43

O is for Opportunity Cost

Well, despite my hopes to the contrary, it looks like it’s official: Adam Gaudette will make his début with the Canucks tonight.

Don’t get me wrong. I think this is a great opportunity for Gaudette, and for Canucks fans to see a much-hyped prospect in action. Whether he lives up to that hype, is another thing entirely, but from an entertainment perspective it certainly adds an element of interest to the conclusion of yet another dreadful season.

Either way, how he does over these last five games is rather meaningless at this point.

What may be significant, however, is the long-term cost this opportunity brings with it.

As our own Ryan Biech recently explained, by playing just one professional game this season, Gaudette will be credited with a “professional season” for the purposes of expansion draft eligibility. Given that on the current timetable, the expansion draft for a new Seattle franchise will take place in the summer of 2020 and under the same rules as the Vegas expansion draft, this means that Gaudette will have three professional seasons to his credit, making him eligible for the draft. That means the Canucks will need to protect him as one of their seven forwards, or eight skaters if they were to protect more that three defensemen (lol!).

Big deal, you say. And it’s true. It’s not a huge deal. But it isn’t nothing, either.

The game of hockey has changed in a salary cap world. And like in many walks of life, if you’re still doing things because that’s the way you’ve always done them, there’s a good chance you’re doing it wrong:

The fact remains that in today’s game, other than landing a generational talent in the draft, success is found by finding incremental gains not only at the margins, but in every decision management and roster decision you make.

So by needlessly doing something today, that will make Gaudette eligible for the expansion draft, the Canucks are giving up an opportunity to do something else with that protected slot. Sure, you might look down their roster and think they don’t have seven forwards worth protecting, and you wouldn’t be wrong. But even an ability to protect an additional player is an asset. It would allow the Canucks to trade for another team’s surplus player. Not just near the expansion draft, but in the two years leading up to it. Any trade that happens between now and the summer of 2020 will need to have that expansion lens put on it.

Given the way George McPhee was able to hold some of these teams hostage and wrangle significant concessions out of them, I’m going to guess that more teams will be making moves ahead of time so that they don’t wind up in a similar position the second time around. This should open up opportunities for teams with protection spots available to pick up some upgrades from those trying to get ahead of the problem.

And this is where the opportunity cost comes in. The Canucks are gaining some utility from showcasing Gaudette in this meaningless stretch of games, but they are giving up the potential to benefit from some of the opportunities discussed above. Opportunity cost is a common term used in economics and investing:

Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made. This cost is, therefore, most relevant for two mutually exclusive events. In investing, it is the difference in return between a chosen investment and one that is necessarily passed up.

The issue is, that the utility they are gaining by playing Gaudette does little to make the team better and advance them on path back to a rebuild. But the opportunity they are giving up would do just that.

Keep in mind that there is an opportunity cost for Gaudette here as well. He is giving up his final year of university. And burning the first year of his Entry Level Contract by signing him now was certainly one of the reasons he was willing to make that trade-off. But as I explained when Boeser did the same thing last year, that first year is burned whether he plays in a game or not:

Beyond that, I’m sure that if the Canucks were completely up front with Gaudette and his agent that they would be willing to sign him early, which gives him his signing bonus, a prorated salary for the last two weeks of the season, and burns a year of the ELC, but that he wouldn’t actually get into a game, I think he would still make the decision to sign. There’s little added value there for Gaudette in playing these last five games.

But hey, I hope the kid has a great début tonight. And I hope even more that he develops enough over the next two years that the Canucks have not choice but to use a protection spot on him. Unfortunately, that will also mean that the opportunity to benefit in some other way will be lost.

Hope that cost is worth it.

 


RECENT GRAPHIC COMMENTS



  • TD

    It would have been better to not burn the year and be eligible for the expansion draft, but it’s also important to maintain good relationships with your players. His line mate this year, Dylan Sikorsky is debuting for Chicago tonight. Denato is playing his sixth game with Boston. The world isn’t hypothetical. Gaudette was excited to become a Canuck and expressed some loyalty to them for drafting him. Playing hardball with the top scorer in the NCAA and not give him his contract could backfire and cost the Canucks in the long term.

  • Steamer

    Rather sulky perspective; risk was losing a player to free agency, so that is the motivation. Playing now gives both player and club an opportunity to access ability to play & process the game at the highest level, so hardly a waste of time or gratuitous exercise. Graphic was cute, though.

  • neal

    When Seattle joins the NHL in 2020 it really won’t matter teams will protect their best players.It’s not like the Canucks will lose Gaudette if he proves himself.

  • Harrison

    Imagine the comments from fans if the Canucks played hardball with Gaudette and ended up with a Butcher/Kerfoot/Vesey situation and the lost him for nothing.

