In investment finance, sophisticated investors can sometimes find ways to make money from market inefficiencies. With the salary cap, sometimes a herd mentality in terms of scouting and ranking players and other rules, I think analyzing what the crowd is doing could similar yield nice gains in terms of building an NHL roster. I think the Hurricanes are already headed in this direction in a few areas, but I also think there could be more opportunities to exploit.
Today’s Daily Cup of Joe takes a quick look at potential opportunities to be exploited in today’s NHL.
Scouting and drafting
Missing the crowds
I wrote about this in some detail awhile back. The Hurricanes have pretty clearly placed an emphasis on spending more draft picks where there are fewer scouts. It makes sense. As the number of scouts watching players rises, so does the chance that at least a couple like a player and boost his draft stock. It only takes one team to like a player enough to have him come off the draft board early. At the other extreme are players playing where there are fewer scouts. Players in those areas have a much better chance of being underrated or not making it onto the radar at all. In recent years, the Hurricanes have (intentionally by my estimation) drafted more players from less scouted areas. Europe and especially Finland are most notable, but the 2019 draft went even farther off the radar taking a couple BCHL players playing a notch below the three major Canadian junior leagues.
Turning over more stones to find goalies
The goalie position is arguably the hardest to scout. Many NHL goalies take 4-6 years to develop, and many come from later in the draft. As such, many teams including the Hurricanes go with quantity to try to find a winner or two. The Hurricanes have pretty consistently drafted a goalie for a number of years now. Each gives the team another possibility. In addition, the Hurricanes quietly did something interesting with goalies for the the summer prospect camp. Despite having four drafted goalies in camp (which would be enough to cover drills and the scrimmage), the team still chose to invite three unsigned players to camp. My thought is that recognizing that goalies can be late bloomers that the team is using every opportunity it can to look at more goalies. The move gives the team visibility into the personality, attitude and level of play of a few more goalies which could be useful if one continues to develop and becomes worth considering as a free agent.
In addition to playing a numbers game, I also think it would be interesting to prioritize goalies who are maybe 6 foot 0 or 6 foot 1 in height. Since awhile back, there has been a huge bias toward ‘the bigger the better’ for goalies. I completely agree that size helps, but my thinking is that the difference between say 6 foot 1 and 6 foot 4 is not as big as teams seem to have it right now. As such, I have to wonder if it would be possible many years to find a good slightly smaller goalie is underrated because of size.
Roster building
The value of cap room
The single biggest trend right now in the NHL is how many teams are pushing up and over the salary cap and its implications. Today, the Vegas Golden Knights traded away promising Nikita Gusev for only second and third round draft picks. The move was yet another to add to the list of trades necessitated by salary cap problems. The Hurricanes benefited in obtaining Erik Haula and also collected a first round draft pick for taking on Patrick Marleau’s cap hit. The New Jersey Devils have made a summer of leveraging cap flexibility. They won P.K. Subban because they could take on his full salary and also obtained Gusev as noted above. With more teams pushing up to the salary cap ceiling, I would expect the trend to continue. Teams that have cap room and flexibility should continue to benefit by virtue of preying on teams that need cap relief to make the math work. If I was the general manager of an NHL team, I would be trying very hard to enter each off-season with $6-10 million of cap flexibility not counting what I needed to re-sign and replace players. I think this flexibility will very likely continue to yield bargains each summer.
The middle price tier
Building off of the salary cap challenges that many teams face, I think the best bargains to be had are in the middle price range that pivots around $3 million salary. Every summer, there are a handful of top-tier free agents whose price gets bid up in crazy bidding wars. I like Artemi Panarin as much as the next person, but $11.6 million? C’mon. Similarly, Sergei Bobrovsky is now scheduled to make $10 million per year between the ages of 31 and 38. If nothing else, this contract is incredibly risky. And because of the massing sums being doled out for the top-tier free agents, very few teams seem to have both budget and interest in good players who fall short of the elite level. Ryan Dzingel is a good example. He is a proven middle six type forward who can score. And his salary is barely above one-fourth of Panarin’s. In a game where 19 out of 20 players on the roster contribute fairly significantly each game, I think the market inefficiency to be exploited is to buy low on middle-tier free agents and also be ready to acquire good middle-price players via trade when teams find themselves in a salary cap bind and desperate to move salary.
What say you Canes fans?
1) Which of the four situations detailed above has been the most beneficial for the Hurricanes thus far? Which will be most significant going forward?
