Prospect Speculation: The Bubble is Going to Burst

Prospects bust all time. There’s inevitability about it – like death and taxes. It’s an outcome that even the most surefire prospects succumb to along the way – be it health, performance, or any other imaginable variable. Guys like Danny Hultzen, the second overall pick in the 2011 draft, or Bubba Starling, who was taken just three selections later. Prospects like Mark Appel, the former eighth pick in the 2012 draft who would re-enter a year later and go #1 overall, or Kohl Stewart or Nick Gordon or Mickey Moniak.

Sure, organizations were out the signing bonus money – often times several million dollars based on early round picks – and their fan bases left frustrated. Now, though, there’s an entirely different crowd that’s going to begin to feel the financial strain and frustration of buyer’s remorse: baseball card collectors.

Prospects go boom. They implode. They fail.

It’s inevitable.

And then there’s the guys that don’t fail – the ones that crack a big league roster for several years – but just don’t live up to expectations. Think: Clint Frazier or David Dahl or Austin Kearns or Matt Wieters. Fine careers, sure, but when stardom is projected and never realized, it’s a millstone of disappointment that torpedoes the financial ceilings in the card industry.

Several years ago, during his time at ESPN, Adam Rubin transcribed an interview with former Mets Vice President of Player Development Paul DePodesta. One of the topics, of course, was attrition rate.

“It might be 50 percent of first-rounders that actually become good major league players. And that probably drops by half once you get into the second round. And it probably drops by half again when you get into the third round.”

DePodesta would continue with an often unappreciated aspect of prospect development:

“So if a guy becomes a solid #3 or 4 starter, and that was your first-round pick, you should be very, very happy. You won on that pick. But I don’t think that’s generally the expectation. I think people think of first-round picks and expect to have a potential superstar. That’s actually very rare. It’s just doesn’t happen very often.”

And beyond the typical group pushing those expectations – the national and local media, and fans – there’s a new group that’s entered the picture over the past 18 to 24 months: baseball card collectors.

Hoarding vaunted rookie cards of would-be superstars has seemingly been around forever. Ask the group that survived the 1980s, the ones who were certain that Gregg Jefferies or Eric Anthony would become the next big thing.

The big difference in today’s card market, though, is scarcity. More precisely: manufactured scarcity. Combine that with a massive influx of new and returning collectors, as well as the group of “investors” looking to make a quick buck, and prices are skyrocketing through every conceivable stratosphere.

Until those prospects don’t pan out and their bubble bursts.

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Prospect Attrition Rate: Case Study #1

MLB.com’s 2011 Top 100 Prospect ranking is fascinating. And like any Top 100 list, in hindsight, it’s an interesting mix of comedy interwoven with a rare blend of “what the hell were we thinking?”.

Here are the first 20 prospects on their list:

There are three players among that group – Trout, Harper, and Freeman – who are unquestionable superstars. There are a couple guys that have had long career with varying success – Pineda, Hosmer, Teheran, Myers. There’s a couple former starting pitchers that morphed into dominant relief arms (Chapman and Britton), and then a whole lot of “what ifs”.

Now let’s take a look at the Top 20 prospects by MLB.com for 2017:

Superstars: Devers and, depending on the year, Bellinger.

Among the players on both lists, how many of them are future Hall of Famers? Three, maybe four.

Those four: Trout (who is the only surefire lock for the HoF), Harper, Freeman, and Devers (but there’s a long way to go on that argument).

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Prospect Attrition Rate: Case Study #2

The first round of the 2005 draft churned out a lot of talent. Seven different players tallied more than 30 wins above replacement (Baseball Reference) in their career: Ryan Braun, Andrew McCutchen, Troy Tulowitzki, Ryan Zimmerman, Alex Gordon, Justin Upton, and Jacoby Ellsbury. Superstars? Unquestionably. Hall of Famers? Not a single one. And it’s not even a close argument either.

The opening round of the 2006 draft could eventually graduate three players into the Hall of Fame: Clayton Kershaw and Max Scherzer, who are no doubt inclusions, and Evan Longoria.

A year later, 2007, the first round had five players accrue more than 25 wins above replacement (Baseball Reference): Josh Donaldson, David Price, Jason Heyward, Madison Bumgarner, and Todd Frazier. While all compiled fine careers, none of them are Hall of Famer worthy.

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When it comes to speculating on prospects – or rookie cards – there’s only one type of player that an “investor” should be interested in: future Hall of Famers.

Players destined for the Hall of Very Good – guys like David Price or Andrew McCutchen or Josh Donaldson or Troy Tulowitzki – aren’t going to push the needle on the financial side.

How many future Hall of Famers are currently in the minor leagues? Two, maybe three?

And, yet, the card prices for prospects that absolutely won’t sniff the Hall of Fame, let alone the Hall of Very Good, are bonkers. Let’s take a look at recent sold prices:

The most famous, or infamous, card if Jasson Dominguez’s 2020 Bowman Chrome Prospect Autograph Superfractor 1/1 PSA 10 that went for $474,000 a couple months ago. Dominguez was mediocre, at best, during his debut in Low-A and looks beyond abysmal during the opening weeks at the same level. Through April 26^th, he’s hitting .226/.250/.339 with a 23-to-2 strikeout-to-walk ratio in only 64 plate appearances.

Or what about this Maximo Acosta:

Or this Colton Cowser:

Or this Brendan Rogers:

Or this Cristian Hernandez:

Or this Carson Williams:

Or this Hedbert Perez:

How many Hall of Famers are in the bunch? Statistically speaking, probably none. So it’s going to be game of hot potato on when to move the cards to the next person before someone is finally stuck with a card they’re going to lose significant money on.

Every single one of these cards will not carry the same hefty price tag in five years. Hell, maybe not even in the next five months. Who wants to spend thousands upon thousands of dollars on a league average player? That market doesn’t exist. And it never will.

This is just the tip of the iceberg. Peruse Twitter, cards of guys that have zero chance of making the big leagues are going for hundreds, if not thousands of dollars. Why? Hype, manufactured scarcity.

Imagine if Domonic Brown, or Andrew Benintendi, or Yoan Moncada, or Bubba Starling were the prospect darlings in today’s market that they were years ago. How much would their premium cards go for? And how much would those investors have lost? All but $20 of their initial investment.

We are currently reaching a critical level within this prospect speculation bubble. And it’s going to burst. People are going to lose money hand over fist in the coming years as prospect attrition settles in. It’s inevitable, like death and taxes.