After I posted my analysis of the Redskins’ trade for Robert Griffin III, a few readers asked how good Robert Griffin III would have to be if the Washington Redskins more properly valued their future draft picks. In my previous post, I used a discount rate of 173%, the discount rate calculated by Cade Massey and Richard Thaler, which is alarmingly high. Below, please find the highlights of how good RGIII would have be to make the trade even, given various discount rates.
These calculations differ slightly from my previous analysis because I made a relatively small mistake – I ended up double counting part of the value the Redskins traded away, which added to the value RGIII had to give to make the trade fair. As you can see, this difference mattered in the calculations, but not in the conclusion. Given a rational discount rate (let’s say below 10%), this trade comes out even only if RGIII is one of the best quarterbacks ever. Since this outcome is very unlikely, the Redskins almost certainly vastly overpaid for RGIII.