I voted option #1. A balance of risk and reward. I will also add that I only value what will happen with the prospect between the next 6 to 8 years. I don't give a crap if XYZ prospect is still going strong 13 years from now. I'll find plenty of new players between now and then. There is no reason to think I'm going to have these investments/prospects forever or their current MLB team will either.

But every investor has a different appetite for risk. Some like a lot of risk, lot of reward. Some like little risk, little reward.

How we balance risk is really what you are trying to get at.

If you're 20 years old you might have 50% of your portfolio in high risk stocks knowing if you hit on one or two of those, twenty years from now you'll be golden. If you're 6o, you're probably looking to move into more secure securities.

We talk about there being different approaching to building teams -- the stars and scrubs team vs. the all average team for instance -- but I think there are different ways to build farm systems. Some look for that one superstar player. Some take less risk but rely on that steady flow of average to slightly above average player.

The best systems balance both. They take some calculated risks but also try to keep a balance of players that will perform at an average or near average level.

That being said. It's always harder to find the superstar on the free talent market or even in free agency.

So, I think its best to try to balance with a little bit of leaning towards high risk/high rewards players because high reward players are so much harder to find.

I'm not even talking about players necessarily taking a legitimate step forward, but just improving in the eyes of the general prospecting community enough for their value to increase. Then, you sell high on the prospect. I'm talking about guys like Towles, Headley, etc. who prior to the 2007 season were C+/B-/low B types for the most part, and though they still aren't viewed as star players, they're suddenly locks for top 100 lists.

What I find intriguing about this approach is that by this logic, you should always trade your highest draft picks and simply invest in a bunch of risers with the idea of dealing them when their value peaks. High draft picks would generally be avoided because the value of that draft pick in most cases will not be surpassed by an already excellent prospect taking a further step forward.

Just my two cents. I haven't entirely thought this through, but I think as long as 90% of owners would consider this insane, it might just actually work.

When it comes to the draft I would be drafting high ceiling guys. I am a person who is in favor of high risk/high reward players. Like everyone has been saying, these players are harder to find and do flame out more often, but when you get a good collection of them, you have got yourself a solid core.
I also believe in a draft of 50 rounds, there are enough rounds to find those players that slip in the draft with higher ceilings or those players that turn into solid 3 star prospects. I like the Tigers approach to drafting, although you dont necessarily need to take the highest price guy, but I would definately pay the money for the top pitcher in the class at pick 27 or 28.
I am against taking "safer" lower ceiling picks like Jeremy Sowers and others. I would set aside a budget of about 8 or 9 million on the draft.

I would also be putting serious money towards Latin America. I dont think I need to explain, but I can find a lot of gems and superstars over there along with some other 3 star prospect. I wouldnt be paying 2 million for these player, but I would budget abot 2 or 3 million total on the international field.

To get this 10-12 million, I would budget accordingly and not sign player like aaron rowand if Im the giants. They are not competing now and that money could be used to go crazy on the draft and international market. This is why it makes me sick when people say "well I understand the Giants took Jackson Williams because they were saving money and had five other picks." With those 6 picks I would have nabbed porcello and other high ceiling high priced guys. Its a small price to pay when you end up with these guys on your big league club. If they flame out, well then we lose 7 million from porcello, but aaron rowand and zito are still making 170 million.

Long term, if I have a small budget, that is fine. I do not mind what the marlins do. I disagree with trading Cabrera, he is a "build your team around player." I could live with giving him 7 years - $140 million. I would also lock up hanley ramirez long term. The rest may be tradeable when they get too expensive. The only way I would have traded cabrera is if I got Miller, Maybin, and Porcello. I would throw in Willis and Gregg and maybe even volstad or thompson to even it out. But that is the only way you are getting my cornerstone player.

That is my analysis, I gues I should consider writing a book next time. Feel free to critique, tell me where Im wrong and why, and also where you agree.

As an example, Cameron Maybin has the highest ceiling of any player still in the minors. On top of that, he has got a very high floor, since there is close to zero chance he won't be at least a usefull starter. Even though he's still over a year away (on a normal development curve), his value sky high. Heck, I might have just talked myself into putting him at #1!

I think the community prospect lists are way overrating the first two kinds of hitters, and ought to be more open-minded towards the phenoms.