The NFL Draft is an annual exercise in probabilities. Each draft pick represents a blended average of bust rate, success rate, and varying levels of mediocrity. In a perfect system, those taken earlier represent the higher expected value, while those taken later represent the lesser expected value.

In other words, players selected in the first round have a higher projected net positive impact to their respective teams than those players selected in later rounds.

This makes sense, right?

However, in addition to added value on the field, a second and equally crucial factor in selecting draft picks is considering the salary cap impact of the selection. The 2018 salary cap for each team is $177.2 million, plus or minus any rollover from the prior year. As a rule, NFL teams are required to spend at least 89% of the cap over a four-year period.

Understanding the Cap

Unlike Major League Baseball, where teams are limited only by their desire and financial ability to spend on a player, the NFL salary cap places all clubs on a level playing field since they each receive an equal portion of the league's television deal. Last summer, each squad raked in nearly $244 million in addition to team-specific revenues.

Therefore, the salary accompanying a player signing does not represent a loss to the bottom line for the team, but rather an allocation of a percentage of available resources. When general managers were bidding on Kirk Cousins this offseason, his ultimate salary was determined not by the financial burden it would place on the team, but rather what percentage of precious salary cap his contract would represent.

And, similarly, general managers must take the cap into account when making selections in the NFL Draft.

Gone are the days where rookies negotiated their own deals. Instead, rookies are paid on a set rate based on draft slot. All drafted players are subject to four-year contracts worth values that decrease throughout the draft, and teams own a fifth-year option on first-round picks.

For example, the Cleveland Browns number-one overall selection, Baker Mayfield, is estimated to make $32,683,750 over four years for an average annual salary of $8,170,938. Meanwhile, the 10th overall selection, Josh Rosen of the Arizona Cardinals, projects to earn $17,598,139 for an annual average of $4,399,535. Both salaries are guaranteed and set by their draft slot, not their position of play.

These low values are what makes rookie contracts and future draft picks so valuable, especially for certain positions. And it's critically important to acknowledge that not all positions are equal.

Take a look at the average annual salary at each position and how quickly the contract value deescalates.

This graph paints a beautiful picture of positional value and positional scarcity. Notice that the peaks at quarterback and outside linebackers (think edge rushers) are among the highest-paid positions. The rate of decreasing salaries, though, is steeper at outside linebacker than at wide receiver. This reveals that the perceived talent differential between elite and good players is smaller at the wide receiver position than outside linebacker. Every position has a small tier of well-paid players and a large trough of replacement-level players making at or near the league minimum.

If rookie contract values are known before a team selects an individual, expected player value decreases throughout the draft, and veteran players are paid differently across positions, we can make judgments on how well a team valued the cap in the 2018 NFL Draft.

Getting Experimental

Let's engage in a thought experiment here by trying to create a system to identify a fair market value for each player. Begin with the assumption that no player drafted is immediately better than the 90th percentile at his position, and that the rate only gets worse throughout the draft. As a result, the number-one overall player would deserve to get paid at the 90th percentile of current contracts at their position. The last player taken would deserve to be paid at the first percentile. Players in between those two extremes decrease incrementally throughout. For example, pick 50 happens to equate to about the 73rd percentile.

Starting with Mayfield, who we have agreed has a baseline value of the 90th percentile at the quarterback position, we see that his determined annual value is $22,000,000. There are 94 current quarterback contracts, which means that, at the 90th percentile, Mayfield should be paid as the ninth-highest paid quarterback. Currently, that places him just behind Joe Flacco's $22,133,333 annual average. Compared to his current annual average of $8,170,398, the selection of Mayfield saves the Browns $13,829,063 per year.

Moving to the second overall pick, the New York Giants selected running back Saquon Barkley. Per our formula, Barkley would deserve to get paid at the 89.6th percentile. Of the 143 running back contracts, this theoretical percentile places Barkley as the 15th-highest paid running back -- an average annual salary of $4,000,000 -- equaling that of New Orleans Saints running back Mark Ingram. With that being said, per the predetermined rookie pay scale, Barkley is set to earn $7,798,871. Therefore, not only did the Giants fail to capture value, they also overpaid for the asset comparatively -- a massive blunder for the G-Men.

Salary Cap Savings Winners

By repeating this analysis throughout the first three rounds of the NFL draft, it's no surprise that five teams separated themselves from the field in terms of salary cap savings: Buffalo (who saved $19,750,866 in salary equity), Arizona ($18,639,795), Cleveland ($17,013,692), Baltimore ($15,960,834), and New York ($15,906,843). These were -- as you probably noticed -- the five squads that took a signal-caller in the first round since the cost of doing business at quarterback is so high.

