Being a critical thinker and a long-time Leafs fan, I like to analyse Brian Burke’s public statements as a hobby. This method of analysis has been proven to valid in my prediction of MLSE front office affairs. Last August I wrote about Burke’s plans for the 2010/2011 NHL Season, 5/6 unfolded.
I predicted the following controversial event that would change the course of the Leafs season:
- Not-trading Kaberle in the summer: YES
- Trading Kaberle at the Trade Deadline: YES (along with the approximate values)
- Trading Giguere at Trade Deadline: NO
- Sign yet another young goalie prospect: YES (Mark Owuya)
- Trading Beauchmin: YES
- Starting Aulie: YES
You can track down the article(s) on B/R.
Burke is a very wise general manager who sends a lot of hidden signals to other GMs in his public statements. Here I will share with you the synthesis of these analyses to reveal Burke’s agenda.
One thing I’ve noticed in Burke’s speech is his perspective on “assets”; Burke manages his team in a very “economic” way. For instance, he would not sign players to long-term deals because of asymmetric information and the ambiguity involved in the long-run. Burke makes trade to increase his short and long-term assets. This we saw in the case of the Versteeg trade, where essentially Burke traded Stalberg, DiDomenico and Paradis, for a first and third round pick.
In economics, there is a special type of market known as Monopoly, where a single-firm is the only supplier of a certain commodity. Monopoly power allows firms to sell products at a higher price-tag than their true evaluation. How does Burke apply this concept? Goaltending. Although the Leafs does not exactly have a monopoly in the goaltending market by the strict economic definition, it does have an advantage in a twisted way. Not many teams have high-calibre NHL goalies that are expendable. For teams to have expendable starting goaltenders, it requires the teams to have developing young goalies in their system. Here is where the Leafs have a monopoly-like power in Allaire and the stream of prospective goalies coming into the system. Burke is gambling on that one (or more) of Gustavsson, Scrivens, Rynnas, and Owuya would become a high-calibre NHL goalie. And what did Burke spend to acquire these assets? Plane tickets and dinner tabs.
With this in mind, we can make some predictions.
On Giguere’s RFA status
In Burke’s “asset maximization” model, with very low probability that he will let Giguere walk out for nothing. Burke is likely to sign him to a two-year deal in the range of $2.0M/year. This is the ultimately the optimal contract as Burke could trade Giguere at the trade deadline for assets. If Giguere were to be re-signed, it’ll likely to be after July 1 for two years (an one-year deal would make Giguere a rental player, thus lowering his return on the trade.) Giguere still fits the role of vetern-presence, mentor, and leadership (given he’s healthy). However, ultimately whether Giguere is re-signed or not depends on his physical condition leading up to training camp where he will be under scrutiny. If Giguere ends up walking away from the Leafs, we will know why. And if such is the case, expect him to perform poorly next season.
First things first - Richards, Statsny, Carter, or Parise?
There should not be ANY debates over which of these players (perhaps more) Burke will target; analyse the scenario in Burke’s shoes, we find that it is rather a sequence of events with set priority.
From Burke’s perspective, signing Richards will increase Leafs’ asset without giving up too much assets (cap space is an asset; Burke talked about this publically before). So his priority is Richards. However, July 1 comes AFTER the draft; Burke cannot wait till July 1 to sign Richards, because of asymmetric information. Burke doesn’t know who Richards will sign with, and because of that, Burke cannot focus on trading assets (and cap space) for a No. 1 center at the draft. What he must (or probably is doing) now is negotiating with Nieuwendyk; he will offer Niewndyk some assets (probably third-round pick and a player...Sjostrom?) on the condition that Richards signs with Toronto. Burke will ask Nieuwendyk to inform Richards of Toronto’s offer ($40M for 5 years) and ask him to waive his NTC if he feels that’s the right deal. There is NO bidding at this point. BIDDING for a player is when the information is symmetric. Burke KNOWS what Rangers is willing to offer, but Rangers does not know what Toronto is willing to offer. With this asymmetric information, Burke will tailor a contract more appealing to Richards.
