Monday, April 29, 2013
2013 NFL Draft - Evaluating the Day 3 trades
Note: See Day 1 evaluation here and Day 2 here
Time to dig into the trades from Day 3 (rounds 4 through 7) of the NFL Draft. As with the previous two days, here is a graphical representation of the trades from Day 3 of the draft as calculated by the Sports + Numbers draft value chart (explained here).
1. What is Cleveland doing? – After praising the Browns yesterday for taking advantage of a team using the old chart, making the Dolphins believe they received value equal to a fifth rounder for receiver Davone Bess when the Sports + Numbers chart shows the Browns only parted with the value of a sixth round pick, these moves look questionable. These were straight-up this year for next year one round ahead picks, so why the discrepancy? In an effort to bring some standardization to the process, I calculate the discount rate on picks as an actual discount rate rather than the NFL standard of “one round per year.” The effective discount rate of NFL teams, as found by Cade Massey and Richard Thaler, is somewhere in the vicinity of 136%. If you leave everything equal and vary the discount rate, the Browns would have to be using an annual rate of 61% to make the Pittsburgh trade “fair” to both teams and 23% for the Indianapolis trade. 61% is a pretty insane discount rate (think what would be used if I wanted to do an NPV for a loan shark) while 23% is still on the high end. Given that the new front office smell is still floating around in Cleveland, the Browns brain trust may be assuming that they have the luxury of time and trading at a lower discount rate than the standard, very high, rate that the NFL uses. The other option here is that the Browns are not using any new chart at all and they simply valued Bess at a 5th round level yesterday. As for the later trade with the Colts, given that Indianapolis came up very Lucky (pun intended) and had an expected win-loss of 7-9 based on their point differential, the Browns may have tacked a few extra slots of mean reversion onto their analysis of where the pick would be in 2014. Time (and Andrew Luck) will tell if that is a wise strategy.
2. Not a lot of evidence for new chart use – These trades simply do not line up according to the Sports + Numbers chart (or any new version). While the premiums involved are small, there is scant evidence here for a change in mindset of NFL teams.
3. Thoughts on the existing chart – Looking at the trades through the Jimmy Johnson chart, it remains clear, as it has been on other days in this draft, that a lot of teams use it as both a starting point and ending point for negotiations.