Reality Check
It's time to consider opportunity costs
Editor’s note: The majority of this article was completed prior to Monday’s win over the Angels. The win Monday night is taken into account in the final paragraph.
As it stands claiming a Wild Card berth would require 90 wins1. The Padres have 38 wins, with only 78 games left to play. They would need to go 52-26, a .667 winning percentage, to reach 90 wins. Only one team, the Braves, have maintained such a winning percentage (Braves sit at .675). It’s realistic to think the Padres will need to be the best team in baseball for the rest of the season in order to make the playoffs. This isn’t likely to happen.
Never Tell Me The Odds
Notable odds makers place the Padres chances at making the postseason between 13.4% (baseballreference.com) and 22.2% (fangraphs.com).
Baseball Reference derives their odds by simulating the remaining schedule 1000 times, while Fangraphs uses the ZiPS projection system developed by Dan Szymborski. Those projections seem awfully rosy. Here was the NL performance chart prior to Monday’s game:
Based on the Pythagorean win expectation for the Padres (.533), along with the standard deviation between expected and actual outcomes across the NL, we can estimate that the Padres playing at a .667 clip for the rest of the season is an outcome about 2.5 standard deviations above the mean if they put up the same run differential across the remaining games. This suggests a less than 1% chance to make the playoffs.
Many outlets reasonably feel that the Padres are a better team than their run differential to date suggests. But how much better? As we detailed before, the starting pitching and defensive performances to date have been sustainable, but the bullpen performance is due for negative regression (we’ve already seen this manifesting the past week). The one possible reason for optimism about the remaining season came from the observation that the Padres performance hitting with RISP was so nauseating it very likely wasn’t sustainable. Entering Monday the Padres have started to ‘positively regress’ in BA with RISP, now hitting .212, only the 9th worst performance in MLB history.
They are still miles behind being league average. Here’s some cocktail napkin math: The Padres project to have ~643 ABs with RISP over the rest of the season. If they can perform at a league average BA (.255) instead of their current BA (.212) in these situations, they project 164 hits vs 136 hits. We can conservatively estimate this increase in hits would increase runs scored by ~25 runs above the performance in the first half. Even if we ignore our projection that bullpen regression is coming, would regression to the mean performance hitting with RISP be enough to make the .667 winning percentage in the second half likely? Projecting an additional 25 runs scored to the run differential, and keeping the runs allowed projection static, the resulting Pythagorean wins expectation would be .569 (based on projections of 363 runs scored to 316 runs allowed across the final 78 game). A winning percentage of .667 would mean performing about 1.85 standard deviations above the mean expected performance. That translates to the top 3.2% of expected outcomes. That’s our optimistic projection for the Padres’ chance to make the playoffs, presuming the bullpen regression ends up very minimal and the offensive output improves significantly. About 3.2%. That is not 0. But neither is it likely.
We said above it would take 90 wins to make the playoffs based on current projections. But we don’t know how the last 78 games will play out. It may not take 90 wins to make the playoffs. It may take fewer. A familiar team once made the playoffs with only 82 wins in 2005 (the lowest win total to ever qualify for the postseason). The Hail Mary that Padres Faithful are praying for is the trajectory of the 2006 Cardinals, who somehow made the postseason with only 83 wins, and went on to win the World Series. Famously, the 2021 Braves did not break .500 until the 111th game of the season, well into August. The bottom line is this: a successful season at this point is very unlikely, but is not completely out of reach. Before Monday’s game this was the scenario analysis for different totals of wins required to make the playoffs across the last 78 games, assuming the Padres shed their RISP woes and continue the same defense/pitching performance:
Again, these are our rosiest projections. If the Padres do not play better across the remaining 78 games the outlook is significantly more bleak. Even if it takes only 83 wins to make the playoffs (45 more wins across the final 78 games, a 44% probability), it’s still more likely that the Padres miss out. It will take massive luck to reach the playoffs this year, but it’s not accurate to say it’s completely out of reach.
Opportunity Costs
We know from several team sources including AJ Preller’s recent interview with Ben & Woods, that the intention is for the team to try to win in the second half, and make the playoffs.
We started this article going through that tenuous math exercise because we hope that AJ’s upcoming decisions are centered around one extremely important consideration: opportunity cost.
What’s the downside of sitting back and just hoping for the 3.2% outcome of the Padres reaching 90 wins and making the playoffs? Well, in a single season vacuum there is no downside and the right decision is to keep the faith, try to shoot the moon. But in the real world pursuing the 3.2% outcome comes with a potentially high opportunity cost. By sticking with AJ’s plan to keep the team intact and pursue a second half run, AJ will forgo a chance to trade certain high performing players that are unlikely to remain with the team for its 2024 season. Not trading these players means we will be realizing present value at the expense of future value. Even with qualifying offers to Josh Hader and Blake Snell in the offseason, the Padres will only receive modest draft compensation should they walk in free agency. The Padres could get far more future value for Snell and Hader in trades at the deadline this year, but that would come at the cost of the the slim chance this team has of reaching the playoffs this season. We want to emphasize that giving up on a contender, even an underperforming one, is a big deal. But that doesn’t mean there isn’t a right time to give up. What we suggest is that the moving target of the Padres playoff odds be the lodestar for AJ as he considers the opportunity cost of competing (diminishing future value) vs the opportunity cost of selling by the trade deadline (eliminating whatever chance there is to make the postseason this year). And we’re going to attempt to give some guidance about that inflection point.
