Trading for NFL Stars: An Opportunity Cost Analysis

When star players become available for trade, fan bases everywhere clamor for their team to make a move for these players. Although acquiring a star like Jamal Adams or Yannick Ngakoue seems like a terrific idea to improve your team, the cost may not be as good as it seems. I argue trading away first round picks for players is usually not a prudent way to acquire talent because of the cost-controlled nature of draft picks providing inherent value over replacement.

Defining Value

When constructing an NFL team, the goal is to put the most talent on the field as possible. The most talented players bring the most value to the team. We will assume a player’s talent can be quantified: for convenience, let’s use units of dollars where PV (Player Value) is what a player should be worth in a perfect world. Every player also comes with a contract that comes in units of dollars. Contracts have value, too. Contract value we will define as Player value minus Salary.

 CV = PV – Salary

When constructing a roster, the goal is to field as much player value as possible. This is very intuitive. What is less intuitive, is in a league with a pseudo-hard salary cap, our primary focus should be on maximizing contract value. Rearranging the equation above:

PV = CV + Salary

Maximizing the total PV on your team can then be written like:

\sum PV = \sum CV + \sum Salary

And with total salary equaling the salary cap:

\sum PV= \sum CV+ Constant

This shows that maximizing contract value will result in maximizing player value, assuming you use the entire salary cap.

Value of Draft Picks and Rookie Contracts

Typically, free agents will not offer much contract value. Generally, they will sign for close to their player value (or at least that’s the goal). The primary place with potential to acquire significant contract value is the NFL Draft. Rookie contracts are effectively predetermined based off draft position. These contracts are relatively inexpensive and provide the opportunity to acquire a major contributor (Large PV) at well below market value (Small Salary so Large CV). Although many players turn out to be busts, the upside potential is a gamble every team, rightfully values. Draft busts don’t hold a team back because they bring major negative contract value, they hold a team back because they could have acquired a contributor.

Although it is difficult to assign an inherent absolute value to a draft pick because there are so many variables at play, we are able describe draft picks by value relative to other picks. There are several charts that relate value for draft pick trades when trading up or down in the NFL draft. I am partial to Rich Hill’s trade chart (add a hyperlink here) as it is based off historical draft pick trades to provide real relative value between these picks. This will be used as our reference.

Relating Draft Value to Contract Value

Draft picks offer value which we need to relate to contract value. The best way I see to do this is to look at past trades. We want to look for a trade involving draft picks and exactly 1 player, where ideally that player has both a large salary and, to simplify the equation, 0 player value. Lucky for us, we have Brock Oswieler.

The trade was Brock Oswieler and his $16 million guaranteed contract, plus a 2nd and a 6th for only a 4th round pick. After the trade, Oswieler was quickly dropped, a textbook salary dump. Using Rich Hill’s trade chart (treating the future 2nd as if it were a late 2nd) the equation would look as follows:

Brock Oswieler + 6th rounder + Future 2nd rounder = 4th rounder
Brock Oswieler + Pick 188 + Pick 61ish = Pick 142
-$16 million CV + 5 DCUs + 80 DCUs = 12 DCUs
73 DCUs = $16 Million CV
4.56 DCUs = $1 Million CV
DCU= Draft Capital Unit (where 1000 DCU = #1 overall pick)

We will use this rate of conversion from draft picks to CV in order to show how bad of an idea it is in general to trade draft picks for proven players.

DeForest Buckner Trade

This offseason, the super bowl runner-up San Francisco 49ers traded one of their star players on the defensive line DeForest Buckner to the Indianapolis Colts for the 13th overall pick. Buckner had only one year left on his contract at about $12 million. Buckner quickly signed a 4 year, $84 million extension making his entire contact 5 years, $96 million.

The Colts spent 304 DCU (13th overall pick) and $96 million for 5 years of DeForest Buckner. Using the proxy assigned above the draft pick traded would suggest this contract should have a contract value of $66 million. This would make Buckner’s player value $162 million for 5 years or $32.5 AAV! With player value defined as what they should get in FA, this would make him the highest payed non-QB by over $7 million per year!

Conclusion

This calculation is by no means faultless. This process is assuming past valuations in trades have been correct. This is assuming value of salary cap space is linear. This is assuming it is players, not draft picks which are overvalued. I could go on. Here is a simplified version of this calculation. If you are the Colts, which would improve your defensive line more: DeForest Buckner or Javon Kinlaw AND Jadeveon Clowney (who is still a FA and I am sure would happily sign a 5-year $96 million contract). Nothing against DeForest Buckner, but I know which side I’m taking.