Browns

The Browns, Colin Kaepernick, and Positive Arbitrage

A clear cut Top 32 quarterback in the NFL is unable land a job because of the controversy that surrounds a simple gesture; an act of principled defiance. The Cleveland Browns are in the midst of a multi-year rebuild, which is centered on bottoming out to acquire top-tier talent and collecting a high volume of assets in order to acquire the talent necessary to be a long-term contender. Colin Kaepernick and the Browns occupy an interesting space in the NFL wherein they could both benefit from each other.

Setting aside the social and political aspects of Kaepernick’s plight, the controversy regarding Kaepernick has created an uncertainty that adversely impacts the valuation of Kaepernick the football player. When a football player is incorrectly undervalued, it creates an opportunity for a value gain.

Jonah Keri in The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First notes how the Tampa Bay Rays focused on the value of small marginal gains in the process of rebuilding. In the book, these gains were often made through positive arbitrage which is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.1

These gains are a product of market inefficiencies. Inefficiencies can be created by a number of different things, a market using flawed evaluation tools, an unstable marketplace, or perhaps, a player’s value being suppressed because of his socio-political practices. While the Ravens have publicly denied the claims, ownership in multiple places have supposedly shown trepidation regarding Kaepernick due to public image costs for Kaepernick’s off the field value.

In a situation where multiple organizations have progressed towards the acquisition of a player but cooled on the asset because of off the field considerations, the player can become an undervalued asset. Quarterback specifically is a position where organizations take on enormous risk or cost with a chance to stabilize or mitigate risk. Be it the Texans getting out of contract albatross in Brock Osweiler for the cost of a second-round pick, the Bears signing Mike Glennon to a three year $35 million contract, or Josh McCown getting $6 million to help the New York Jets tank. Brian Hoyer is getting $6 million per year for two years from the San Francisco 49ers.

Indeed, Kaepernick is likely to at least return to a player valued as a high-end backup, which can merit a third or fourth-round pick for a contending team attempting to protect against risk.  While a new automobile depreciates value when it leaves the lot, Kaepernick’s value should appreciate when he moves on to a new organization. Further, for owners and organizations afraid of a player protesting, Kaepernick has decided to quit his in-game protests for the 2017 season.

A year in a new organization, a few designed plays, and an adaptable Kaepernick becomes a valuable backup quarterback especially if the worries of protests and sponsorship losses prove to be an act of folly. Long-time NFL journalist Andrew Brandt believes this will be the case as he compares it to when he covered the Michael Vick signing with the Philadelphia Eagles.2

If signed for a below average rate because of the market efficiency, Kaepernick becomes an appreciating trade asset. The type of asset that nets a fourth round pick.  Earlier this year WFNY discussed the value of pick acquisition:

This process, much like Daryl Morey’s approach in Houston, requires patience and is strewn with complexity. This process acknowledges that to truly contend, and do so for a significant period of time, you have to land elite talent. The easiest road to do so in the NFL is through the draft, and on rare occasions a trade. In this vein, the Browns have collected a bevy of picks, bottomed out for a superstar-caliber defender, while continually searching for new ways to build assets to bring in impact talent.

For the Browns, acquiring and consolidating assets is central to building the foundation of a contender in terms of “the process.” Kaepernick represents an opportunity to acquire and rebuild the value of an asset.

While this piece develops the Kaepernick example, it is not limited to him. The Browns during this rebuild will be aided by taking inappropriately valued assets and either wielding value gains for their on field improvement or using value gains to cash out for greater assets. The Browns signing of J.C. Tretter is an example of such a signing. Coming off a serious injury, Tretter is a relatively young, previously productive center signed to a three-year contract. For the Browns, there is a huge potential value gain in Tretter, a player who is of less value in the current space to a contender because of an injury history but with a season of production could significantly raise his value.

Players like Kaepernick and Tretter are opportunities for the Browns to improve the value of players found in an inefficient marketplace.

