A.J. has to decide what to offer for Juan Soto.
There are many possible outcomes, but probabilistically only one that makes sense
A.J.’s job is hard. He must make decisions in the face of great uncertainty. At Letters to A.J. we help ease his burden by dissecting the probabilistic decisions before him. We also recommend the best path forward.
This is the first letter to A.J.
What should a major league baseball GM trade for a 23 year old Ted Williams?
It’s tempting to say “whatever it takes”, but this isn’t the correct answer. The goal of the GM is to win a World Series, thus the correct answer to what a GM should trade for a player depends on what the GM thinks about the probability of the team winning a world series with or without trading for that player.
This week it was made known that A.J. has to decide what (if anything) to offer for Juan Soto. A.J. doesn’t know if Juan Soto is the next Ted Williams. A.J. doesn’t know if the Padres will win the World Series if he trades for Soto. It isn’t A.J.’s job to know, it’s his job to make probabilistic estimates.
Here we will explore a series of questions A.J. should ask to determine his best course of action:
“Is it likely that Juan Soto is the next Ted Williams?”
Baseball Reference’s top 5 statistical similarity scores for Juan Soto through age 22 should be familiar to baseball fans: Mike Trout, Frank Robinson, Bryce Harper, Miguel Cabrera, and Mickey Mantle, with Mike Trout being the most similar through age 22. More commonly, the Ted Williams comparisons arise due the perfect left handed swing and precocious strike zone mastery so rarely seen in baseball history. Juan Soto is 23 years old, has already banked a 7 WAR season, and is on pace for another this year. He has no known long term injury concerns. Historical comparisons suggest that A.J. should consider it likely Juan Soto is a hall of fame talent just entering his prime.
“What production are the Padres likely to get if they trade for Juan Soto?”
Players’ skills aren’t translated to production in a vacuum. Park factors and contract considerations inform the type of production that a player ultimately puts forth. Soto’s home ballpark, Nationals Park, has a park factor of 99 suggesting he has not been the beneficiary of inflated stats a la Coors Field.
But can Soto withstand the offense suppressing aspects of Petco Park (park factor of 94)? This is the biggest unknown. Petco devours hitters. Even after the fences were brought in, it continues to be the 2nd worst hitter’s park in baseball.
Soto’s career OPS in Petco is an underwhelming .791 in 8 career games. The sample is quite small and his BABIP of .208 suggests extreme bad luck, beyond simply park factor explanations. In 284 career games at Nationals Park, a slight pitcher’s park, he has a career OPS of .958, compared to a career road OPS of .978. It’s fair to presume that in a neutral ballpark his OPS is likely in the .960 range. The differentiating feature of Soto’s game, his mastery of the strike zone, is unlikely to be influenced by playing in Petco Park which puts a higher floor on any offensive regression he might suffer. Even if playing in Petco depresses his OPS significantly during home games, it’s likely that he will maintain a composite OPS of >.900, which is consistent with perennial all-star/borderline MVP status.
Soto is under arbitration eligible contract through 2024. He turned down a 15 year $440 million contract offer from the Nationals. A.J. must consider whether it is likely Soto will re-sign with the Padres beyond 2024, but he can consider two and a half seasons of all-star to MVP caliber play during the 2022-2024 seasons very likely.
“What is it likely to cost the Padres to get Soto?”
It is almost unprecedented for a player this good, this young, this healthy, and under contract for an additional 2 years, to be traded.
Sources say the Nationals are likely to ask for a team’s top 4 prospects, ideally including young major leaguers. For A.J. that would likely mean offering C.J. Abrams, Mackenzie Gore, Robert Hassell III, and one of Jackson Merrill, James Wood, Luis Campusano, or Esteury Ruiz (henceforth known as Abrams et al.)
A typical probabilistic heuristic to evaluate a trade would be to add projected career WAR of the outgoing players to the projected WAR of the incoming players. For the case at hand this would mean projecting the career WAR of Abrams et al. and comparing it with the projected career WAR of Soto. This is a sound methodology for evaluating exchanges of value in a vacuum, but A.J. does not live in a vacuum. A.J. must consider another two other factors which are the time value of production, and the location of production.
Winning a World Series famously requires many players having simultaneous good years. Essentially, if your goal is to win a World Series this year, you should value a 7 WAR season from a player now much higher than a 7 WAR season a year from now. This is the time value of production. There is little probability that Abrams et al. produces a single 7 WAR season before 2024, and likely will not reach peak production until the 2025-2029 timeframe. On the other hand, it is likely that Juan Soto will produce close to 7 WAR annually through the 2024 season. When considering the time value of production, A.J. should consider a World Series win more likely by 2024 if he trades for Soto.
But what about a broader time horizon, say 2030? To answer this question, A.J. must consider the location of production, which is to say how many years of all-star production Abrams et al. will produce for the Padres during that time period. None of Abrams et al. is currently playing at an all-star level, and eventually the rookie contracts will expire and the Padres will have to pay market rates to retain their services or let them walk. This means there is a narrow window within which the Padres should expect to capture all of the value produced by Abrams et al., and beyond that timeline they should assume that some of the career production of Abrams et al. will be accruing to teams other than the Padres. While Abrams et al. are very likely to produce many seasons of all-star level production, it is reasonable to expect that some of those productive seasons will be for teams other than the Padres, and A.J. should be realistic about how many seasons the Padres should expect to benefit from and weigh only that sum in deciding whether to trade for Soto.
