Filter posts by...
Finances
Tuesday, February 07, 2012
Oh, about 4MM$ a year for the next 3-4 years. Kershaw signed two years, to forego his first two arb years. How much would he have gotten, had he had the same performance, but not won the Cy?
I think Matt would be in a better position to answer that. However, if we look at the big four (Felix, Verlander, JJ, Weaver), we see a pretty typical pattern for one year deals, and what we should consider as the upper limit: 3-4MM$ the first year, 7-8MM$ the second year, 13-14MM$ the third year, and 20MM$ if it gets there for a 4th year.
As Dave reminds us, young guys sign away their early years as well. Lincecum got 2/23 for his first two years, but he came off TWO Cy Youngs.
Cole Hamels signed 3/20.5, which is a discount had he gone year-to-year like the Big 4 did (25MM$ or so for their first 3 years).
Kershaw just signed 2/19, and one would think that if he signed for a third year, he’d have gotten another 15MM$ or so to come in at 3/34. Signing multi-year also means you are getting a discount, so, that probably means he’d have expected to get say 38MM$ had he gone year-to-year, compared to the 25MM$ the Big 4 got. That’s a 13MM$ bonus for Kershaw over the Big 4 for those 3 years. Or 15MM$ bonus over Hamels.
Basically, a Cy Young really takes the sting out of arbitration, and accelerates a pitcher’s service clock by one year. What Lincecum did for his year 1 and year 2 arb deal (of 2/23) makes more sense to think of it for his year 2 and year 3 arb deal. (The Big 4 for example were paid about 21MM$ going year-to-year.) Same thing with Kershaw, who signed for 2/19, which is very much in line with thinking that his Cy Young accelerated his service time, since it matches to the Big 4’s year 2 and year 3.
Wednesday, January 25, 2012
Prince Fielder: signed for 9 years, 214MM$; paying for 6 wins in 2012, dropping by 0.5 wins each year; paying for 5MM$ a year, increasing by 5% each year.
Wednesday, January 18, 2012
This was written prior to the actual 6/60$ deal (plus 52$ posting fee). Based on what I wrote below, it’s obvious that the entire amount of surplus value went to the Japanese club.
***
(I wrote this part last month.)
We’ve talked about the posting system in the past, and it’s going to be another news story now that Yu Darvish is involved.
The basic consideration for Darvish would be something like this: make 7MM$ a year for the next three years in Japan, and then be a free agent. Or, ask to be posted, get a significant portion of your value transferred to your Japanese club via the post, and get the remainder to yourself.
What’s the breakeven point? Let’s see.
How much would an MLB team pay, today, for Darvish starting in 2015 season, and for 2 more seasons after that? Now, you have to remember between now and then, injuries or change in talent level can happen. Taking a shot in the dark, let’s say an MLB team will guarantee him a 3/45MM$ deal, if he signs today, but can only start pitching in 2015. And of course, he gets his 21MM from Japan for 2012-2014. So, his total take is 6 years, 66MM$.
On the other hand, if he signs a 6-yr deal today (and if he were a completely free agent), let’s say he gets a 6/110MM$ deal.
There’s some 44MM$ gap here, between the 110 and 66. If that entire 44MM$ goes toward a posting fee, then Darvish gets 66MM$, and his Japanese team gets 44MM$ (and it costs his MLB team 110MM$). Since that 66MM$ is exactly what Darvish is worth (presuming the above illustration as true), then it becomes a 50/50 shot whether he accepts the deal or goes back to Japan. Either way, he makes an estimated 66MM$, on average, over the next six years.
(Again, presuming that the above illustration is reasonable.)
Does his Japanese club really want that money? Well, they are only paying 21MM$ for Darvish for the next 3 years. How much value are they getting out of him? I have no idea. Let’s say that in Japan, he’s actually worth say 35MM$. So, his Japanese team is getting 14MM$ of surplus value by keeping him. That becomes THEIR breakeven point.
It seems therefore that a deal at some point in between 14MM$ (club’s presumed breakeven) and 44MM$ (total surplus available), say at 29MM$, gives the Japanese club an extra 15MM$ in surplus value, and Darvish gets 15MM$ more than if he waits it out.