  1. Note: It is a touchy subject. Discussing human beings, athletes, as assets is an impersonal and perhaps denigrating practice. However, this is the process which all front offices partake in, evaluating individuals as assets. []
  2. Note: These situations are being compared here from a public relations perspective only as the circumstances run parallel. I have deep moral reprehension of aligning the actual actions of these men together. []

  • mgbode

    Umm, B-Bo….uh….well…given the social context of the particular issue that is being discussed and, well, how do we say this gently…

    Our quarterback surnames would then match the signs in a ballpark just as a starting pitcher struck out his third batter in a game and that might not be something we want to highlight.

  • tsm

    Not to belabor this, but interviews can be self serving. I am vigorously opposed to the concept of “identity politics”. We need to judge people as individuals, absent a showing that they are representing a particular group.

  • mgbode
  • Garry_Owen
  • Garry_Owen
  • mgbode

    That is outside the realm here though.

    Kaep has indicated he believes it is a principled stance in his interviews, therefore it is principled on that premise and others can state it as such as Garry pointed out above.

    If we cannot take a man at his word here, then there is no such thing as a principled stance.

  • Garry_Owen

    Russians

  • RGB
  • RGB
  • Garry_Owen

    It’s a wonderful idea, truly, I adore it, but that article absolutely stinks with baseless dreaming and speculation. I especially like the part where he concludes that the Browns can “slide Keizer into the starting spot.” Right. You know, because previously Osweiler had it locked up and was the only thing standing in the way.

  • RGB

    It’s TBL. 10% useful. 90% crud. (And getting worse…)
    The Gase connection is the 10%.

  • Chris

    That’s exactly how I picture Sashi stockpiling draft picks!

  • Chris

    So Kevin Hogan isn’t making the team?

  • Garry_Owen

    The question supplies the answer.

  • Harv

    every word

  • Harv

    Jared Kushner. Aaron Judge. Michael Martinez.
    Things: Cross fit. Trade deadline. Drinking urine. [As in, was stuck in the ocean/desert/chimney, so …]

  • Garry_Owen

    Chimney? Huh. Trying to figure out how that could even work, not to mention how one could be sick of hearing about that particular thing. I think I need to get some more interesting reading material!

  • Harv

    chimney: watching this documentary about civilians surviving WWII, tearful woman recounting living inside a chimney (yep) for literally weeks, trying to catch snow in her mouth and … (I’m thinking: no, not again, don’t say it …) …Yep.

  • mgbode

    No matter what you think of the economics or anything else, we will always have to credit Kaepernick for being the inspiration for the following…

    “So, we’ve officially established the bar.
    Playing for the Browns > Sitting in a frozen porta-potty during the battle of Stalingrad.” – RGB

    http://waitingfornextyear.com/2016/03/browns-talking-with-49ers-about-kaepernick/

  • paulbip

    Rule #1…go protest on your own money. #2 Get rid of the National Anthem at sporting events. It’s gone from bowling and golf. #3. this kid is not worth the distraction. Let him take his millions and play Arena football. He’s been a spoiled brat all his life.

  • Eric G

    Apologies if I touched a nerve

  • Garry_Owen

    No! Not at all. I didn’t mean to come off that way. It was not a passionate response; just a response. I’ve heard media folks say that before, but it has always been discordant to me. Sorry if it seemed harsh.

  • MartyDaVille

    Any person who finds Kaepernick’s act objectionable is also taking a principled stance, and he should be granted the same amount of respect that Kaepernick’s supporters give him.

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  • maxfnmloans

    Kaepernick has made public statements in the past in support of Castro, or at least saying “he’s not such a bad guy”, so him signing in Miami would go over like a fart in church

  • mgbode

    I did not say otherwise.

  • Garry_Owen

    That’s some good archiving. I had no recollection that he was the impetus for that brilliant discussion.

  • mgbode

    Mike’s article reminded me I had advocated for him as a backup last year… looked it up, read the comments… and it was like a beacon of light pushing out of my screen.

  • MartyDaVille

    Huh? I didn’t say you did. I just made an isolated self-contained comment, and your comment just happened to be the one I hung it on because it was the most recent one on the thread.

    I ain’t pickin’ on you.

  • mgbode

    all good, just making sure.

  • tsm

    Interesting on rule #1. Many businesses don’t allow political signs nor statements while on the job. This is the right of the employer. Of course, away from work on your own time you can engage in any legal behavior you choose. We forget this critical distinction at our peril.

  • Maryannermiller

    Plan57s

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