More on Hockey Drafts
Sunday, June 28, 2009 at 06:52PM |
Dennis Shiraev Before the first round of the 2009 NHL Entry Draft, Washington Capitals General Manager George McPhee (GMGM!) said that the Capitals would take the best player available when called to make the 24th pick in the draft. They would take whoever they thought was the most skilled player after 23 players from the pool were already selected instead of taking a less skilled player who may better fit into a position where the Capitals are currently lacking. Was this just a way of dismissing reporters’ questions about the Caps’ pick, or is it a sophisticated strategy derived from a precise calculus of skill and potential?
Even without taking any complicated risk analysis into consideration, there are simple reasons for why it is better to select the best player instead of the most fitting player. It has a lot to do with the size of a hockey team and the versatility of positions. It’s not exactly a football team, but a hockey roster is sizable at twenty players—two goalies, six defenders, and twelve forwards. A team can certainly lack, say, good centers or left wingers, but because good forwards can change positions, there is rarely a situation where an excess of good players at one position creates problems. Common sense dictates that even if the Caps are full at left wing now, for example, it would not make sense to pass on a great prospect just because he has played on the left side during his Junior career. As long as he excels, it would be easy to find a place for him somewhere in the roster. The specialization of positions and the size of rosters for baseball, basketball, and football increase the likelihood of conflicts at specific positions.
But let us move a step further and integrate some mathematics. How high someone is ranked in pre-draft depths chart basically reflects the confidence that scouts have in the players’ success. I’m sure that if one ran a statistical analysis of all hockey drafts, the top five picks would have around an 80% success rate (some metric for success in terms of seasons played and point production would have to be made), while fifth and sixth round picks are probably less than 10%. So when a team makes a selection, the manager effectively combines the probability of success with the necessity of acquiring a certain position. The expected value of a player at the time of the draft is equal to p x v , where p is the probability of success and v is the value of the player to the team if he succeeds. My argument is that if we worked out metrics for both variables, the v variable would not be highly dependent on the current position the prospect plays for the aforementioned reasons (one exception: goaltenders). So it makes perfect sense to simply maximize p and take the best player available at the time of a team’s selection.
Book Recommendation: The Ascent of Money by Niall Ferguson
This is the second Ferguson book that I have read— I am yet to return guest blogger Grant Gibson’s copy of The War of the World from last summer— and I must say that this one was definitely written for popular consumption. It's not extremely technical and is an easy and quick read. The Ascent of Money traces the historical development of money and credit, starting with its origins in ancient Mesopotamia and ending at the beginning of the 2008 financial crisis. No, Ferguson does not actually cover every aspect and change in money and credit practices over thousands of years of Western civilization. Instead, he gives individual accounts of the creation and evolution of legal tender, government bonds, stocks, and even an interesting account of stock option pricing mechanisms.
For people who have little familiarity with economics or banking, this is a must read. Ferguson does a great job explaining the basics of stocks, bonds, leverages, credit swaps and pretty much anything else you might hear about on a business news network. If you have taken an introductory or intermediate level economics course, some of the chapters in this book may be a little bland for you. Even so, it’s worth a read. I was fully familiar with all of the different financial instruments that Ferguson analyzes, but the way that Ferguson situated these instruments in their original historical context was insightful .Double hat tip to Grant Gibson and Oliver Renick for the recommendation.