Sunk Costs

There's word around the Internet this week that the Oilers are open for business leading up to the draft. Lowetide quoted this piece from the Boston Globe that threw out names like Penner, Gagner, Hemsky, and Cogliano. And an article from Rishaug on TSN.ca on Monday had this tidbit: "Anyone in the organization (with the exception of Eberle) could be in play and available to the highest bidder." With all this trade talk, I'm a bit worried about some of the comments I'm seeing.

Certain Oilers fans are making the argument that the Oilers shouldn't trade this or that young player because only loser organizations suffer through the development years of their players only to trade them when they're hitting their prime. I've seen terms like "NHL's Farm Team" thrown around. The argument that we shouldn't trade players just as they're reaching the productive years of their careers seems to make sense at first, but actually doesn't really hold up.

Sure, loser organizations are usually the same organizations that trade away their talent just as they are getting good. But that's not what makes them losers. What makes them losers is that they don't get full value for those young players when they do trade them. It's one of those causation vs. correlation things.

There's a concept in Economics called Sunk Costs. Basically what it says is that when you're trying to make a decision about the future, it does you no good to worry about what you've already done. If you manufacture a product that costs 10 dollars to make and you break even on every sale, it doesn't really matter that you spent 100 million dollars building the factory. You're still better off cutting bait and putting the rest of your money in the bank. At least there it will earn a little bit of interest. The 100 million is gone, no matter what you do.

In the same way, it doesn't really matter if the team suffered through the "Clouseau-esque" development of some of our young players. Just like the 100 million dollars, we can't get that ice time back. And we shouldn't let that baggage affect our decision-making. (You can make the same manufacturing analogy about vets like Moreau, too. Just swap out "breaks even on every sale" with "takes a significant loss on every sale.")

We can all agree that the team is bad today, but the way to get better is by evaluating the future value of each move, and then pull the trigger on the ones that make sense moving forward, without worrying about what has already happened.

So, I agree that for a player like Sam Gagner, the risk/reward of cashing in his future value for the expected future value of a Hall/Seguin probably doesn't make sense, but it doesn't have anything to do with the growing pains we've already suffered with the player. Gagner has a future value. Hemsky has a future value. Cogliano has a future value. If the Oilers can trade them away and get better future value back, then they should do it. Period. It's the only way we will ever get better.

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