The problem is that the posting system doesn’t work like that. If Darvish doesn’t agree to, say, a 6/66MM$ MLB deal, then everyone loses. The Japanese team doesn’t get the extra 15MM$ of surplus, Darvish doesn’t get the extra 15MM$ to force his hand, and the winning team in MLB doesn’t get the player it wants.
However, as we saw with the Dice-K contract, and as we see with locking in players to long-term deals who have not made tens of millions of dollars already, players give a much deeper discount. So, that 30MM$ surplus goes mostly to the team. Rather than split it 50/50 so each of the team and the player gets 15MM$, it’s likely that the current situation gives an 80/20 split, in favor of the team. So, that 30MM$ is going to be split as 24/6. Therefore, the Japanese club will want 38MM$, while the other 6MM$ will go to the player, giving him a 6/72 deal, enough of a bump that it makes his decision to leave Japan fairly easy.
The fair thing to do is to tie the posting fee to the player’s contract directly, and more balanced. In this particular illustration, 29MM$ should go to his Japanese club, and 81MM$ should go to Darvish (presuming a 6yr deal). So, roughly 75% for the player, and 25% for the team.
Of course, this balance changes based on years in control remaining for the Japanese team. You can come up with a system, like: player must sign for 5 years, and for each year of control that the Japanese club has, they get 10% of the contract. So, they could let the guy go with still 5 years left, but the Japanese club gets 50% of the contract.
These are just some general ideas/guidelines. I’m sure the Straight Arrow readers among you can refine and improve upon this model.
***
(I wrote this just now.)
In retrospect, I should have considered the discount he’d give for signing a long-term deal now. The fair price was 6/72. By signing now, rather than waiting to be a free agent in three years, he gives say a 30% discount on years 2015-2017 (which you see above I have 45MM$), or about a 14MM$ discount. We could have predicted he’d sign for 6/58, with the rest of the surplus (110-58) of 52MM$ going to the Japanese club.
Tuesday, January 17, 2012
Don’t know how I missed this from Matt and Tim.
Lincecum is 3rd-year arbitration-eligible. Even if he was 4th-year arb eligible, there’s no way he could get what he’s asking.
If you look at the pitchers who are as good (or arguably better), meaning Verlander, Weaver, JJ, Felix among his contemporaries, or going back to other pitchers (who were never free agents), Lincecum simply does not stand above them. These guys made about 13-14MM$ in their comparable year. Lincecum does have the two Cys, but they were more than two seasons ago.
He should consider himself lucky the Giants offered him 17MM.
In 2010-2011, among pitchers with at least 400 IP, he’s 10th in ERA. Among pitchers who are arb-eligible (ignoring that FA years have been bought out), we have ahead of him: Felix, Justin, Matt Cain(!), and Cole Hamels.
Even if you go back for a three year look (2009-2011), among pitchers with 600 IP, he’s 4th in ERA, right between Felix and Matt Cain(!).
There’s no way the arbitrator is going to listen to stats over the previous four years.
In terms of comparables, basically, 14MM$ would be the arbitrator award. The Giants went to 17MM$ (presumably because they paid him so much last year to begin with, at 14MM$). They bumped him up 20% (which, IIRC, is the minimum bump right? can’t remember right now).
Lincecum will sign for 17MM$, and maybe 20MM$ for his last arb-year.
Thursday, December 22, 2011
Danks: 5/65 (one year of arbitration, 4 years of free agency).
***
John Danks’ salary in his first year of arbitration was close to the salary of the big guys (Felix, Verlander, JJ, Weaver) in their first year. His second year however was decidedly less (about 20% less).
In his third year, he’d have to settle for being one tier below those guys, if not lower. The big 4 were at around 13MM$, so 20% below that puts him at close to 10MM$. Let’s say that he would have signed for around that amount, either through arbitration, or as a result of negotiations (club submits 9, player submits 11) in 2012.
That really leaves us with a 4/55 extension, starting in 2013.