Taken together, it is likely that A.J. will have to give up Abrams et al. to get Soto, and it is also likely that trading for Soto gives the higher probability of of winning a World Series by 2024. It is possible that Abrams et al. will accrue more total WAR than Soto through 2030 but it is not likely that all of the production of Abrams et al. will accrue to the Padres. A.J. must apply proper discounts to account for the time value and location of the production Abrams et al. in deciding whether to trade for Soto.
“What costs are the Padres likely to incur if they don’t trade for Soto?”
It’s easy to believe there is no cost to the Padres if they don’t trade for Soto, but this is a fallacy. There is a significant opportunity cost. The Padres are a top 10 team in pitching and defensive metrics, but are 21st in OPS and 16th in runs scored through the All-Star break. With the expected return of Fernando Tatis Jr. to the lineup in the second half of the season, the addition of Soto would likely push the Padres into the top 10 in offense. A.J. must consider the opportunity cost of not trading for Soto: a chance to field a team top 10 in pitching, defense, and offense.
Another cost A.J. must consider in trading for Soto is the near certainty of exceeding MLB’s competitive balance tax (CBT) in consecutive years. In the Padres’ case, exceeding the CBT threshold this year would result in being taxed by the league at 30% on every dollar over the $230 million limit. But this is really just scratching the surface. In short, sustained spending in excess of the CBT threshold carries significant penalties that only the richest and most powerful teams can afford to confront with a dismissive sneer. Historically, the Padres are not one of those teams.
However, the Padres are in their own uncharted waters as the team is experiencing a period of unprecedented spending spearheaded by principal owner, Peter Seidler. Seidler has made no secret of his desire to win a World Series and has given A.J. the financial resources to do so. Soto might very well be the missing piece of this jigsaw puzzle and no one understands that better than A.J. and Seidler. Thus, it stands to reason that if the Padres make a serious pursuit of Soto, it is because Seidler has given the green light to exceed the CBT threshold, accepts its implications, and has incorporated it into his plans.
What about the Nats’ “bad contracts” problem?
Patrick Corbin appears to no longer be a viable starting option for a contending team after producing negative WAR each of the last two seasons. Stephen Strasburg is out for the season again, and one may wonder if he will ever throw another pitch in the big leagues. But the Nationals still owe them an astounding amount of money. The Nationals would love nothing more than a white knight to come along and take one or both of those contracts off the books. Only a few teams can realistically afford to do this (e.g. the teams who sneer at the CBT). Why wouldn’t the Nationals steer Soto toward one of them? Frankly, they might. It remains to be seen whether the Nationals will prioritize high end prospect talent or immense deadweight salary relief, or demand both.
The Padres are currently 5th in overall payroll, and the question of whether the Padres are willing to go deeper into the CBT is knowable only to ownership and perhaps A.J. If Padres ownership permits A.J. to consider offering deadweight salary relief in addition to Abrams et al., it is likely that the Padres would be the clear favorites to land Soto. However, in this scenario it would be crucial for A.J. to consider the opportunity cost of bearing that deadweight salary. Corbin is owed $24,000,000 in 2023 and $35,000,000 in 2024. Strasburg is owed $35,000,000 annually through 2026. Consider that most analysts expect Soto to command $35,000,000 per year in his next contract (he turned down the Nationals’ offer of $440 million over 15 years, an average of $29 million annually). The opportunity cost of taking on this deadweight salary could therefore be considered approximately the market value of Juan Soto. If the Nationals insist on including the deadweight salary of Corbin and Strasburg, A.J. must consider whether it is likely that the Padres would be better off with Soto plus the deadweight salary (and its opportunity cost), or Abrams et al. and roughly the salary it would take to sign a player of Soto’s caliber on the open market. The keen reader will note the flaw in assigning opportunity cost in this way: while it may cost $35,000,000 to sign a player of Soto’s caliber, players of this caliber are not readily available on the open market. We thus suggest A.J. apply a discount to the opportunity cost to account for the possibility that even if he opted to retain the salary cap flexibility there may not be a player similar to Soto available on the open market to spend on. In the aggregate, even accounting for the opportunity cost of assuming deadweight salary, it is likely that taking on Soto, Corbin, and Strasburg for Abrams et al. still furthers the Padres’ goal of winning a world series by 2024 more than the alternative.
“What should A.J. do?”
A.J. is undoubtedly whispering this to himself as he anxiously passess another sleepless night reflecting on the weightiest decision of his career.
Soto is a hall of fame talent, healthy, who has a skillset that is likely to withstand the oppressive confines of Petco Park given his strikezone mastery, and is under contract through 2024. It is very likely that getting Soto will lead to 7+ WAR accruing to the Padres annually through 2024
While Abrams et al. is a steep price to pay, the peak production of that cohort is likely to accrue from 2025-2029, possibly outside of the Padres window to compete for a title, and should be discounted for the time value of production. A discount should be also be applied for the location of production for Abrams et al., which is likely to only be partially for the Padres.
If the Nationals insist on including Corbin and Strasburg, A.J. should consider their addition a large opportunity cost as their salaries could have been spent on another player of Soto’s caliber in theory. However, A.J. should apply a discount to the opportunity cost since the salary cap space can be fairly considered necessary but not sufficient to obtain another player of Soto’s caliber. Juan Sotos do not become available every season, nor even every decade by some measures.
After measured consideration of the situation, we at L2AJ feel that the right decision to maximize the probability of winning a World Series by 2024 is to trade for Soto.