Believe it or not, I’ve never actually heard that explanation of time value. Do you have a source?
I’ve been looking and can’t find much of anything. I’ve only ever heard draftniks say future picks are one round less and assumed why.
Not sure I can pinpoint where it is explicitly stated but same concept of time value of money.
1 dollar today is worth more than 1 dollar a year from now because I can take that 1 dollar today and invest it. If I can put it into something that returns say 10% then a year from now it will be worth $1.10 which is more than the 1 dollar I get next year.
Likewise, if I have two identical players (Johnson - eligible for the draft in 2022 and Mike - eligible for 2023), Johnson will gain NFL experience and hopefully inch closer to reaching his full potential. Mike will improve too but not as much because college does not provide the level of develop the NFL does. So let's say Johnson improves by 30% this year while Mike only improved 15%. Next year Mike is drafted but he and Johnson are no longer identical because Mike is now worth 115% of his 2022 self but Johsnon is worth 130% of his 2022 self because you got him a year early and thus was able to invest more into him.
So that is why a draft pick today is worth more than a draft pick next year. You get to invest the 2022 draft pick for a year which all things being equal will mean that draft pick will have progressed further than a similar player not drafted until 2023.