Ohlendorf on draft value: “On average, the player brought twice the return”

One Yankee I always admired, though he didn’t pitch all that well during his tenure, was Ross Ohlendorf. I suppose it’s an affinity for a guy who has some brains to back up his athletic skill. It’s a shame, really, that more wasn’t made of Ohlendorf’s Princeton thesis while he was with the Yanks. It’s topic: the amateur draft and the return teams get on their investments compared to what players produce before reaching free agency. ESPN’s Tim Kurkjian has a wonderful report on Ohlendorf and his thesis. In it, the 6’4″ righty deftly demonstrates that playing skill doesn’t necessarily correlate with understanding of the game.

Here’s Ohlie on his thesis:

“Many of the players in the study did not make the major leagues,” Ohlendorf said. “However, many of those who did produced tremendous returns for the teams who drafted them. When looked at as a group, the internal rate of return on all the draft picks in the study was 60 percent. This is an extremely high rate of return. It is saying that if you invest $1, it will grow to $1.60 after a year and $2.56 after two years, and so on … I believe the stock market has had a historical rate of about 7 or 8 percent, prior to the last year. So even though many of the investments did not work out, the upside on those that did was so great, signing the high picks to large bonuses appears to have been a very smart investment.”
…
“So based on the assumptions I made in my paper, the A’s signing Giambi was the biggest winner in top-100 picks of the 1989 through 1993 drafts because he played extremely well in his first six years of major league service,” Ohlendorf said. “The White Sox did the best job in these drafts, with an internal rate of return of 217 percent. Their best signing was Frank Thomas.”

The ESPN article has a chart with the best returns on investment for drafted players. They’re all familiar names, and three current and former Yanks appear on the list: Jason Giambi, Alex Rodriguez, and Mike Mussina. Unfortunately, the Yankees drafted none of them.

The the entire article is a great read. After Ohlendorf explains the parameters of his thesis, which received an A and got him membership in the Sigma Xi Scientific Research Society, his teammates and former coaches gush about his intelligence and baseball prowess. Chances are Ohlendorf will never break through as a top-flight starter, but if the guy wants a future in baseball he’s got it.