If you ever learned game theory in economics, you have probably heard of the lemon car dilemma. The example outlined in The Economist in discussion of the original George Akerlof paper presents a scenario where a shopper wants to buy a used car. That car has an equal chance of being in good repair and of being a lemon. The shopper would pay $20,000 for the good car and $10,000 for the lemon, but he cannot tell which cars are which. The seller, however, does know which cars are which, and he needs $17,000 for good cars and $8,000 for lemons to make money.
The information gap leads to adverse selection. The shopper has an expected value of $15,000 from his car purchase because he has a 50/50 chance of buying either a $20,000 good car or a $10,000 lemon. However, the seller only breaks even on the lemons if the shopper will not exceed $15,000, so he will not agree to sell any of his good cars.
The analogy is imperfect, but fantasy players share a risk with the car shopper. When I evaluate a rookie player, I give some weight to my perception of his potential ceiling and some weight to his potential floor. The average creates an expected value, but like with the used car scenario, that average captures neither real scenario.
This line of reasoning started for me because of Cam Newton. Newton is about to become a star. You might think he already is, but it is nothing like the vision Panthers’ fans have of his future. Newton graded 8.3 overall with -9.4 passing his rookie season, but I have watched him make every throw, at times, and learn from every mistake. He has only scratched the surface of his potential. It is not hyperbole when I say that Aaron Rodgers is the only player I would consider for him in a trade.
As a fan, I look forward to the future of my local team, but I also wonder what Cam could have done for my fantasy team. I play in a dynasty league where in-season, one-dollar pickups have depressed roster prices. We all have money to spend, and rookies are the only players to buy.
I was the only one of us who was enthusiastically optimistic about Newton. My friends all suffer from common fan mentality. They all distrusted the GM, Marty Hurney, who has made an art out of trading future draft picks for worse ones in the present. The 2010 season was abysmal for the Panthers, and it could have been worse. One friend told me he believed Hurney would have taken Jimmy Clausen with the first overall pick if he had it. He is probably right.
Luckily, as strange as that is to say, he had traded away the Panthers’ first round pick so he could take Everette Brown the year before. A bust in-of-itself—Brown graded a positive 2.7 as a pass rusher his rookie season but has accounted for -3.2 and -0.5 as a pass rusher the past two seasons in steadily decreasing playing time. However, that prevented Hurney from selecting Clausen, who scored a –17.2 overall rating in 2010 in just 663 snaps, before the middle of the second round, which was the first pick he had in 2010. That massive difference in guaranteed money—and recall that 2010 was before the new rookie salary scale—allowed the Panthers to take a mulligan in 2011 with Newton.
The difference is that I do not watch a lot of college football. To me, Newton was an athletic prodigy. He looked like a linebacker and ran like a running back. In addition, I thought he could throw. He completed 66% of his passes at Auburn, and I did not have the means to judge him otherwise. I knew he had some off-the-field trouble, but his charisma made that easy for me to ignore.
In retrospect, I was in a perfect situation. Newton was about to become a star, and I was the only one in the draft room who thought he might. I completely messed it up.
I had always tried to be disciplined in auction drafts. That meant a few different things. First, I tried not to include a player’s career potential in my projections for the one season. That reasoning had become challenged by some recent rookie QB play. In 2008, Matt Ryan came in at fourth in our rankings with a 21.8 overall grade. Joe Flacco in 2008 and Colt McCoy in 2010 came in as positive contributors, at 2.0 and 0.1, respectively. However, that had failed to translate into fantasy production. Ryan, for example, threw for just 3,500 yards and 16 scores that rookie season.
Second, I never exceeded my projected dollar values. I tried to take what the other managers gave me so I could gain advantage when they underrated players and positions. I believed that by spending a few extra dollars in premium to get the players I wanted, I would have missed potential value picks later.
I was willing to pay a few dollars for Newton. His upside was similar to the season Vick had in 2010—Vick was able to lead most leagues in fantasy scoring despite his -0.3 passing grade because he was so productive (12.4) as a runner–but I saw that as a best-case and never imagined he could be that good immediately. In the draft, a bidding war pushed Newton to $12. As a point of reference, I determined the value of his 2011 season was $43 in our format. The two owners who bid up Newton did so because he was a day-one starter, not because they had genuine optimism for his productivity. They had few other options and were desperate.
A lot of the missed opportunity is because of the specifics of my league, but I believe I can distill the lesson I learned into a general concept. The price you pay for any drafted player should be informed by the opportunity cost of available alternatives, but the fewer viable alternatives in your league, the more willing you should be to exceed the price for the expected value of a rookie player and approach his ceiling. Chances are any player who fails to reach his potential will be undesirable as a keeper, in any case. However, if you capture even a few dollars of value over cost of a player, he becomes an asset for the life of his career.
I know that the rest of my league will have learned a similar lesson, and I expect Andrew Luck to suffer the burden of new expectations. Robert Griffin III could face that inflation, as well, if there is a consensus opinion that dual-threat quarterbacks are a revolution and not an anomaly. This may not be the draft to take advantage, at least as it applies to quarterbacks. However, future quarterbacks will fail and the bar will eventually reset. Do not allow yourself to shy away from taking a risk, if context makes it appropriate.
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