2) Who has other market inefficiencies or situations that the Hurricanes and other teams should be looking to exploit?
Go Canes!
1) Matt. I think “missing the crowds” is the most important. It is actually the essence of finding market inefficiencies. Market is a synonym for crowd. However, I think you don’t take the point far enough. Scouting less scouted leagues is ok, but what will really make a difference is getting to the point of mostly ignoring scouting. I remember reading somewhere (I can’t find the exact citation right now) that the best corporate recruiters make good hiring decisions about 55% of the time. Basically 1 hire out of 20 better than a coin flip. That is because it is almost impossible to remove biases from human decisions. Efficiency for blind interviews based on determined characteristics is much higher. If you are interested look at the research for orchestra tryouts in the 1980s.
For hockey that means relying much more on formulas. For instance, a simplified formula would be to target wingers from the WHL and SuperElit leagues who score more than .82 goals per 60 minutes (this is totally made up). Of course a reliable model would factor in size, speed, handedness, etc. I am sure Tulsky is already doing this. I am also sure that many in the organization hear what Tulsky is saying but still value “grit” or “hard work” above the formula. Progress will be slow.
2) Perhaps the greatess market inefficiency is around penalties. The Canes have been good for several years at having a positive PIM differential. Both scouting and coaching should focus on making it even better. Think about this: if the Canes take 3 minutes of penalties per game and the opponents take 6, then even if the PK is at 80% while the Power Play is only at 12% the Canes end up ahead over the course of the season. On the Canes site at HFBoards there has been some fascinating discussion about finding defensemen in the mold of Pesce and Slavin by using a model that factors in low PIM as a proxy for young players being positionally sound and having advanced hockey IQ. I have never heard a scout mention that they like players who don’t take penalties—based on the players actually drafted, the opposite seems more likely.
The whole thing with PIMs is a symptom of how scouts evaluate players. If you ever talk to a scout about this they will tell you how they break down a player and it is almost entirely about ability. They often don’t watch how the player fits into the team’s systems or even their self-discipline.
Honestly, it’s hard to be tough on a kid who is aggressive and takes too many penalties. A lot of that is immaturity, but sometimes it can be a bad habit that never goes away. I would agree that defensemen that take fewer penalties is probably a good feature. It suggests they don’t often get beat where they have to take someone down. It also suggests they aren’t that physical, which could be good or bad depending on how they play the game.
As far as scouting goes the Canes, and many NHL teams, need to get with the times. The majority of scouts cover Canadian Major Junior, primarily the OHL. Fewer and fewer players are coming from that route. Logically, scouting should go where the players are coming from. The two main areas the Canes need to increase their presence is Europe and the NCAA.
Sounds like the Canes are putting more effort into Europe. Outside of the Finns, the Canes have done a poor job getting European players. Under the Rutherford/Francis regimes the Canes wouldn’t even look at Russian players. Stupid. The Canes have also been underrepresented by Swedes as well.
Every year more and more players are succeeding in the NHL from the NCAA. Some are drafted, but the undrafted college player has become a much bigger part of the game. There are several stories out there about how the Canes botched college signings in the past. This needs to change. Better scouting and a commitment to finding those players will strengthen the organization.
I really think the latter two – cap room and middle-tier – have been the most effective (although I am not sure we played the cap room arbitrage as effective – trading off CdH while taking on Marleau, which took us out of the running for Gusev when it was known VGK, with whom we have already traded, was against the cap wall). NJ has played the cap room arbitrage particularly well, and I think they have gotten a lot better with their moves this season.
Our bread-and-butter is “middle tier +” – that is our salary structure, as discussed yesterday, is focussed on middle-tier as you define it around $3M (at limnited term) with other important contracts typically only $1-2M above that (the “+”). That gives us real depth unlike the games that VGK, TOR, and EDM have been playing (and NYR will down the road as well).
Salaries are 3 dimensional. They have a dollar value, they have term, and they have the absence or presence of no trade clauses. We tend to look at dollar value as the more important dimension. But term can matter more, especially when added to the players age. The presence of NTCs in a players contract can play havoc with that players market value. The best contract is one that pays the player below his market value, expires as that player just passes his prime and allows that player to be traded at market value whenever that trade is in the best interest of the team. Further the roster has a time dimension. There needs to be planned turnover allowing player contracts with their associated cap dollars to expire in the right sequence. The Canes cap hit will start next summer w/ approximately $25,000,000 in cap space with 4 players to resign or replace, and 4 RFAs to resign or replace. Ideally players are developing, on their ELCs ready to provide low cost replacements for any of those 8 whose salary will exceed their value, relative to cap hit. Managing the cap must be like the circus performer spinning plates in the same ring as the lion tamer at work.