In addition to picking Josh Allen seventh, the Bills also took outside linebacker Tremaine Edmunds 16th and defensive tackle Harrison Phillips 96th. We could obviously debate the merits of Allen as a quarterback, but the intent of this exercise is to measure value and equity as a function of draft position and corresponding contracts.

Here's a summary of how the top-five teams did with each selection they had in the first three rounds. We'll look at just those rounds because the rest of the draft has minimal cost.

Salary Cap Savings Losers

Rookie contracts are so cheap that it's difficult to screw it up over the course of three rounds. However, the Seattle Seahawks managed to be the only club out of 32 to bring in a net negative number.

With only two selections in the first three rounds (a problem in and of itself), Seattle took running back Rashaad Penny in the first round at a loss of $691,412 and defensive end Rasheem Green for a gain of $662,417. Combined, the Seahawks totaled -$28,995 in salary equity.

Three other clubs failed to clear $1,000,000 in salary savings -- the Los Angeles Rams ($78,531), Philadelphia Eagles ($593,913), and Tennessee Titans ($847,196). For each of these teams, their poor performance was tied to their lack of picks in the draft, which must be weighted against them.

Overall, here's the equity gained by each team when analyzing the first three rounds of the draft:

Weaknesses

It's important to be forthright in identifying the weaknesses with this type of thought experiment. First, this study only examines the first three rounds of the NFL draft. The actual draft is seven rounds long, so why do this?

Well, due to the steep decline and eventual plateau that is demonstrated in the "Average Salaries by Position" graph above, it doesn't take long for the cost of rookie contracts to exceed the percentile-based contract worth. Ultimately, in rounds four through seven, only 9.6% of selections returned positive salary value. For this reason, I decided to only examine the rounds where value was so large and overwhelmingly positive.

Second, this exercise assumes equally incremental drops in value throughout the draft when we know that players are more often clustered into tiers. Several players may be nearly identical in talent and outlook and then there is a substantial drop before the next group in players. Related, the study does not attempt to grade the quality of the actual player selected but rather what his draft equity indicates he is worth instead. It assumes that players are drafted in order of equally fair evaluations across the board. But we know that team needs and inherent bias weighs into selections as well.

It's also important to note that average annual salaries are being used as the baseline in this study. This does not take into account guaranteed money, which can be very difficult to predict. Average annual salary, though, is the best way to normalize the cost of a player's contract over the duration of their contractual agreement. The 2018 cap hit number could have been used but does not provide an accurate view of the player's actual value when isolated.

Also, it doesn't measure the confidence that each pick will pan out beyond what is naturally baked into the draft equity of the player. For example, we have a higher degree of certainty that Saquon Barkley will be a dominant running back for years to come. But the range of outcomes for Baker Mayfield or Sam Darnold would be much wider. Distribution of future outcomes is inherently a part of each draft pick's ultimate landing spot. Even a player with alleged off-field issues has those negative potential outcomes baked into draft price.

Lastly, this thought experiment doesn't provide recommendations that can be used in a bubble. The recommendation from this tool would nearly always be "draft a quarterback," so it does take more nuance to apply it to team-specific usefulness. Adding granite countertops and a tile backsplash to your kitchen will return more equity for your home than a new garage. But if your kitchen is already in decent shape and you could really use a garage, then you should be building a garage. Getting an asset that you can put into use is a big deal and at times will trump the equity-based value. These results are more of a guide than a set of rules.

Conclusions

Salary savings is not the only thing to consider when making a pick. A team must also consider needs and individual evaluations. However, the NFL Draft is the ultimate lesson in opportunity cost.

A team's decision to spend valuable cap space on rookies at positions of high value means they are free to pursue or extend players at other positions. Most notably, having a good quarterback on a rookie contract can be a massive boon for a franchise, and that's a big reason why the Eagles and Seahawks won Super Bowl titles in recent seasons (and why the Rams are going all-in right now, knowing this is a pristine window while Jared Goff is on his rookie deal).

Money saved on rookie contracts directly impacts a team's ability to attract and retain long-term success. Salary cap maneuvering is a zero-sum game, and those not hacking the system by taking advantage of opportunities to pay quarterbacks, edge defenders, and wide receivers (and a few others) well under market value are providing a disservice to their organization.

With rookies, teams will miss. It's just the way it goes in the NFL Draft. But the contracts for draft picks are such that when a team whiffs on a pick, it's not an incredibly costly miss. On the flip side, when they're right, they're right in a big way, and it's vitally important for teams to steal money at the draft each and every year.