***
Because it’s an extension that doesn’t start for one year, he has to sign at a discount. If he signs a 4/55 deal today, that starts in 2013, perhaps he signs a 4/61 deal today, that starts in 2012 (if he were a free agent today). Basically, he signs a guaranteed deal early, in exchange for lesser money. I don’t know if that discount is 10%. It’s a number I pulled out of my a$$. But, it seems to smell like a nice number.
So, the numbers you see below is based on delivering a performance consistent with a 4/61 deal in the years 2013-16.
***
He’s a young pitcher, born April 1985, just one year older than Felix. Entering 2013, he’d be 28 years old, so we’re going to apply a somewhat modified aging curve.
So, this is what the Whitesox are paying for:
2012 3.7 wins
2013 3.4 wins
2014 3.0 wins
2015 2.5 wins
2016 2.0 wins
How much is a 3.7 WAR? If you give him 198 IP in 2012, his effective win% (i.e., runs allowed converted to winning percentage) would be .538 in the AL. A .538 win% means allowing runs at 8% below league average.
His career FIP is 7% better than league average and his career RA9 is 10% below league average. (You would adjust that for regression toward the mean, but you’d also need to adjust for his age, which will pretty much cancel out the regression.)
So, his career indicates he has the talent level to give up runs at 7% to 10% better than league average for the 2012 season, and the Sox are paying him for delivering 8% better.
This seems about as perfectly fair deal as you should expect from both sides.
Friday, December 09, 2011
By the same guy who gave you Longoria I.
This time, straight from Harvard Sports Analytics.
On average, top first basement start to decline precipitously after age 32. Using this trajectory, we can expect Pujols to contribute approximately 47 WAR over the rest of his 10-year contract, assuming he won’t have any wrist issues and will be able to bounce back to a high level this year like his counterparts from the past.
Good.
So how much is 47 WAR worth? Some writers cite a value of $5 million for a marginal win on the market today, implying that Pujols’ remaining years should be worth approximately $235 million.
Ok, sort of.
However, looking at the 2011 salaries and performance of all non-pitchers in the league (excluding those who did not play), teams will pay, on average, $600,000 for a replacement level player (WAR = 0) and $3 million for each incremental win above replacement.
Oh boy.
That’s because this fellow is likely looking at players that are arbitration or pre-arb. I can’t tell, because he doesn’t explicitly say. He also gives a 2.7% annual increase for the next 10 years, based on the one data point of last year. He ignores the basically 0% of the bad economy, and the 10% of the normal baseball economy. That’s not to say that 2.7% is a bad estimate. It can turn out to be a reasonable estimate.
Now, what’s another way to do this? How about you start at 6.5 wins for 2011, and drop him by 0.5 wins each year. In 10 years, that comes out to 42.5 wins (LESS than the 47 he cites). So, I’m being pessimistic relative to his valuation of wins. Then, we give him 5MM$ a win in 2012, and increase that by 5% each year. That gives us 255MM$.
So, we can throw in whatever numbers we want out there, making seemingly reasonable choices, and then coming up with THE NUMBER.
Now, you can actually make say 3.5MM$ a win as something more reasonable than 5MM$. If you went the free agent route for a team of 25-30 players, and paid them 5MM$ a win, a 90-win team will cost you over 200MM$.
Given that today, we have many teams that don’t spend 200MM$ on salaries and player development (draft, minors, etc), and are 90-win teams in true talent, then the 5MM$ is over-inflated. This is simply an argument that ALL free agents are overpaid. This no longer becomes an Albert Pujols issue.
But, with respect to the free agent market being rational, then Albert Pujols’ contract is right in line with rational expectations.
Tuesday, December 06, 2011
Presuming he signs a 10-yr deal, he gets paid 5MM$ for a win in 2012, and the cost for each win in subsequent years inflates at 5%, while his value diminishes by 0.5 wins, here’s the inference to make:
He signs for ____ , they value him for __ wins in 2012.
160MM$ -> 5 wins
190MM$ -> 5.5 wins
220MM$ -> 6 wins
250MM$ -> 6.5 wins
290MM$ -> 7 wins
Place your bets.
