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The Yankees didn’t overpay Gerrit Cole

The dollar figures are staggering, but the Yankees might still have a steal on their hands.

World Series - Houston Astros v Washington Nationals - Game Five Photo by Patrick Smith/Getty Images

Whenever a star free agent signs a record-setting contract, the reactions are generally uniform. Eyes pop out of their sockets, future market-setters salivate, and fans wonder aloud how someone who plays a kids’ game can possibly make so much dang money.

I can’t begrudge onlookers whose minds head in that direction. Gerrit Cole, for example, will make $324 million over the next nine years because he’s incredible at baseball. That, obviously, is crazy. Just as obvious, though, is the fact that if Cole didn’t make that money, it wouldn’t go to any teachers, or nurses, or farmers, or social workers. It would simply go to Hal Steinbrenner.

So keep that in mind when I tell you what I’m about to tell you; Gerrit Cole isn’t overpaid. Not even close. In fact, the Yankees might just have a steal on their hands with the Cole signing.

To support that sentiment, I’m going to fall back on a framework that I have personally grown weary of in Dollars per WAR, or $/WAR. The $/WAR model has helped enable the extent to which efficiency has been fetishized across baseball, and provides an easy framework to point to for anyone who wants clubs to be run like hedge funds. Flags fly for titles, not efficiency, but striving to maximize WAR while minimizing the $ mistakes the two.

Yet using $/WAR works in this case because it so easily nullifies the arguments of those would decry Cole as overpaid, even while willfully engaging those arguments on their own distorted terms. I’d typically be loath discuss a deal such as Cole’s exclusively from the viewpoint of how efficient the move is with regards to ownership’s bottom line, but Cole is so good, and so perfect for this particular team, that not even such a cynical approach to this signing can knock it.

The basis for a $/WAR analysis is quite simple. One looks at the wins a player is expected to produce throughout his contract, as well as the expected cost per win on the free-agent market over that span, to come up with a total value number. The actual details of producing a reasonable player projection, as well as the machinations behind finding the cost of a win on the market, are complicated, but the application of those numbers are not.

For Cole, we can use Dan Szymborski’s ZiPS projections, which FanGraphs published alongside Jay Jaffe’s analysis of the Cole signing. ZiPS forecasts Cole to go 16-8 with a 3.11 ERA in 2020, striking out 280 in 200 innings and producing 5 WAR. From there, ZiPS expects Cole to gradually decline.

Now, we need a cost per win. FanGraphs’ calculations indicated one WAR cost about $8 million on the free-agent market last season. The hot stove, however, was frigid last year compared to this winter’s market, so it’s probably safe to assume the cost of a win will increase this year. Let’s call it $8.5 million.

The final assumption we have to make is the rate at which the cost of a win will increase over the term of Cole’s deal. In the past, five percent has been a usual number. If we stick with that figure, $/WAR spits out the following projection of Cole’s contract:

Gerrit Cole $/WAR valuation (ZiPS)

Year Proj. WAR Cost per win Value (MM)
Year Proj. WAR Cost per win Value (MM)
2020 5 8.5 $42.50
2021 4.7 8.9 $41.90
2022 4.4 9.4 $41.20
2023 4.1 9.8 $40.30
2024 3.8 10.3 $39.30
2025 3.4 10.8 $36.90
2026 2.9 11.4 $33.00
2027 2.5 12 $29.90
2028 2.1 12.6 $26.40
Total 32.9 $331.50

The forecasted total value of Cole’s production over the next nine years amounts to just over $330 million, a startlingly similar figure to his actual compensation over that time. Keep in mind, we used pretty conservative inputs for this model. Cole’s ZiPS projection of five WAR is not at all high. The cost per win will likely come out above that $8.5 million number this year, perhaps far above it, with Cole, Stephen Strasburg, Anthony Rendon, and many others having signed huge contracts.

Let’s play with our assumptions a bit. ZiPS isn’t the only public projection system at our disposal. FanGraphs’ depth chart projections peg Cole for 6.4 WAR in 2020, a figure that I think most Yankee fans would find more reasonable. If we start Cole at that number, and then have him decline at the same rate ZiPS expects, we get this forecast:

Gerrit Cole $/WAR valuation (FanGraphs’ Depth Charts)

Year Proj. WAR Cost per win Value (MM)
Year Proj. WAR Cost per win Value (MM)
2020 6.4 8.5 $54.4
2021 6.0 8.9 $53.5
2022 5.6 9.4 $52.9
2023 5.2 9.8 $51.4
2024 4.9 10.3 $50.1
2025 4.4 10.8 $47.0
2026 3.7 11.4 $42.3
2027 3.2 12 $38.4
2028 2.7 12.6 $33.9
Total 42.1 $424.0

With just a slightly more aggressive projection of Cole’s ability, we’re already well above $400 million. Still, we don’t have to stop there. We’re using the average cost per win here to value Cole’s contributions, but there’s no reason to assume all teams should actually value a win the same. A team like the Yankees, a big-market behemoth that will be in the thick of contention for the foreseeable future, should probably place a higher value on a win than an also-ran. It’s much more valuable to go from 95 wins to 102 than to go from 67 wins to 74.

Let’s simply say the Yankees should be willing to pay up to $10 million per WAR on the market right now as a championship contender, and subsequently inflate that figure at five percent. This is a more aggressive assumption, as it maintains that higher cost-per-win number on the supposition that the Yankees will remain a contender through the 2020’s. Here’s the picture:

Gerrit Cole: The half-billion dollar man

Year Proj. WAR Cost per win Value (MM)
Year Proj. WAR Cost per win Value (MM)
2020 6.4 10.0 $64.0
2021 6 10.5 $63.0
2022 5.6 11.0 $61.6
2023 5.2 11.6 $60.3
2024 4.9 12.2 $59.8
2025 4.4 12.8 $56.4
2026 3.7 13.5 $49.8
2027 3.2 14.1 $45.2
2028 2.7 14.8 $40.0
Total 42.1 $500.1

Half a billion. If we take the $/WAR framework and shove into it a 6.4-WAR 2020 projection for Cole and the grand assumption that the Yankees, as a championship contender, will be willing to pay more than the average team for a win, then we can easily argue that Cole will be “worth” half a billion dollars over the next nine years.

This, to me, is a bit of a stuffy way to analyze baseball in 2019. Ballclubs should be in the business of winning games and entertaining fans, not maximizing efficiency, and seeing every move solely through the prism of dollars per WAR moves us further away from enjoying the game for sport and closer to viewing it purely as a business enterprise. It’s more fun, in my opinion, to watch Gerrit Cole do this:

Or this:

And to remark upon how cool it is that he can do that, rather than to speculate whether paying him $36 million a year is an effective use of the Steinbrenners’ resources.

Yet even if we adopt the businessperson’s perspective of baseball, then I have some interesting news for you; Cole got a $324-million contract, but he could have asked for $500 million. And it would have been more than fair.