  • Ser Jaime Lannister

    I cant see this managment group being clever enough too pull some of those moves off which is unfortunate. As for the signing Canucks had zero leverage when it came to negotiations and thats fine, were not about to let one of our top prospects walk away. Adam has had an incredible college season and has earned this contract, its great that hes able to play some games so he can get accustomed to the NHL and make his preparations for the summer. Kick some ass Adam :p

  • Rodeobill

    I completely agree with the article, and the reasoning is sound. From a rational standpoint, if he kicks ass, he also could help play us out of a better draft position too. The only part I don’t agree with is I am not so sure that getting some ice time this year was not part of the carrot dangled to get him signed. I still think canucks management tries to work in the best interest of the team (although not always succeeding in that endeavor) and is aware of this rational as well. I assume there to be some reason they made this decision, be it a negotiated bonus for signing, or to prove accountability to players to act on things previously said, or who knows what else. I give them the benefit of the doubt here that they did not make this choice to throw some scraps out at the end of a dismal season to keep the howling fans/media at bay. On nice thing about the JB signing is he has room to not care about that as much for a while and make unpopular choices if need be. Good article, and well reasoned though.

  • Given the players on their way out and those under contract through the expansion draft, I’m not sure there’s much cause to be worried.

    Sometimes, I think certain writers (like Petbugs) overlook certain human elements when talking about how to optimally manage teams. I don’t mean “intangibles”, but rather, Benning and Co. have to sell tickets to hockey games (which, at this point in the season, is only done by selling hope for the future), they need to sell the players on things getting better next year, and they want to reassure themselves asap that they have a player in Gaudette who can crack the lineup next year. So maybe playing Gaudette isn’t optimal asset management, but it’s still likely the right thing to do, to keep the fans and players engaged.

  • GLM

    I mean Adam Gaudette was drafted in 2015, majority of the players in his draft year just finished their 1st year of their ELC and will need to be protected in the expansion draft anyways. If Canucks did decide to force Gaudette to wait and not sign him until the start of next year (which could risk him waiting another year and entering FA), I think they’d be required to give him a 2 year ELC contract like Stetcher’s, which would expire in 2020, which is the same time his current contract is gonna expire at anyways.

  • Dirty30

    Three potential outcomes:

    1. Gaudette is incredible and has to be protected, but he’s incredible and has to be protected!

    2. He sucks horribly and the Canucks should be glad to be rid of him to Seattle.

    3. He falls somewhere in between and he becomes part of Utica, the bottom six on the Canucks or is traded for some kind of asset.

    So the only opportunity cost was that 10 minutes I spent reading the article that I will never get back …

  • truthseeker

    As others have already pointed out above…

    I think you are missing the point. Make no mistake, this is virtually only about having Gaudette not go to free agency. He was never going to the minors for the minuscule paycheck there. This was Gaudette’s camp telling the canucks, sign us pay us NHL dollars and bonuses now, or we’re going to free agency next year. And that’s exactly what Gaudette should do. Maximize your own personal value.

    Until the rules change about NCAA players this will be standard procedure. The canucks are simply doing what is totally normal for the situation.

    • Defenceman Factory

      I don’t think you have interpreted this quite right. The way I understand it is the Canucks could have signed him now, paid him his signing bonus, burned a year of his ELC and not played him.

      Gaudette could be given every monetary consideration but not play in a game this season and not require protection in the expansion draft. He could be in Vancouver, getting paid, practicing with the team and learning the systems from the press box.

      I went back and re-read Biech’s article again and believe I have this right. Assuming I do The Canucks could have enticed Gaudette here now avoiding the risk of him going to free agency next year, not played him in a game and avoided having to protect him at expansion (this would also delay waiver eligibility by a year).

      I am now questioning the wisdom of playing him this season. Hard to believe playing in these games was the make or break it part of this deal.

      • truthseeker

        well…I didn’t mention anything about playing games. Just that his camp would want him at the NHL level to collect that pay check and not down in Utica making less money.

        I went back and read that article too and yeah I think you’re right. They could have brought him up and given him all the benefits, minus one or two I’ll get to in a moment, short of actual games and saved him from the expansion draft.

        The two reasons I can think of for actually playing him are A) his camp wants that year burned so he’s a step closer to his next contract and ultimately free agency later on, and that’s a pretty huge incentive so I could see his camp actually saying we want games. It’s a part of what I mentioned in my first post. Or B) the canucks want him in for the PR. It would look kind of bad to bring the kid in and then not play him for the season ticket holders. Ultimately it’s probably a combination of the two factors.

        • Sharpshooter

          He will apparently get a $25000 bonus if he plays in 5 games this year. His base salary is supposedly $900000, not the usual $925000. As someone mentioned above he held all the leverage and his agent used it well.

        • Dirty30

          Likely both — Gaudette had a good year and could have done a fourth, gone to free agency and had lots of interest. But it would have meant another year in school and no nhl paycheque and little to prove at that level.