***
If you need a shorthand, each win is going to cost over the life of the deal 20% higher than it would cost in 2012. So, if you have the cost at 5MM$ per win in 2012, then it’s going to cost a weighted average of 6MM$ per win over the next 10 years.
So, that’s what you do:
Total lifetime wins
x cost per win in 2012
x 1.2
If you want a shorthand for Total lifetime wins:
wins in 2012 x 10 minus 22.5
Putting it together: if you have 6 wins in 2012, then lifetime wins over next 10 years is 6x10-22.5 = 37.5
And so, cost for those wins is
37.5 x 5 x 1.2 = 225MM$
Isn’t math great? Stay in school kids.
Monday, December 05, 2011
Please don’t say sh!t like that. This is the reason:
http://www.insidethebook.com/ee/index.php/site/comments/remaining_value_of_contracts/
If you want to evaluate Reyes’ deal, evaluate it in its entirety. Otherwise, you are giving the Marlins no credit for possibly getting him on a discount for the first three years, but then knocking them for the huge premium in the last two years. This is the implicit valuation of Reyes by the Marlins:
Year Wins $perWin $Value $Cost $Gain(Loss)
2012 4.44 $5.00 $22.2 $17.7 $4.5
2013 3.94 $5.25 $20.7 $17.7 $3.0
2014 3.44 $5.51 $19.0 $17.7 $1.3
2015 2.94 $5.79 $17.0 $17.7 $(0.6)
2016 2.44 $6.08 $14.8 $17.7 $(2.8)
2017 1.94 $6.38 $12.4 $17.7 $(5.3)
So, the Marlins of valuing him as a 4.44 win player in 2012, dropping by 0.5 wins each year. They also have the value of a win at 5MM$, and increasing that value by 5%.
The net result is that under these assumptions, Reyes will provide a net gain in the first 3 years, a net loss in the last 3 years, such that, overall, he’ll be worth 106MM$.
Now, you can go even further and turn this into present value dollars if you like.
But, never, ever, ever, talk about things like he’ll be a net negative in the last two years of his (or anyone’s) deal. That’s a “duh” statement. That’s because Reyes, like all people, are human, and their bodies will break down.
Thursday, November 24, 2011
In the THT 2012 Annual, Matt has a tremendous piece on the different valuations for free agents, depending on whether a team resigns the player, or another team signs the player.
When a team resigns its own nonpitcher, starting pitcher, or relief pitcher to a multi-year deal, they pay 5MM$ per win. When another team does it, this slightly overpay the nonpitcher, but severely overpay the pitcher.
The unanswered question is: why? It’s not like the players end up underperforming their forecasts (just a bit, but not that much). It’s possible that a team knows more about its own pitchers than a forecasting system, and so, are much better positioned to forecast them.
Hence, if a team simply doesn’t want its own pitcher back, then this acts as a cautionary indicator to the other 29 teams.
It’s quite a fascinating read, and I encourage more aspiring saberists to tackle this issue, using Matt’s piece as a launching point to come up with additional conclusions.
Wednesday, November 23, 2011
I’ve seen unconfirmed reports that the CBA is not retroactive, and therefore, Papelbon being signed pre-CBA requires compensation from the Phillies, while he wouldn’t qualify for compensation (from the Phillies anyway) post-CBA.
When the Phillies signed Papelbon, or when the Redsox signed Dice-K, these teams are paying for all costs, meaning salary and other associated costs (compensation picks, bidding rights, etc). It’s very well possible that the Phillies would have valued the loss of their draft pick (presumably 29th, which I’ll just give it a value of 5MM$ for illustration purposes) plus the 50MM$, as exactly what they wanted to pay.
Now, post-CBA, they would have offered Papelbon 55MM$ possibly. Overall, it still costs the Phillies the same. The only thing that has happened is transferred the value of that pick from the Redsox to Papelbon.
Actually, that’s not entirely true. Under the new CBA, the Redsox get to pick 29th and the Phillies get to keep picking (this time 30th). So, the Redsox get the same value. Therefore, what really happens is that the value of the change in compensation rules is transferred from all 30 MLB teams to the Phillies, and they simply would have passed on the savings to Papelbon.
