The Canadiens just got the first pick in the NHL draft for the third time since its establishment in 1963. The acquisition of the 1971 and 1980 picks was the crowning achievement of brilliant strategies. Guy Lafleur’s case has been widely documented.
The 1976 trade that yielded the 1980 first pick is less so; yet it was Wayne Gretzky who was targeted. However, he will never be picked up. The Canadian made a trade in 1981 with Hartford for the first choice of 1984 (Mario Lemieux), but the Whalers, bad players, will not have the elegance to finish last the agreed year. These GMs of the Canadian were a mixture of Wolves of Wall Street, grand masters and godfathers, with results to match.
In 2022, the Canadian owes his first choice only to his turpitude – and a little luck. It is encouraging to see that this flagship is progressing, and with it the whole nation.
The Canadian began this descent into mediocrity precisely in 1980, missing both Gretzky and Denis Savard (chosen second). In 1971, he was not mistaken. One can discuss – in a fascinating uchronic perspective – whether Marcel Dionne, the second choice, would have had Lafleur’s career, had he spent it in Montreal rather than Los Angeles; Would Lafleur have become the national hero that he is, if he had achieved his exploits (or not!) in an expansion club, like Dionne (or even Gilbert Perreault)? This takes no credit from anyone: they have all become giants. This is the romantic view of sport; there is a more clinical one.
In it, the players are assets, like securities. Draft ranks are like stock options. These assets acquire, appreciate or depreciate; they sell themselves, they swap, they are exchanged at the appropriate time. The production on the ice is the dividend cash. When the anticipated gain from a transaction is greater than that of future dividends, it is most often liquidated.
However, the paradox inherent in transactions for sports assets is the same as that observed for securities on the stock market: for each seller, there will be a buyer who will believe more than him in the asset traded (since he makes a decision opposite to that of the seller). However, it is indeed the same asset. Daniel Kahneman, Nobel in economics, sees in this contradiction a flaw in the rationality of economic actors; buyers, he says, have their perspective distorted by what he calls the affect heuristic. Buyers, moreover placed in competition, sensitive to various anchoring biases and other halo effects, have a propensity to pay too much. In short, they are blinded by emotion.
Managing directors, from their forts overlooking the plain, sometimes fall in love with their horses, like investors with their titles. You shouldn’t fall in love with your titles or your horses. Nor with the choices.
I quantified the value of draft picks in the book The puck was not rolling for us. The value of the second choice reaches 85.3% of that of the first. The value of the third reaches 78.8%, and that of a late first-round pick, 22.2%. Michael E. Schuckers, in a similar exercise, obtained similar results. These figures are not applicable when a so-called “generational” player shows up; however, this is not the case in 2022. The respective merits of the first three choices are debated.
We will remain silent on the value of these young men on a human and sporting level. It is an expertise that belongs to others. However, their value as assets must also be assessed.
Let’s say player A is “the best”. In market terms, its stock is worth $100; that of players B and C, $85.30 and $78.80. The anticipated dividends are comparable. Picking the $100 stock on draft day to make a daily gain of $14.70 is a hassle. How much would New Jersey (second choice) or Arizona (third choice) pay to get that first choice? What is the market premium for a swap rows? The gap would be quickly covered: the first choice is an asset with glitter. Proposals can come from rivals; in which case the price goes up. Getting a first-round pick in 2023, for example, can potentially be worth…$100 on its own.
By realizing this swap, the Canadian could easily obtain more than the value of the first choice, and this, by playing on the proven irrationality of buyers in such circumstances. He would get one of the three best players available (who knows, the best), plus a higher value asset in the gap between them. It would be a gamble worthy of the great tradition of cunning of the general managers of the Canadian. They didn’t win by playing safe.