          Canucks need some good news — seeing Boeser get injured still makes my stomach hurt. If Gaudette is all happy hype but the team sells more season tickets, the move with Gaudette will likely be a wash.

          • truthseeker

            So just signing the contract burns a year because he’s 20? OK, got it. Thanks!

            Maybe you should have contacted Benning and let him know he could have done that…lol.

            I suspect they think more about showing off to the season ticket holders than worrying about a potential expansion draft.

          • Defenceman Factory

            Definitely want to see Gaudette play. Probably sells some tickets. I know many here won’t agree but I believe Benning is well aware of the implications of playing Gaudette but the chance to sell tickets can’t be passed up by ownership.

  • tbone

    Hey GC…. this subject is moot because the Canucks cannot afford not to sign a player of this caliber when given the opportunity. Burn a year of his entry level contract….gladly…..he’s now under club control for the next 6 years.

  • Graphic Comments

    I was pretty clear. Signing him for this year and playing him are two different things. You burn the year just need signing him. You don’t send him to Utica. You keep him up with the team. He gets his signing bonus and his two weeks of NHL money. There’s no reason for the games played bonus to be in this contract. They lowered his salary to put that bonus in. If the Canucks are open and transparent about this going in, there’s little risk of damaging the player relationship: “You get the $95k signing bonus, max ELC salary, travel and practice with the team, and get the feel for what it’s like being on an NHL roster. But we’re not going to play you so that we can protect your rights.”

    • TheRealPB

      This only works in a hypothetical world that doesn’t involve, you know, real humans. Show me an actual case where this has EVER happened. Show me one single NCAA who came out early after their college careers ended, signed a contract and then just hung around and just practiced with the team. Has that ever happened? Sure it could be that someone signs and goes straight to the AHL (Werenski) for a handful of games and then joins the NHL the next year. Or like a McAvoy who plays a few games in both the AHL and the NHL playoffs after coming out of college. I just don’t know how you can levy a criticism as you are without a) recognizing the cost of potentially losing Gaudette if he was to stay in school and and not sign (a real risk if you play shenanigans of the kind you’re suggesting) and b) floating an alternative that has little evidence of being successful (or even being tried).

    • Dirty30

      I agree with the point made about “opportunity cost” but TheRealPB makes a valid argument why it’s not realistic to simply consider cost and not the person involved.

      Gaudette had a great year, likely attracted attention and despite being a life-long Bruins fan made the decision to honour the agreement made when he was drafted by Vancouver.

      This is a classic example of why rational choice theory in economics fails. On paper, people make rational choices, in the real world, people do things based on experience, emotions, and factors to which we are not privy.

      My best guess? Gaudette’s agent was getting a ton of calls and he was on the phone to JB to make a decision. Through it all, Gaudette seemed to be the honourable one and wanted to stay loyal to the team that drafted him. And if no one had wanted him, your plan would have be fine. But reality trumps theory every time.

      • liqueur des fenetres

        If you’re arguing that Gaudette had all the leverage and he’s motivated by money then he was always going to sign with the Canucks (like he did) because that was the only way he starts getting paid and the only option that brings him one year closer to free agency. You argue that he irrationally wanted to play the last 5 games of the season, but the counter argument was pretty easy, be a team guy and miss out on 5 meaningless games now (less than an hour of ice time) and be rewarded with opportunity at the start of next season. He’d already gotten what he wanted, anyway.

        Furthermore, by sitting Brock for his first two games of the season Green and Benning showed they’d go to extremes to not be seen kowtowing to a prospect, even one as good as Boeser. There’s no reason to think they were bullied by Gaudette’s side. The most likely conclusion here is that what GC is saying isn’t true, or that they weren’t aware of or didn’t value its profound implications.

        • Dirty30

          Actually, I’m arguing that Gaudette was motivated by more than money — that getting the opportunity to play some games now was part of the motivation to sign now. GC’s idea that the Canucks could sign him and not play him is valid but unrealistic. Sitting with the team while they played even for the full ELC doesn’t seem like something Gaudette would have accepted (but I don’t know his mind so that’s conjecture on my part).

          Rational choice would be take the money and hand with the team … paycheque the same either way. Emotional choice is get on the ice and be a Canuck and play some more hockey!

        • Defenceman Factory

          The most likely case is the Canucks wanted him to play and were well aware of the consequences. Him playing sells some tickets and generates some genuine interest in these last few games. Gaudette gets familiar with his new surroundings, coaches and teammates. Coaches and training staff get a good look at him in game situations helping to develop an off season training plan and get insight into if and where he might fit in next year’s line-up. This helps make decisions on who will be re-signed or traded and what free agents might be brought in. Gaudette’s a gamer, he wants to play.