Indeed, since the Phillies’s 1st round pick has close to the least amount of value among the 15 best teams (those teams would have forfeited their 1st round picks… the other teams would have forfeited their 2nd round pick), the Phillies were the team best-positioned to lose the least by signing Papelbon.
All to say: don’t worry about it. The Phillies paid what they want to pay.
UPDATE: I’m reading elsewhere that if the Redsox had offered Papelbon a guaranteed one year 13MM$ contract post-CBA, and the Phillies signed him, then it’s a forfeit of the Phillies pick, not a sandwich pick for the Redsox. Anyway, I guess I shouldn’t comment until I read the CBA myself, because relying on sources doesn’t seem to be a good idea.
Regardless though, my main point stands that the Phillies offer is based on more than just the salary paid.
Tuesday, November 15, 2011
The non-quick way is to do what I did here. That chart shows how to infer the wins you are paying for, based on years and length of contract. For example, in that chart, it says that if you sign someone who is a true talent 4 WAR player entering the 2008 season, any of these salaries would be equivalent:
yrs total perYear
1 $17.6 $17.6
2 $34.5 $17.3
3 $50.5 $16.8
4 $65.2 $16.3
5 $78.0 $15.6
6 $88.7 $14.8
7 $96.5 $13.8
8 $100.7 $12.6
Notice what happens if you simply add the number of years to the average annual salary:
yrs total perYear function
1 $17.6 $17.6 $18.6
2 $34.5 $17.3 $19.3
3 $50.5 $16.8 $19.8
4 $65.2 $16.3 $20.3
5 $78.0 $15.6 $20.6
6 $88.7 $14.8 $20.8
7 $96.5 $13.8 $20.8
8 $100.7 $12.6 $20.6
Here it is for a 2-WAR player entering 2008:
yrs total perYear function
1 $8.8 $8.8 $9.8
2 $16.1 $8.1 $10.1
3 $21.4 $7.1 $10.1
4 $24.3 $6.1 $10.1
It starts to break down when you get to true 5 WAR players or above, but it only breaks down if those superstars sign a 3-yr deal or shorter:
yrs total perYear function
1 $22.0 $22.0 $23.0
2 $43.8 $21.9 $23.9
3 $65.1 $21.7 $24.7
4 $85.6 $21.4 $25.4
5 $104.9 $21.0 $26.0
6 $122.6 $20.4 $26.4
7 $138.2 $19.7 $26.7
8 $151.1 $18.9 $26.9
9 $160.5 $17.8 $26.8
10 $165.7 $16.6 $26.6
In all cases, the “function” column is pretty stable.
So, there was a discussion about using the contract a player signed to get his value. And of course, how to compare players of differing years.
Therefore, I will offer that we simply do:
Annual Average Salary + Years Signed
A 3yr/36MM$ salary (value of 3+12 = 15) is equivalent to a 5yr/50MM$ salary (value of 5+10=15).
Nice and simple.
If a player is negotiating with a team, if he says “I need one more year”, then the team can just say “Then you have to take 1MM$ a year less”.
Nice and simple (as a starting point).
Monday, November 07, 2011
Billy Beane:
So yes, there was certainly some resistance internally, but anytime there is mathematics involved there’s going to be a certain amount of resistance. I think 99 percent of us have some resistance because going back to seventh grade, and when are we going to use this [math], and now you’re seeing somebody use it!
...
The great thing about math is there something logical to it, so once we had faith in it among a small group of us, we did really feel like we weren’t taking a risk. You know, it didn’t seem risky to us. That’s what everyone asks all the time, and quite frankly, we were wondering why doesn’t anybody else get this?!
And on Moneyball itself:
So, now you’re starting to get a movement… if there’s anything I think the book did, I think it accelerated it by putting it [sabermetrics] out there for everybody. It was gonna happen anyways.
Also the parallel with technology helped it take off—access to information was all over the Web because it was being gathered. You know, whereas before Bill James was doing it—and he used to print basically these tight little pamphlets—and even some of the stuff that we were originally using was somewhat, not literally, but was somewhat manual, related to how information is gathered today.
