This one turned out to be much more difficult to word than I was anticipating...
Prerequisites for understanding: None
Prerequisites for deriving: N/A; conceptual.
Just One Number
A reasonable understanding of value is a critical tool in the sabremetrician's arsenal. While may many argue that you can't put a number on every little thing a player does, when a team is making a transaction they must assign some value to players lest they make completely arbitrary decisions. When a player signs a contract with a team, he's signing for what the team is willing to pay him. This may or may not jive with what fans, analysts, or even other teams may think he's worth, but no team gets a bad deal on a player deliberately, nor do they make stupid trades on purpose. In order to be even remotely efficient with their resources, teams must have processes for determining player value. How?
The Currency of Baseball
This is actually the big question in baseball analysis: How much is a player worth? It is impossible to have an informed opinion on any transaction that occurs without subscribing to a logical definition of player value. This value is essentially the currency with which baseball operates. Are those two prospects a good return for that star slugger about to walk in free agency? Was that ace pitcher worth tying up ten percent of the team budget for the next seven years? Clearly the idea of salary as value is inadequate here - there's no reasonable way of comparing prospects with an established player using salary alone. Ironically, the rules regarding club control of young players means that the dollar is not, and never has been, the currency of baseball.
What is it then? The answer is simple: wins. A baseball team is trying to get as many wins as possible both now and in the future given the resources at hand. More wins means more people at the ballpark, which means more revenues. More wins also means the chance of a playoff spot, which has a huge impact on team finances. In other words, value can be measured by how many wins a player adds to a team in any year. Acquiring wins drives the whole system, and they're worth a certain amount on the market - over the last few years, an expected win has typically been worth around $4 million per season when signing free agents.
Teams often differ wildly in terms of how they calculate expected wins. This means that they'll value players very differently, leaving some to make head-scratching moves while others gobble up apparently undervalued assets. Our goal as analysts is to provide a coherent, consistent methodology for evaluating players in terms of wins. If a statistic cannot be translated into wins, it is of minimal utility to us. Fortunately, most can.