Why is it that so many NFL teams don’t understand the concept of “Net Present Value,” or more importantly, how to calculate an NPV when they are drafting players and planning for their future? I ask, because it seems like every year, there is one team, and sometimes two, who screw up the calculation and get picked off by the New England Patriots.
It’s really not that complicated. A dollar owned today is worth more than a dollar owned a year from now. But more often than not, a dollar owned today is not worth more than $1.50 owned a year from now. In such an instance, today’s dollar has a lower NPV than next year’s buck-fifty.
Along those lines, The New England Patriots now lead the league in finding trading partners that don’t understand this concept. Twice in 2009 and once again this past weekend, the Pats have found suckers who are willing to accept a dollar now for the obligation to pay the Pats $1.50 one year later. Curiously, all three are from the South, lending credence to the perception that Southerners really aren’t that good at math.
Here are the specifics at hand. A year ago, the Pats traded third round picks in the 2009 draft – picks 73 and 89 – the Jacksonville Jaguars and Tennessee Titans. In exchange, the Pats received SECOND round picks in 2010, which turned out to be the 44th and 47th picks. So the Pats were able to trade away a year and move up 29 picks in one instance and 42 picks in the other. Fast forward a year, the Pats flipped the 89th pick in the draft to Carolina. Now I don’t have a crystal ball, but my hunch is Carolina is not a playoff team with Matt Moore at QB and therefore, this pick will be no worse than 45-47. So the Pats have once again completed a transaction that will net them 40 slots on the draft board.
Now that might not sound like a lot to some but the consequences are significant when you look at the hit rates on third rounders versus second rounders. It depends on what criteria you want to use, but your chances of getting a quality NFL starter or a Pro-Bowler are much higher with the benefit of 40 draft slots.
That being said, I can’t for the life of me figure out why these teams are so willing to enter into these types of transactions and I am bit curious why the Pats are always the one on the sellside. My hunch is a number NFL teams adhere to a “value chart” where the “value” of draft picks in different rounds and years can be weighed against one another. This chart is then used to guide trades where picks are amalgamated and used by teams to move up their selections. Well, here is a helpful hint to those who rely on this calculator: the calculator is busted.
Folks, second round draft picks in the NFL are gold. Most teams covet them and they can be used as valuable currency. Just ask KC and Washington who have used them to acquire starting quarterbacks. Or New England, which used one to acquire an all-PRO wide receiver (Notice I didn’t say Pro Bowl, which is incredibly disrespectful to someone who has actually been named ALL-PRO). Moreover, if you go back and scan recent second rounds, you’ll see plenty of big NFL names picked in the second round. Obviously not as many as picked in the first round but a hell of a lot more than the number selected in round three.
So why do a handful of teams seem to jump at this trade? And almost as important, why are the Pats always ready to play the role of Goldman Sachs and take the other side? Quite simply, it’s because they get it and the others are too often tempted by the short-term “fix.” Either that or NFL conventional wisdom on this subject is so tortured that the whole crowd is in the dark.
I really don’t care what the cause of confusion is. All I care about is the fact that the confusion keeps making my team richer. The Pats now own the Raiders number one in 2011 (likely a around ten) and the Panthers pick in 2011 (likely around 45). On top of that, they own both their of picks in 2011. And here is the bet. You know what is going to happen a year from now ….someone is going to trade their number one in 2012 to New England for that pick NE got from the Panthers. That someone will be Atlanta (staying with the Southern theme), Matt Ryan will regress further in 2011, and in 2012, the Pats will own the sixth pick in the draft. This all coming after they agreed to give up the 89th pick in 2010. Not even Goldman Sachs makes trades like that.
[Side Note: In Tennessee’s defense, they were coming off an excellent season in 2009 and I am sure they didn’t expect that second round pick in 2010 to be so high. So the Pats kind of lucked into a better situation when the Titans season unraveled. But was it luck? Perhaps the Pats saw this coming and they like to complete these transactions with teams they expect to slide in the following year. On that basis, my early bet is Carolina, a rebuilding team, wins no more than six games in 2010.]
[Side Note II .... another trade along these lines that wasn't mentioned: the Pats traded a late first rounder, a few years back, to a woeful Niners team. the Niners agreed to send back their number one the following year. that pick came in around number ten, allowing the Pats to select 2009 AFC Defensive ROY, Jerrod Mayo. The Niners, meanwhile, selected lineman Joe Staley, a nice but forgettable player.]