I think the parallel with technology also helped it take off, because it just gave it access to more people out there who were sort of running their own models as well. So, there was just more and more evidence that there was something to this.
And Michael Lewis on the parallel between world finance and baseball:
And they rated things as AAA so they could sell them. Because once you got that point you had a whole group of unthinking buyers who just accepted the stats—kind of in the same way that someone in baseball might used to say, “The guy hits .300, he must be really good.”—without thinking whether or not his hitting .300 leads to runs.
...
I think the Wall Street story is as illustrative as the Moneyball story… Just be very careful what you measure, because the minute you start measuring the wrong thing it becomes a fetish.
Friday, November 04, 2011
Here’s what Fangraphs readers say. Don’t focus on the amount as a fixed number, but rather relative to the whole group.
Contract Name
$186 Albert Pujols
$136 CC Sabathia
$136 Prince Fielder
$101 Jose Reyes
$78 C.J. Wilson
$42 Jimmy Rollins
$40 Jo. Papelbon
$39 Aramis Ramirez
$38 Carlos Beltran
$34 Edwin Jackson
$30 Mark Buehrle
$27 Heath Bell
$25 Ryan Madson
$25 David Ortiz
$24 Grady Sizemore
$23 Hiroki Kuroda
$22 Michael Cuddyer
$19 Josh Willingham
$16 Rafael Furcal
$16 Kelly Johnson
$14 Carlos Pena
$14 Jason Kubel
$14 Javier Vazquez
$12 Aaron Hill
$11 David DeJesus
$11 Ramon Hernandez
$8 Clint Barmes
$7 Wilson Betemit
$7 Rod Barajas
$7 Derrek Lee
$6 Jamey Carroll
$6 Jerry Hairston
$5 Mark Ellis
$5 Jorge Posada
$5 Jim Thome
$4 Nick Punto
Tuesday, November 01, 2011
CC Sabathia had an opt-out option following the 2011 season. That opt-out clause had a certain amount of value when his first signed preceding the 2009 season, and that opt-out option’s value changed pitch by pitch, game by game, year by year, so that when the 2011 concluded, that opt-out option had a certain amount of value.
CC had signed a 7yr/161MM$ deal with the option going into the 2009 season. Had he not had that option, he would have signed for MORE. It might have been a 7/180MM$ deal let’s say. That is, he got some discount in order to have the opt-out option. This is really a faith in himself, that he knows more than the Yankees about how he would have aged.
In his last 3 years with the Indians, he had a total of 20 fWAR. Seeing that he was at his (theoretical) peak and had nowhere to go but down, the expectation would have been for him to accumulate something like 16.5 wins for 2009-2011, and then 15 wins for 2012-2015. Those 31.5 wins, worth a weighted average of 5.7MM$ per win gives us 179MM$. CC signs for 18MM$ less, in return for the opt-out option.
If CC earns less than 16 wins for 2009-2011, then it’s a wasted option. If he earns more than 17 wins in 2009-2011, then we have a good chance that he is aging better than expected. He will then exercise that option. He had 19 fWAR from 2009-2011. This means that CC aged better than expected.
Whereas when he signed the deal in 2009, his expected WAR for the 2012 would have been for around 4.5 wins. Today, knowing what we know with his last three seasons (and his career), his expected WAR for 2012 is closer to 5.5 wins. Because he is better today than we expected him to be, he exercices his opt-out option. This is no different than any stock option. CC Sabathia Properties is just like your Microsoft or Oracle stock options.
Had the economy not tanked, CC would have gotten a much better deal than the one he got. This is how it looked like in 2009:
Year Wins $/wins Pay
2009 6.0 $5.0 $30.0
2010 5.5 $5.3 $28.9
2011 5.0 $5.5 $27.6
2012 4.5 $5.8 $26.0
2013 4.0 $6.1 $24.3
2014 3.5 $6.4 $22.3
2015 3.0 $6.7 $20.1
(We need to subtract 6MM$ for each of 2009, 2010, 2011, in return for the opt-out option. The 6MM$ and all the above numbers are just an illustration. I don’t know what the actual value of the option is, but it would be easy enough to figure out.)
