Carlton appear to be early winners of the trade period with both Adam Saad and Zac Williams on the verge of joining. In recent times the Blues have been particularly proactive pursuing wantaway players, regardless of contract status. A phenomenon known as the Winner’s Curse might suggest their aggressive approach to this component of list management may be doing more harm than good.
The winner of any auction will have the most optimistic evaluation of the asset, assuming unlimited resources. Where an asset’s value is uncertain, there is a greater risk that the auction winner will have overpaid. This is the Winner’s Curse.
The overconfidence in our own skills of assessment lead us to overlook the downside or risk. Caution is rewarded where there is greater uncertainty.
While there may be non-financial aspects to Saad and Williams’ decision, Carlton have won the bidding war. Carlton need to reflect on why other clubs were not able to trump their bid. Either their salary caps were constrained or they have a lower assessment of both players’ value.
One of the core tenets of good list management is to sign players to contracts that they are likely to outperform. Winning what is tantamount to an auction for a sought after player is highly unlikely to result in obtaining the player on a team-friendly deal.
There may be circumstances in list management where it is impossible to overpay. In the NBA, one player can have an outsized impact on the destiny of a team. Lebron James has shown that you can surround him with virtually any cast of players and the team is instantly a contender. The NBA also has “max contracts” which fix a ceiling on contract length and player salary. Given these constraints, players such as Lebron James can’t be overpaid. Indeed, for a select few players in the NBA, the max-contract ensures they are underpaid and locked into team-friendly deals.
The AFL does not have “max contracts”, so clubs aren’t protected from themselves. List managers are free to offer players whatever length or salary they wish.
There are circumstances where non-financial factors such as location, culture and support soften the impact of salary in the bidding process. When Tom Lynch left Gold Coast it is possible that Richmond did not offer the highest contract. The opportunity to join a large Victorian club and Premiership contender likely contributed to the decision, weakening the bidding power of rivals.
Another perspective may be that Richmond’s prior contractual management may have opened the salary cap space for a competitive bid on Lynch. By signing so many players to team-friendly contracts they were then able to overpay when a star became available.
In order to determine what a team friendly contract may be for a particular player, it is first necessary to develop metrics by which players values can be determined and compared to someone else who plays the same role. In baseball a sabermetric statistic known as “WAR” (wins above replacement) allows teams to compare a player to a replacement level player at minimum cost. Sports such as baseball are conducive to such advanced metrics given the one-on-one nature of the sport. The volume of valuable and measurable statistical events in baseball make it amenable to such analysis.
It has typically been very difficult for sports such as ice hockey, soccer and footy to come up with similar statistics given the integrated and contextual nature of the game. The value of a kick depends on the actions of multiple teammates and opponents. The value of a pitcher can be measured in outs, but the value of a footballer’s off-ball defensive work can be subjective and contextual.
Without having objective measurables that allow a team to quantitatively value a players’ impact on the field, it is difficult to determine their contract value. With such objective uncertainty, AFL clubs are liable to be overconfident in their subjective assessments of players and thus susceptible to overpaying.
It was reported Zac Williams was offered a contract of $800,000-900,000 per season , and Saad offered a deal worth between $600,000-700,000 per season. That’s a significant chunk of the salary cap locked in to two players neither of whom would be considered a star of the competition.
I believe both Williams and Saad will be excellent for Carlton next season. Williams will likely provide much needed midfield help and Saad will replace the retiring Kade Simpson in defence. Proponents of Carlton’s strategy may point to their on-field success as justification for their splash in the market. But performance should always be measured against the financial and opportunity cost. It is unlikely that either Williams or Saad will perform to the value of their contract. If Carlton has significant cap space and can front load the deals such that they are unlikely to face problems down the road then perhaps it is worth it. These two high priced recruits will join other expensive recent acquisitions in Mitch McGovern and Jack Martin and only time will tell whether the approach will be viewed as beneficial to the team’s medium to long term build towards a premiership.