In the first part of our draft series I looked at the expected contribution of a draft pick in terms of veteran dollars to determine where underpricing exists the most and to propose a new trade chart. In this part I want to expand on the values of the draft picks and different ways to really use a trade chart, which probably should not be a static chart as I set forth in Part 1.

When we look at the draft in the manner I did before we are completely removing the element of scouting or any other form of analysis of the draft class from the equation. When we want to make the best decisions we want the best information possible. How often do we hear things like “this is a good draft class” or there is “good value in round two, but not so much in round 1”.  As the draft draws closer and closer we should be able to use this information to modify the draft charts accordingly.

You’ll recall that in the last piece I broke down the players into quartiles to come up with our average expectation. The average expectation should always be used in a blind trade such as trading a 2015 draft pick for a 2016 one or a trade before all players have declared. But by draft day we should be able to better project on a player, general round by round quality, or overall draft quality. A team looking to trade up or down should accordingly move within the quartile values to determine their own trade values.

I’d propose, in addition to the average range discussed in part 1, looking at the draft in five different ways:

1. The top 25%- This is where we expect a “boom” draft where we are going to hit on our top line expectations. Clearly this is very risky but I think would be used on a case by case basis for certain players rather than rounds.
2. The top 50% blend- We agree that the draft is filled with good prospects but we don’t have a strong feeling on players being great, but we are pretty sure they won’t fall into the bottom rankings
3. The top 75% blend- We don’t think the players will be total flops, but the draft looks to be weaker overall. Odds are some guys will hit but we want to be cautiously optimistic about the chances.
4. The mid 50% blend- We are confident there are no superstars in the draft but equally confident there are limited amounts of useless players
5. The Bottom 50%- This is a bad draft and we don’t see much upside overall in the crop of players.

Here is how these tiers all look when graphed:

You can see from the graph how much benefit there is when you do hit in those top quartile ranges. It is why there should be extreme value placed on a pick when you fully believe that the player is going to be dominant (i.e. Andrew Luck) and the next options have more question marks. Regardless the draft is still almost completely underpriced with the exception of landing a below average draft pick. This is probably one of the reasons why teams like the Ravens do value those comp picks so much since there is almost always a benefit over the veteran alternative as free agency can also prove to be quite a risk when teams overbid on players.

So how do we use this in a trade?  First of all we need to move away from a point based system and move into a value based system.  The value we will use is the projected value of the pick on the veteran pay scale minus the minimum salary benefit (essentially a cost over average). Now we can easily mix and match player valuations dynamically and trade such that the values over average more or less balance out.

Let’s go back to the RGIII trade as example 1. In this trade Washington was hot to move up to number 2. From the Rams perspective they immediately need to demand value for a player who projected in the top 25% for the draft position. It doesn’t matter if the Rams thought RGIII was that good, all that matters is what Washington thought. To make the trade that means Washington needs to provide about $11.27 million in value. To increase their haul the Rams will argue that outside the top 2 this is an average or below average draft.

Of course we know Washington caved on the deal—they traded three 1^st rounders and a 2^nd rounder for RGIII—but how bad was it? From Washington’s perspective to be even close to equal value on the deal they had to assume that they were going to be in the Super Bowl the next two seasons if the 2nd round was considered average risk. To come out ahead they needed to be at least a high ranking playoff team in 2012 and 2013 and have to internally project the 2012 second round to be terrible.

If the Rams made the assumption that the future first rounders will be pick 16 (relatively fair assumptions) and that the 2012 draft was indeed average they gained $1.6M in value. If they thought that the 2012 first rounder was above average (call it top 50%) they gained nearly $4 million in value. If they didn’t think RGIII was a top 25% guy they walked away with $7 million. The bottom line is that they slaughtered Washington in the trade.

Now the following season the Raiders traded down with Miami, who ended up picking Dion Jordan with the third overall pick in the draft. Oakland was somewhat criticized for the trade because they only picked up an additional second round pick, which was a far cry from the haul the Rams received for RGIII, picked just one spot earlier the year before, and the traditional draft trade chart said they fell way short of compensation. The criticism would be fair if the expectation was that the 3^rd pick was an elite talent and pick 12 was not (they would have lost nearly $5 million in value), but in general the 2013 draft was considered poor.

Oakland wasn’t really coming from a position of power as, unlike the Rams, they were likely the team looking to move down so they couldn’t do the sell job the Rams could do. As long as Oakland saw the 12 and 3 of being similar in chance of being a decent player then they actually did come out ahead in the trade. Miami clearly saw a better player at 3 than 12. If they view 12 as average and 3 in the top 50% or 75% of all picks then they viewed themselves coming out ahead, especially when we consider how much more underpriced (the cost of the draft pick versus the expected return) the Raiders picks were than the 3^rd overall pick that Miami received.  Unlike the Washington deal this was a win-win (as the players turned out maybe a lose-lose was more accurate) and probably aided by who was initiating or pushing the trade talks.

If we are discussing player for pick trades, which are rarer than pure draft pick trades, there is more complexity because of the differences in real cost. When we discuss Philip Rivers for the number 2 pick, it’s a given that the team acquiring Rivers is getting a high level player. The Chargers may believe they are getting one in Mariota but odds are he won’t be as good as Rivers. If we look at this purely on value, Mariota would max out as being worth $11.3 million unless a team is willing to bet he’s a once in a generation type of talent. Rivers, on the other hand, at worst should bring the value of a $15 million player based on his AV. That would indicate that the Chargers need to get more in return, which won’t happen in practice.

The big difference here is the contractual cost. Mariota will potentially give the Chargers $6.6 million per year in added cap space to spend when we compare his high end projected veteran value (around $11.9M) to his actual salary (about $5.3M). So from the Titans point of view the Chargers are getting Mariota plus an added $6 million or so to spend each year.  That brings the Chargers value in the trade somewhere around $17.3 million in veteran dollars compared to Rivers $15 million in value. Rivers, if signed to an extension, would likely wind up costing $23 million a year so there are significant cap benefits for the Chargers here beyond our immediate $6 million gain.

So the Titans should receive an additional $2.2 million in value to balance out the trade.   Based on where the Chargers currently pick that would make a fair package Rivers, a 3, and a 5 for the number 2 overall pick. Alternatively they could include another veteran player that would provide that additional value.

If you want to fool around with trade scenarios feel free to download this Excel spreadsheet that allows you to change your quartile expectation and valuation accordingly for a given draft slot. Simply enter the picks you are considering in a trade and see if the numbers work out to be a reasonable and fair trade for both sides. Remember these values are based on what it would cost to have a comparable veteran player on the team so if you get somewhat confused feel free to let me know.

If you are just interested in a static chart with the numbers here are the pick by pick values over minimum I have assigned to each player based on how you project the player to pan out compared to historical draft data:

NFL Draft Pick Value: Projected Performance

Download the OTC Trade Analyzer Excel Spreadsheet