He was paid for delivering 16.5 wins, but he delivered almost 19 wins. He was undervalued, and therefore, he wants to be properly valued.
This is what he looks like today:
Year Wins $/wins Pay
2012 5.5 $5.0 $27.5
2013 5.0 $5.3 $26.3
2014 4.5 $5.5 $24.8
2015 4.0 $5.8 $23.2
2016 3.5 $6.1 $21.3
That’s 5 years and 123 million$.
The two key differences is that he’s more talented today than we expected him to be. But, with the economy tanking, he doesn’t get the larger multiplier effect. Hence, the fairly mild extension he got.
Friday, October 14, 2011
Back in April 2010, I had a quick indicator to determine the chance a team of making the playoffs (or, more accurately, having a playoff-level team, i.e., winning at least 89 games):
Chance of Playoffs = (Payroll Index / 2) - 23
I figured I’d check to see how it worked out for 2011. Payroll Index is simply the team payroll divided by the league average. Anyway, let’s see what we get (doing this as we speak):
Read More
Tuesday, October 11, 2011
Poz looks at the contracts that need to be foreclosed on. These are contracts where the mortage owed is far higher than the equity remaining.
He correctly notes the following:
In the end, it evens out I suppose. The system works so that players get paid later in their career for what they did earlier in the career
Let’s say you have a guy in his early 30s, on the down side of his career. He’s still a star, but he’s going down. Let’s say he has this trajectory left:
Wins
4.0
3.5
2.9
2.2
1.4
0.5
That’s 14.5 wins left over the next 6 years, and a team would pay 78MM$ for that. The standard payment structure is just like your mortgage: 13MM$ per year. As we know, your mortgage payment is mostly interest payments in the beginning, and only near the end are you paying down mostly equity.
If you were to pay for performance, this player’s contract would look like this:
Wins $/win EarnSalary ActSalary
4.0 $5.00 $20 $13
3.5 $5.25 $18 $13
2.9 $5.51 $16 $13
2.2 $5.79 $13 $13
1.4 $6.08 $9 $13
0.5 $6.38 $3 $13
His first year, he earns the most, and his last year, he earns the least. If it’s 4 years later, and he’s got 2 years left, he’d have 26MM$ owed to him, but only 12MM$ of value. It would look like it’s a horrible contract. But the reality is that the player gave his team a discount the first 3 years, only to get the deferred payments in the last two years.
So, I get what Poz is saying, and I agree with it under the specific lens of how untradable these players are. But for the teams that own them in the middle of the contract, you have to evaluate the contract in its entirety.
Monday, October 10, 2011
By , 09:45 PM
You hear this kind of thing all time:
“I’m tired of talking about it,” he said. “We’re not shopping him. We’re not entertaining offers. It’s frustrating. He’s one of the best players in the game. Why would we trade him? I wish people would stop writing about it.”
That was by Walt Jocketty, the GM of the Reds, and it is in reference to Votto.
Now, some of it is posturing, but you hear it so often, that surely it can’t be posturing all the time. Personally, I think that most of the time it is sincere.
It makes no sense. What is the difference how good a player is? One, someone could always offer you a better player or combination of players.
Two, and MUCH more importantly, who cares how good a player is? It’s not like you own him for free, like if I had one of the best cars in the world, say a Bugatti Veyron (worth 2.5 mil and one of the most expensive cars in the world), in which case I could reasonably say that I wouldn’t trade him for any other car in the world (of course, someone could offer me 2 cars or 10). You have to pay all your players a salary, which is like a mortgage, as Tango likes to say (and it is a great analogy). What you own of course, is the equity on that player, which is roughly the difference between the win value of that player and his salary.
If someone offers you a deal that has more equity, you should consider it. Obviously there is more to it than that, but to say or think that any player on your team is “untouchable” seems ridiculous and irresponsible to me…
Friday, October 07, 2011
As only Phil can link them.
***
I agree that if all players were made free agents, the cost of free agents would be driven down. That number, I believe, is going to be 2.5MM$ per win.
from Amazon
Recent comments
Older comments
Page 1 of 320 pages 1 2 3 > Last »Complete Archive – By Category
Complete Archive – By Date