Now, some readers are going to say “But Burke said that ‘no no no no’ when asked whether he asked Richards to waive his NTC”. This is true; Burke has been working with Nieuwendyk, he may not necessarily asked Richards. He also said that he will not give up assets for “talking rights”, but this doesn’t conflict with the above scenario of a “conditional trade”. And remember the “I-did-not-ask-Tomas-to-waive-his-NTC” days before trading him? Of course Burke was true to his word; Nonis asked ;) All those things that Burke say in public is a signal to other GMs to disguise his real work...
Also, I find no basis for Richards’ preference to go to New York because of Tortorella. Richards had a preference for Tampa, but the whole “Tortorella” thing started as a rumour and now blown out of proportion as more “sources” recognizes it. I suspect that it was the other way around, that Tortorella had an interest in Richards at the trade deadline, because of his former relationship with him. And this sort of demand happens from time to time (example: Paul Maurice and Ian White). The fact is, New York is completely different team than 2005 version Tampa Bay Lightnings. Richards liked Tampa and his teammates in Tampa, and that’s it.
In the case where Richards decides to test the open market, Burke lost nothing. He will move on and focus to trade for a No. 1 center at the draft. And if he fails to do so, comes July 1, Burke gets a second shot at Richards. Ladies and Gentleman, Brian Burke has a very high IQ.
To analyse what Burke offers to acquire a No. 1 center via trade, we have to examine his signals through past trades and his reputation and his “style” of trade.
One of the key reasons why Brian Burke has been a very successful GM is his integrity doing business. And because of his integrity, he signals the other GMs whom he negotiates with. This is behind Burke highly against "offer-sheets" because if he does so, he loses a trading partner for the duration of his career as a NHL GM.
Now, to analyze Burke's trade patterns, we look at the Pronger, Kessel, and Kaberle deals. In each of those cases, Burke presented on the table a nice package of players, prospects, and draft picks in return for a key player. On one hand, it seems he may be over-paying for players (Pronger, Kessel), although he decreases risk by packing these draft-picks, which are assets with ambiguous and ambivalent values. But on the other hand, he expects GMs to offer same type of package when they want a player from him. We’ve seen this with the Pronger-to-Philly and Kaberle-to-Boston trade, where essentially the same type of “over-paying” occurred from his counter-part.
What is really traded here are “risks”. We see this in the Phaneuf-to-Calgary deal. Burke took a risk on Phaneuf, though got some compensation in Aulie. Calgary got a proven second/third line center in Stajan. Similarly, Kaberle-Seguin-Knight-first round for Kessel-Colborne-first-round is another trade of risks, as well as the Toskala-Pogge-Blake for Giguere deal.
Now that we have a sense of the type of deal Burke makes, we can predict what’s on Burke’s agenda. Now, I detected Burke’s signal in his statement that he is looking to move up the draft. This reveals four things (potentially):
- Telling other GMs (especially NYR) that he’s busy and not focused on or interested in Richards. While secretly, perhaps Nonis is working on it, Burke sets the scene to snatch Richards while avoiding a "bidding war" with Rangers. Simply brilliant.
- Using “trading-up” as away to talk to other GMs to get a sense of who’s available, at what price.
- Signalling that he has found a worthwhile player in the draft that he likes. Once he moves up in the draft, this pick is more valuable than previously deemed. He could then use an upgraded pick to trade for a No. 1 center. This is similar to how venture capital works; when one investor says he saw value in something, other investors want in on it, thus raising the value. Again, back to Burke’s model of “asset management”.
- He actually saw a worthwhile prospect that he wants.
At the draft, Burke is going to work to trade up, as well as attempt to acquire one of Statsny, Parise, Carter, perhaps in this order, with a very appealing package.
Don’t worry Leaf fans, he’s brilliant, have faith in Brian Burke ;)
The author currently works as an economic analyst. Email: Peter.Guo.firstname.lastname@example.org