You are confusing "inflated" prices - i.e. higher than they should be due to the strategy of a particular individual in your league valuing certain players or categories or strategies higher than typical, with actual inflation - the increase in prices simply due to more $s available from keeper discounts.

Those aren't the same thing and should not be mixed.

But they have the same result in differing player prices, and our disagreement is that I think that they have to be mixed to do it right.

[ssmallz]

I think that's debatable, although "auctions" instead of "auction's" is clearly not correct at all. The problem is that some leagues have inflation going in different ways in different years. Our league is very keeper dependent. For example, this year we have a guy with easily the best keeper list I have seen in 16 years in the league. He has no starting pitchers at all (we have 6 SP, 5 RP, 13 hitters) and needs maybe 4-5 hitters at auction depending on whether he keeps a close-call keeper or two. That will probably shift the inflation even further to the pitching side than the hitting side. Other random events can change inflation that has nothing to do with league history, too. For example, with that top keeper list leading to more money spent on pitching (in particular top tier starters) math would say that pitching would be more inflated than last year when this wasn't the same. But last year had a weird wrinkle. One guy in the league with one or two keepers (Garrett Hampson, locked in lineup all year, lol) and tons of auction cash (we are $300 budget) had to draft by phone because he works in electric line repair and there had been tornadoes in the midwest right before the draft and he was up there working on that. He didn't want to get the plunger (yes, we have a "trophy" for last place), so he executed a "pitchers and pinch-runners strategy. He spent over $240 out of $300 on pitching. Somehow managed to finish 5th out of 16---the last money slot, despite being last in runs, RBI's, and HR (a whopping total of 153---in the year of the juiced ball when HR records fell everywhere) and managed to pick up some keepers in dump trades at the deadline because he was so far ahead in the pitching categories. That skewed wildly what the numbers would have said where the inflation was going. And it happened because of natural disasters a week or so before the auction. Numbers can't predict that.

And he didn't make the strategy up---someone finished 5th several years ago with the same strategy. But nobody else has ever tried it. No way to know in advance if anyone will this year. We lost a player last year and have replaced him. Our rules have new teams as expansion teams with no keepers at all. If the new guy (who knows someone in the league who could tell him about the strategy) wants to have a chance at the money in his first year with an ability to do dump trades to get better for the next year (everyone needs pitching with our roster rules) he could do it. Or he might not. Numbers can't predict that.

A different year, one guy tried the streaming one dollar starters all year strategy (tank ERA and WHIP) and that skewed the inflation completely differently. That hasn't been tried in a while, but could be tried again. Nothing numbers can predict from league history. The historical numbers will put the inflation in the middle from the average of both types of years. That's unlikely to be correct (I recall an old science teacher's joke about averages being iffy by a duck hunting reference with two shots equal distance on each side of the duck with the duck being dead on the average.)

You raise an interesting point about the effect of 1 rouge team on an auction. I ran a few simulations on excel with the following parameters, 12 team auction with 25% inflation. I made the assumption that going into the draft the inflation is expected to be uniform for hitters and pitchers just to make the math easy.

Now lets say you have 1 team that decides to spend 80% of his dollars on pitching but only 20% on hitting. What's interesting is that the effects are based on what the exptected hitter/pitcher split is. If let's say you assume there will be a 68/32 hitter pitcher split which is a pretty standard split, hitter inflation will now be expected to be 17% while pitcher inflation goes to 40% which is a pretty stark change from the 25% you expected predraft. However if the pitcher/hitter split is changed to 60/40 then pitcher inflation is only 35% which is closerto predicted.

What's interesting is that if you have a crazy owner who decides to go heavy on hitting, it doesn't change things much. Assuming a 68/32 expected split, if one owner decides to spluge 90% of the budget on hitting it only inflates the hitting prices to 28% while pitching inflation only drops to 17%. This makes sense as the predicted pool of $$ alocated to pitching is smaller than that of the hitters so adding $$ to the pitcher pool has a larger effect than adding them to the hitters pool. This effect is lessoned when going from 12 to 15 teams as the rouge team has a smaller effects on the overall money pool.

The total $$ amount you use I.E. 300/team vs 260/team doesn't matter in the simluation. I understand that hitter/pitcher inflation may not be uniform but making the assumption that hitters and pitchers will be inflated uniformly makes the math easier and the concept is still the same with uneven inflation

[Ken]

But they have the same result in differing player prices, and our disagreement is that I think that they have to be mixed to do it right.

Man, I don't agree at all. I think it's important to separate them so you can understand how to react to situations in your auction.

For an analogy, lets say you are running a business, you have money coming in and you have costs. If you are a smart business owner, you understand your expenses - how much is rent? What does my product cost? What's my labor? What's my energy cost?

In your example, you'd just say "Oh I have a bunch of costs, they add up to $X". Whereas I'm saying "I have $X rent, $Y labor, $Z product costs".

So when I'm facing a decision and it may make my labor costs go up 5% and but my rent goes down 2%, I know how that changes the bottom line. For you, you are just looking at the total and you have no idea how to decide, right?

Similar situation here.

Inflation is a decrease in the value of your dollars because of the rules of the game - literally each owner has more money to spend on the same talent than they would in a startup. The rules say they can spend more now. Not that Bob likes pitchers, that's a different analysis and a different component, but that the rules specify the total budget for every team and explain that you can keep players, so my spending power is decreased for every $1.

[Gregg]

Inflation is a decrease in the value of your dollars because of the rules of the game - literally each owner has more money to spend on the same talent than they would in a startup. The rules say they can spend more now. Not that Bob likes pitchers, that's a different analysis and a different component, but that the rules specify the total budget for every team and explain that you can keep players, so my spending power is decreased for every $1.

What is the effect on inflation of keeping the overpriced inflated player for this years auction?

[Ken]

What is the effect on inflation of keeping the overpriced inflated player for this years auction?

If he's overpriced less than inflation (that would exist if he were not kept), then inflation is increased.

[Ken]

OK, I haven't seen a new thread so I'll post here. Hitter vs Pitcher inflation.

I'll start by saying it's fake.

Here's why.

Again, restating, inflation is due to having more funds available for each team to buy the same player pool. So each player, on average, will cost more because there's more to spend on them.

Now, lets look at one team from a particular league, and say that among it's keepers it has the following:

Mookie Betts $1
Gerrit Cole $20

Both of these are good deals, and because they were kept at good prices, there is more money available to spend on the other players we'll buy at auction than there would have been if we were starting a new league where both players would have gone for much more.

Now lets say I play in another league with exactly the same rules and exactly the same owners and all the same keepers. But in this league that same owner has the following keepers:

Mookie Betts $20
Gerrit Cole $1

On auction day, we have exactly the same players, we are chasing the same set of available players, and we all have exactly the same funds.

If you believe in Pitcher and Hitter inflation being different, you are saying that you are willing to pay more for a pitcher in the second league, simply because I swapped the prices of two players on the same team. We are all chasing the same players in the other league. We all have the same amount of money that we had in the other league. But you think prices should be different?

Why?