Millions of people across the country participate in fantasy football leagues. There are two common draft formats – the simple snake draft, where everyone takes turns selecting a player, and the live auction draft which can be very complicated and intimidating.
With the live auction draft, everyone gets a budget and must fill their roster by bidding on players in every position. Of those brave enough to try live auction drafts, most rely on a variety of websites to generate auction values, but few truly understand how those values are calculated. Here’s a simplified version of how – it relates to the iceberg theory:
Read about The Iceberg Theory of Income here!
You must start with an assumption of how many points each pro player in the league will score throughout the season, given the scoring system of your league. Bonus points are then given to starters and extra bonus points to elite starters (because they make the decision of who to start easier). The players are then broken down by position, and sorted in order from highest to lowest projected score.
Then you have to make an assumption as to how the other participants will divide their salaries among the various positions on average.
It’s fairly standard to start with a $200 budget. Let’s say you think $25 will go towards QBs, $70 each to WRs and RBs and $20 to TEs, with the balance going to kickers, defenses, and random scrub players in each position. Now, the key idea is that you’re not paying for outright points, but for points ABOVE a baseline.
It’s similar to the iceberg theory – the ‘base’ points that can easily be replaced aren’t worth anything, it’s the tip-top above-average points that are worth the money.
You have a roster of certain positions to be filled, for example 1 quarter back, 2 running backs, 3 wide receivers, a tight end, a defense and a kicker, and you can draft bench players also. Kickers may score a lot of points throughout the season, but the exact number is fairly random and so there’s often parity among them – that’s why they usually go for $1, or maybe $2 if they’re on a good team expected to score a high number of points throughout the season. It’s the same idea with defenses.
Now look at QBs – you can only start one QB each week, basically every QB in the league will outscore almost all of the RBs and WRs, but that doesn’t mean that the worst QB will be worth more money than most RBs and WRs, in fact it’s usually the opposite.
If there are 12 teams competing in your fantasy league, each team will draft 2 QBs, and you expect the top 24 QBs will score in an expected range of 200-300 points, you’re just paying for the points over 200. If the top 36 WRs will score in a range of 10 to 225 points, you’re paying for the points over 10. The tighter range for QBs leads to the allocated salary being smaller, just like with Ks and Ds.
So you’ve allocated $300 total dollars to QBs across the league (12 participants times $25 on average salary for QBs), now you break that $300 down based on the points above the baseline. If the 24 projected QB scores are evenly spaced between 200 and 300, then the top QB will have 100 points allocated, because that’s his level above the baseline, the next will be worth about 96, the next about 92, all the way down to 0 for the QB expected to score 200 points throughout the season. So add up those 24 allocated points (24 players evenly spaced over 100 points will add up to 24 times the average of 50, so 1200 total), divide $300 by those total extra value added points to get a price per point (.25), and there you have auction values – 0 to 100 points times .25, so 0 up to 25.
Then repeat for each position. And you have a complete set of values to power you through your auction.
Now to relate this back to personal finance – assume that your fixed costs basically are what they are. They are your baseline (the part of the iceberg underwater). And every discretionary dollar you spend (the tip of your iceberg) is the money you spend for fun. Therefore it should be allocated proportionally to how much happiness it brings you: how much extra value it adds to your life.
That is your ‘fantasy’ money.
-DD