Risk Adjustments
There’s a concept in finance of a discounted future cash flow, where a discount rate is applied to future cash flows to help approximate the risk that those cash flows will not arise, and to compensate for the opportunity cost of the capital used in the investment. We propose AJ consider a similar framework for his trade deadline decisions. This is the idea: if AJ is presented with an offer for Blake Snell and Josh Hader that increases the projected 2024 playoff probability by more than the present 2023 playoff probability, he may take that deal. But there is an added element of risk when assessing future outcomes. We know that the 2023 Padres have at least a chance to make the playoffs, however slim. We don’t know that about the 2024 Padres yet. A lot can happen from preseason projections to regular season performance. In 2022 we saw the unexpected combination of injury and suspension rob us of Fernando Tatis Jr. In 2023 we saw as yet unexplained catastrophic poor performances from Manny Machado and Xander Bogaerts. As bad as the 2023 season has gone there is at least the mathematical possibility of a playoff appearance. The 2024 outlook is subject to uncertainty which requires a risk adjustment. In finance this is done by setting a discount rate for future cash flows. No such risk adjustment is standard in the game of baseball. We would propose that AJ consider a simple risk adjustment: Discount the future value (in terms of future playoff probability added) by n+1 where n = number of seasons punted. So if the chance of the Padres making the playoffs in 2023 is 3.2%, and AJ receives a trade offer for Snell and Hader that raises the future probability of the 2024 Padres making the playoffs by 6%, he should apply a discount of n+1 when assessing the trade value. n = 1 season (2023) punted. So:
Present value of future playoff probability (PVFPP) = 6% / (n+1) where n = 1 season (2023)
Therefore: PVFPP = 6% / (1+1) = 3%
In this case the trade, in terms of present value would be worth punting on a 3% present playoff probability. Since the Padres present playoff probability is 3.2% AJ should pass on that trade.
If another trade offer came along for Snell and Hader that raised the 2024 playoff probability by 7%, the present value would be calculated as:
PVFPP = 7% / (1+1) = 3.5%
Thus AJ would be wise to accept this trade and punt on the remaining 3.2% playoff probability in 2023 because he would be getting more risk adjusted present value at 3.5% by doing the trade.
Applying this discount rate to the future probabilities is meant to approximate the increased risk as we forecast further into the future, to prevent punting for too little. The point here is less about finding the exact formula, as the principle of doing a measured estimate of the actual opportunity costs involved in making the types of deals AJ will be considering over the next month of the season.
Stability
Peter Seidler has made it clear he values continuity, and even a full Padres meltdown is unlikely to dethrone AJ Preller. Those who want AJ gone can take solace that Seidler’s focus on stability decreases the likelihood of a desperate GM mortgaging the future to try to salvage the present and save his job. We will be keeping a close eye on the playoff odds, and if they keep dwindling, we will advocate strongly for acknowledging the opportunity costs of trying to shoot the moon. Our window was never supposed to be just 2023. And it doesn’t have to be.
Chaos
Baseball is a chaotic, volatile game where the best players fail 7 out of 10 times. You’re more apt to see longshot outcomes in baseball than other sports. What are the odds of a team coming back from an 8 run deficit to win? What are the odds of a relief pitcher hitting a grand slam off a hall of famer? What are the odds of Eric Hosmer managing not to ground into a double play in order to set up a grand slam? What are the odds of all of those things happening in the same game?
Longshots happen in baseball all the time. It’s why the game is fun, and so maddening. None of this is to say that the right strategy is to hold out for a miracle. The focus of all of the above is to shine light on the decision before AJ, and to implore him to appropriately account for the opportunity cost of whichever strategy he chooses. Failing to account for opportunity costs, however small, could lead us to a poor decision. Like it or not, it appears AJ will be the GM for the foreseeable future, and he intends to let this team compete. The next month is truly going to make or break the season and we hope AJ will have the guts to do the right thing. We hope, amidst all the chaos, to know what that is.
Lucky 7’s
Last year another longshot comeback started when, in the 7th inning of the 7th game of the postseason, which was the 7th series of the season against the Dodgers, a game that the universe had pushed to 7:07pm start, Ha-Seong Kim wearing number 7, delivered the Padres’ 7th hit of the night. That hit set up Juan Soto, a player acquired for a steep price in terms of future value, to tie the game. Jake Cronenworth would eventually come up with 2 outs and RISP2:
If we’re going to give up on pursuing moments like these we have to make sure we do so only when it is clear that in doing so we increase the odds of a championship coming to San Diego. All of this was written just prior to the Padres win on Monday night. They now have 77 games remaining to try to win that last playoff berth. The Padres are going to need some luck3, we hope 7 can be their lucky number again.
As of this writing if the season ended today the Giants would hold the final Wild Card spot with a 46-38 record, the equivalent of ~89 wins across a full season
Ok a lot of luck. Like, San Francisco Giants levels of luck