Matt, I think you have hit upon the key. Ronnie Francis seized upon that key during his debut as a GM. His predecessor, Jimmy the thief, had as well.
In building the Stanley Cup winning Canes, Rutherford had a keen sense for evaluating players who were either diamonds in the rough or considered to be beyond their prime. He developed a bond with each of them which motivated them to perform above everyone else’s expectations.
Of course, Rutherford had a couple of weaknesses:
1) He spent little if any time poring over scouting reports to evaluate draft picks. As a consequence, when he left, we had a dearth of talent waiting in the wings for their chance at playing in the big show.
2)He had to contend with an owner who was a cheapskate. One can only imagine the constant drag that must have had on his ability to perform.
Ronnie had the same handicap to contend with for his tenure. Mr. K’s unwillingness to spend money must have been very frustrating.
Ronnie shared Jimmy’s seeming inability to pick winners with his first round draft selections. But he is a genius when it comes to picking winners after the first round. His scouts were among the first to avoid the madding crowd and pick people from Scandanavia while seeming to shun the American as well as the Canadian junior programs. He will likely never get credit for being a trailblazer, but he was.
It is gratifying to me to see him being given a chance to test all his theories. I would caution him to learn from his mistakes. He will make mistakes. He must admit it when he does and cut his losses (e.g. our Haydn and Bill Peters).
Today we have the best of all worlds. We have an experienced GM team of Donny and Ricky (Dudley). These men are old school hockey traditionalists. They have a good track record prior to their tenure here, as well as here. But they are not autonomous. In today’s NHL, nobody can afford that. We have what is considered to be a very good stats analytical team. They to are not autonomous. Then we have an involved owner. He brings with him a limited amount of hockey experience which gives everyone a fresh perspective (whether they like it or not). And finally we have Roddy. His influence is substantial.
This approach flies in the face of the approach being taken in the 30 other cities in the NHL. Perhaps that’s one of the reasons why they hate us so.
The traditionalists’ best argument is demonstrated in the movie, “Trouble with the Curve”. The stats people love “Money Ball”. Tommy must love them both.
Tommy and his committee are assembling their team. It doesn’t look exactly like each of us would have it. Will it be a success?
Time will tell.
It’s a great time to be a hockey fan. It’s an even greater time to be a fan of my beloved Canes.
The game of salary crunch isn’t over yet. The Lightning blogger is even suggesting that, after signing their goalie to a 9.5 OV deal, Tampa Bay may have to trade Tylor Johnson and retain some of his 5M salary.
He wouldn’t be a bad addition to the canes roster at 3.5M or similar.
Spotting talent is a bit like stock trading. On average the safe and simple formulas will point everybody towards the same player, to identify and pick the under-the-radar players is always going to be a huge gamble and we are always going to pay much more attention to the successes than the failures of that exercise.
It seems like the teams that win the cup typically defy expectation and develop that x factor that gets them over the hump, be it unreal goaltending, chemistry or some such. The right balance between super stars and complementary players is fascinating (do you want 4 decent lines or a lights out line, a decent line and a bottom 6 that can barely hold their own).
We’ve seen both. The Pens road their 4 or 5 star players, a few complementary scoring pieces and unreal goaltending to back to back Ws. The caps did similar.
Despite their riches of scoring tampa has never quite put it all together, neither had the caps for decades until last year.
The Blues are a much more balanced team, closer to the best possible version of the Canes, I think.
Three other important needs. Hot goaltending, hot backup goaltending, and a 3 deep depth chart in the goal tending position. Year after year Not too much to ask for one would think.
Breezy, I agree. The Blues have no big stars. Neither do we. Aho is not on the lips of most hockey talking heads when they talk about the stars of this game of NHL hockey. And Aho is the best we have.
Like us, they have a team with great chemistry that plays an aggressive forechecking game.
Neither of us were setting the world ablaze for the first half of the season.
They went all the way. We flamed out in the conference finals. I believe we sorely missed Ferland and Martinook. Ferland’s role of enforcer was to act as a lightning rod to attract hostile attention to him, rather than our more fragile scorers. Martinook provided heart. We might have been able to succeed without one. But not both.
This year will show whether our success was a fluke or if it is the beginning of a dynasty of playoff success. Maybe even another Cup.