          As Petbugs points out these benefits may come with an opportunity cost. One the Canucks have evaluated and chosen to pay.

    • Cageyvet

      GC, you didn’t spend enough time on the worst possible outcome……not giving him this contract and opportunity to dip his foot in the pool and have the best possible preparation in the offseason knowing what it feels like to play in the NHL. It’s easy to criticize this move by saying the best case scenario is sign him and keep him protected, but I would have been amongst many fans who would have been furious if this tactic backfired and he became a free agent. Also, who’s to say they didn’t propose this scenario but his agent rejected it? Your usual negative armchair GM’ing to put a negative spin on a good move by management.

    • Freud

      The writer’s points were largely missed by the usuals. It must be hard to write complex pieces that just fly right over people’s heads. The simple minded responses here are something to behold.

      Petbugs probably doesn’t expect much, having watched pieces get misconstrued or completely misunderstood in the comments section endlessly by Team Lemming.

      To the point, Benning has yet to negotiate any contract that showed any creativity or spine that helps this team down the rebuilding path.

      We can easily assume, looking at the contracts handed out to everyone from Dorsett to Hutton to Eriksson to Gudbransen, that Benning and Linden did not consider or even discuss with Gaudette’s agent the options this writer laid out.

      There is absolutely no evidence this management team has ever thought of creating conditions in the future that would allow for adding value through roster flexibility. This current roster is actually the result of the exact opposite philosophy. That being, cave in negotiations now just to get the deal done and we’ll worry about the ramifications later.

      • Canuck4Life20

        The fact that you find this article complex tells me once again that you are not nearly as smart as you think you are.

        The problem isn’t that the authors points are too complex. It’s that they are simplistic and don’t even consider the real-world fact that it takes two sides to make a deal. You and you buddies here (you’re not even trying to hide the fact that you are closely related to the writers on this site in some way) never seem to acknowledge that basic fact of doing business. Back to class fraud.

  • 51Geezer

    The Canucks (and every NHL team) will be better prepared for the next expansion draft. They will have as few NTC players as possible and will trade for picks the players they can’t protect.

    • Defenceman Factory

      Perhaps just a technicality but no trade clauses, even modified no trade clauses, do not mean a team must protect a player. A player must be protected only if they have a no movement clause.

      As it currently stands the Canucks will not have any NMC contracts in place at expansion. The current NMCs in Ericksson’s and Sutter’s contracts convert to NTCs before expansion.

  • jaybird43

    I think it’s pretty obvious tgat the main point to sign and play Guadette is so he doesn’t slip away as a FA next year, as many here have commented. Worrying about a player in 2020 that, oops, slipped away would be stupid. The “opportunity” cost of that would be high.Worrying about roster protection in 2020 has to be secondary. Talk of contracts without thinking about the human element is just dumb ….

  • Ronning4ever

    “Beyond that, I’m sure that if the Canucks were completely up front with Gaudette and his agent that they would be willing to sign him early, which gives him his signing bonus, a prorated salary for the last two weeks of the season, and burns a year of the ELC, but that he wouldn’t actually get into a game, I think he would still make the decision to sign.”

    I’m struggling to understand how the author could seriously believe this. Maybe he has some insider knowledge or rumour that I’m not aware of?

    I’m guessing the Nucks know all this. They’ve used fairly complex contractual manoeuvres before. Juolevi is playing with men while still getting a contract slide. Hutton signed his ELC and then went to Utica on an ATO for 4 games. Jasek just signed an ATO (probably to see if he’d be worth a ECL). I personally feel they would know this and the general benefit to the team. Also think they’d prefer Gaudette go through those steps too, especially given how they’ve used young players.

    From a purely personal level, if I was deciding between continuing in Uni, testing free agency and signing a contract, playing a few games in the show might be a big incentive. Especially for a 21 year old scoring leader who just got knocked out of the playoffs.

    • Canuck4Life20

      He does seriously believe this. Just like the writers on this site think there is a long list of quality free agents that are willing to take one year deals only to be flipped at the deadline to GMs who are eager to give up draft picks for the same players that they weren’t interested in signing to a reasonable contract that summer. It’s all so easy for the highly educated set that write for this site.

  • Deliverator

    Are you serious? Do the names Schultz, Vesey, Hayes, Butcher, Byron, Kerfoot… and this summer, Belpedio and several others ring a bell. What do they have in common? All are drafted college players that decided not to sign with the NHL team that drafted them, and became (or, in Beldpedio’s case, will become) free agents. All would not have become free agents had the teams that drafted them signed them and burned a year of eligibility by playing them for a few games at the end of their junior years. What is the opportunity cost for the teams that drafted them that will never have them on their rosters? If you’re going to become a serious hockey blogger, you’re going to have to pull your head out of the sand and look around a bit before spouting such naive nonsense as you did in this article.