In the SABR Baseball Research Journal Number 34, Phil Birnbaum wrote an article discussing the following principle applied to major league baseball trading: suppose in a population of cars, some will be defective lemons and some will be reliable cherries. The owner of the car knows, from repair bills, which is which, however the buyer does not. This disparity in information results in the market having many more lemons than cherries. Why? Because anyone with a lemon will try to sell it but the owner of a reliable cherry will have little incentive to sell. Phil applied this principle in the article to major league baseball trading, with the quite illuminating result that indeed there appear to be many more baseball lemons than cherries on the trading market.

Does this principle apply to the fantasy baseball trading market? In “real” baseball the assumption would be that the team has inside information, namely the players “repair bills,” that others do not. In fantasy most players don’t have this information, though the expert player does. Yet, with the proliferation of information on baseball sites and with a proper understanding of statistics, this knowledge is fully within any owner’s grasp, and the disparity of information can be fully exploited by either the trader or the tradee. Let’s define a “lemon” as a player whose perceived value is much higher than his actual value. This can be because of injury, but it can also be because of the General’s knowledge of a player compared to the masses.

Case in point: in one fantasy league I am in, we had Bartolo Colon and traded him for a second round draft pick in the offseason. The league is AL only, and each year there is a draft of all available free agents and minor leaguers that have played in AA. Now the key here is that minor leaguers cannot be picked up during the year, and must play at least one game at AA to be drafted. The import of this is clear, most top prospects moving up to AA during the year are available for draft. The league allows players to be kept for as long as you are so inclined. So these picks are tremendously valuable and in fact what we have seen is that the teams who draft well can finish in the money for a decade in a row, and this has in fact happened with a few teams.

On BaseballProspectus there is a daily injury report. It was revealed over time in the reports that Colon’s condition was chronic, and since he opted for rehab over surgery it was not likely to result in a good outcome. Everyone can obtain the mere information on Colon’s choice or rehab over surgery; the analysis and distillation of this information by Will Carroll on the BP site is what had value. In fact, it was the reason we made the trade. Had this owner delved more deeply or had more information he wouldn’t have made the trade. Note that Colon’s performance is virtually irrelevant; even at Colon’s full value a second round pick in this league is likely more valuable than what can be expected of Colon this year.

What are the key points for the Fantasy General?? Here are two salient ideas:

1. You must be able to figure out when you have a lemon. This requires not just the knowledge that the masses have (i.e. hearing the thunder–see my earlier post). You must be able to either interpret what information you have, or get an interpretation from another true expert. Needless to say this is a recurring theme here. This isn’t just about injuries; you as a Fantasy General should have a plan for every player on your roster, and do not hesitate to act quickly with players that you believe may be lemons. An examination of a player’s hit rate, for example may inevitably lead to the conclusion that he is due for a big fall, or a pitcher may have been very lucky with stranded runners. These players are lemons as defined above.

An example is an offseason trade I made of Reed Johnson for Jose Valverde. This worked out even more in my favor because of Reed’s injury, but given Valverde’s performance the trade would likely have been a win anyway. Reed was very lucky last year, and was virtually a lemon in terms of his perceived value versus actual value. The flip side:

2. You must know your opponent. This is a key principle of all conflict and warfare, and fantasy baseball is no different. In any trade you need to determine what your opponents motivation is, and if they are an expert you need to be more discerning. In the above cases, you not only must consider the opponent but also must have more information. An owner who does not, for example, know about xERA or xBA is probably not trading a lemon; the owner who does is a much more dangerous opponent. The owner getting Colon in the above example most likely didn’t have enough information, or if he did he chose to ignore it. This cuts both ways, not just when you are the trader.

There are certain owners that require the Fantasy General to be somewhat wary in dealing, because they are experts also. So when they approach you for a trade your first inclination before even whether it will help my team, is to figure out his motivation. A recent example of this was another expert in my high stakes league shopping Alfonso Soriano to me. In most instances the conventional wisdom is that Soriano will turn it around, and likely he will. However, since this owner is an expert the opposing expert needs to look closer as the expert’s opinion will not only possibly differ from the conventional wisdom, he will aggressively try to exploit this opinion.

We see here sprouts from the seeds of a solid understanding of fantasy theory. In any war or conflict (and a trade is certainly a conflict in terms of the application of strategical principles) the winner can be divined from the gross amount of knowledge they have, their judgment, their knowledge of their opponent and the disparity in knowledge between the owners. The Fantasy General must be cognizant of all factors that are capable of knowledge; if chance intervenes so be it but the process it what matters. As Sun-Tzu would say, don’t fight the battle first and then look for victory.