This thread is a bit esoteric and won't be for everyone so apologies in advance (and there's plenty of threads discussing is player X worth pick Y or better than player Z).
The thought I wanted to share out with the BF trade and draft community is the clear parallels (and therefore learnings) that can be drawn between the world of footy (when it comes to trade and draft) and the world of economics and finance.
In the footy there's three clear forms of currency:
The trade and draft period is all about the way in which each of the eighteen clubs - acting like quasi finance trading desks - value and exchange the different forms of currency in the AFL market AND how the AFL regulates the market.
In this economy the AFL acts as the quasi central bank who create and regulate the markets and - in the case of draft picks - can essentially create picks out of thin air and issue them to a club (like North in the form of an assistance package or Adelaide & others as free agency compensation).
When the AFL undertakes 'expansionary draft pick policy' (i.e. issuing more draft picks) then the effect, ultimately (like it would be in the real economy), is that the value of draft picks will, all else being equal, fall. The flipside of devaluation in the currency of draft picks is that the value of other currencies (like players) expressed in the form of draft picks will go up. So a given player that might have been previously valued at (say) pick 20 prior to the swathe of free agency and assitance picks may now be valued at (say) pick 15 so there's a form of player value inflation at play.
The other regulatory act that the AFL applies to draft picks is that they impose a 'regulated price' on the value of draft picks (pick 1 = 3000 points, etc.) that clubs can then use to 'cash in' the draft picks when used in the father-son, academy, etc. bids.
This regulated price is not necessarily equal to the market value of the draft picks and this creates market distortions and loopholes that clubs can exploit such as Gold Coast trading a single pick for a raft of picks the regulated price of which is far in excess of the single pick.
I think this market economics framework is also helpful for trying to understand clubs' strategies and rationalise their behaviours - some clubs (i.e. those 'in the window') will generally value a draft pick lower than a ready-to-go player whilst the reverse is true for a club in rebuild mode. Separately clubs are always forming views on the relative value of one draft class versus the next and this may lead to clubs trading out of one draft and into another (at this stage the AFL only allows trading future picks one season ahead but other leagues show that trading well into the future is possible).
Welcome any thoughts on the validity or otherwise of some of my thoughts above and perhaps other ways I haven't considered in which there are useful analogues between the worlds of AFL and economics/finance.
The thought I wanted to share out with the BF trade and draft community is the clear parallels (and therefore learnings) that can be drawn between the world of footy (when it comes to trade and draft) and the world of economics and finance.
In the footy there's three clear forms of currency:
- Draft picks;
- Players; and
- Salary cap space (this has only recently with the advent of deals like the Grundy one become a 'currency' that can be traded between clubs as opposed to a commodity used by each individual club. You could argue that list spots are also a currency but they can't be traded so they're also more like a scarce commodity. Perhaps trading list spots may be a future innovation!]
The trade and draft period is all about the way in which each of the eighteen clubs - acting like quasi finance trading desks - value and exchange the different forms of currency in the AFL market AND how the AFL regulates the market.
In this economy the AFL acts as the quasi central bank who create and regulate the markets and - in the case of draft picks - can essentially create picks out of thin air and issue them to a club (like North in the form of an assistance package or Adelaide & others as free agency compensation).
When the AFL undertakes 'expansionary draft pick policy' (i.e. issuing more draft picks) then the effect, ultimately (like it would be in the real economy), is that the value of draft picks will, all else being equal, fall. The flipside of devaluation in the currency of draft picks is that the value of other currencies (like players) expressed in the form of draft picks will go up. So a given player that might have been previously valued at (say) pick 20 prior to the swathe of free agency and assitance picks may now be valued at (say) pick 15 so there's a form of player value inflation at play.
The other regulatory act that the AFL applies to draft picks is that they impose a 'regulated price' on the value of draft picks (pick 1 = 3000 points, etc.) that clubs can then use to 'cash in' the draft picks when used in the father-son, academy, etc. bids.
This regulated price is not necessarily equal to the market value of the draft picks and this creates market distortions and loopholes that clubs can exploit such as Gold Coast trading a single pick for a raft of picks the regulated price of which is far in excess of the single pick.
I think this market economics framework is also helpful for trying to understand clubs' strategies and rationalise their behaviours - some clubs (i.e. those 'in the window') will generally value a draft pick lower than a ready-to-go player whilst the reverse is true for a club in rebuild mode. Separately clubs are always forming views on the relative value of one draft class versus the next and this may lead to clubs trading out of one draft and into another (at this stage the AFL only allows trading future picks one season ahead but other leagues show that trading well into the future is possible).
Welcome any thoughts on the validity or otherwise of some of my thoughts above and perhaps other ways I haven't considered in which there are useful analogues between the worlds of AFL and economics/finance.
