How the Yanks should build a franchise

We’ve got quite the lengthy discussion going on in the comments to my post on Joba Chamberlain, but one in particular deserves some recognition. Written by Tommy, the Phillies fan who serves as one of the co-authors of RAB’s offshoot at Breaking Balls (which you should all read), the comment talks about player development and spending with the Yanks’ seemingly unlimited budget:

I think the key question here is how the Yankees ought to leverage their clear superiority in the “ability to spend” category. There are more or less two ways to acquire talent that cost nothing but cold, hard cash up front:

1. Free agency
2. Scouting and player development

Because of the way the rights to young players are distributed (especially under the new CBA), the Yankees enjoy a massive advantage in scouting and player development. They can dole out huge bonuses to foreign players, whether they pan out or not. Smaller market teams regularly fail to sign top international free agents because the ownership is unwilling to spend a few million dollars on a prospect who may never reach the majors. But, in terms of average expected value, these types of deals tend to be favorable.

But the Yankees comparative advantage widens even further when you consider the Rule 4 draft. There, the unrealistic slotting system is supposed to dictate the bonuses received by players taken at each spot in the draft, thus leveling the economic playing field. In reality, players with signability concerns drop to the second half of the first round, where teams like the Tigers and Yankees scoop them up. Phil Hughes at 23rd overall, when he was the best high school pitcher in the draft? Exactly.

And by signing free agents or trading away these youngsters, the Yankees either forfeit the draft picks or forfeit the potentially high upside of scouting/player development types.

The danger of evaluating prospects is that occasionally it’s a good idea to trade a few, because individually they don’t have a ton of average expected value. But if you make a habit of it, as the Yankees did consistently after the 2001 season, you will significantly worsen your team while spending steadily more money.

By getting away from that trend, they have completely turned around their entire farm system.

Tommy basically nails the issue. The Yankees need to strike the right balance among player development through above-slot signings (as they’ve done), free agency pick-ups to fill in the holes and trades at the right time. The Yankees shouldn’t trade their top prospects for low impact pieces that they can find within their own farm system.

Of course, another piece to this puzzle is knowing when to trade which prospects. Here at RAB, we’ve advocated against trading Phil Hughes because his potential is sky high. At the same time, that makes him valuable as a trading chip, but just imagine if the Yankees had traded another sky-high prospect 15 years ago named Andy Pettitte when other teams came knocking? At some point, the Yanks will have to trade prospects we all like, but I’m sure they’ll get the right pieces in exchange.

For now, though, the Yanks have the luxury of money and depth on their side, and that should be a lethal combination for years to come.