THE BOOK--Playing The Percentages In Baseball

Hmmm… shares of a 25 year old pitcher with a 4.6 K/9 and a 1.7 K/BB in A/AA?  I’ll pass.  I suppose it’s too late to get in on the Buchholz IPO?

What an interesting idea, if it’s safe.  Seems like there’d be a lot of paperwork involved to get money taken out of a player’s paycheck every week and sent to that website, who would send it to investors.  And I’m thinking the “honor system” might not be the best call with professional ballplayers.

From the player’s perspective, is there any benefit to this over, say, just taking out a loan from the bank?  I guess it’s like insurance - it lowers the variance between the amount of money you have/owe depending on the outcome of your career.

From the player’s perspective, this is much better than taking a loan from a bank.  There’s no obligation to repay the lender unless he makes the majors.

According to the site, they won’t take out money every week.  They’ll total things up once a year.  Also, it’s not an honor system; it’s a contractual obligation.  And baseball player salaries are very nearly public information.

I think this is an awesome idea.

I was actually just thinking about this while working on an article about Tulowitzki. The question I was trying to answer is how much would you pay today to assume ownership of Tulowitzki’s salaries over the next 7 years? Practically, there’s a clear moral hazard problem here, on a couple levels. One, the player has less incentive to keep in shape and try hard, and two, he might lose some leverage with his team and would be more willing to settle for lower salaries. Interesting idea, though.

I also think it is a great idea.  Of course, as we talk about with multi-year deals for pre-arb and pre-FA players, a player should always be willing to sell his future for a discount.

With this thing, who decides the initial share price?  Obviously this guy (Newsom) is not much of a prospect and is asking way too much for a share.  Is this company just going to have a bunch of non-prospects trying to get some money now that they will probably never get in the future?

If it is legitimate, players who have SOME shot at the majors should be willing to sell themselves at a 20% discount, which makes it a great deal for speculators, especially those who are good at evaluating prospects.

This company needs to have one or more analysts who can figure out what each player is worth including the dicount.  Or they can let the public create the initial price and the athlete can accept or reject it.  I don’t know what that process would look like.

Great idea though.  I’m not sure I would have launched it before I got at least a dozen players or so.  But maybe with even one (bad) player, it will generate some publicity.

Also, can minor league or major league baseball do anything about this (like prohibit it in their minor league contracts)?  I don’t think they will be too thrilled about it, although with a limit of 5% of a player (which is a good idea), it is not a big deal.  An agent probably takes that much.

Bobby, they are limiting it to an “IPO” of 20% of the float.  The player retains the other 80%.  Typically a company going public offers 10%, so I would have likely scaled back on that.  However, 20% is the maximum, so it’s possible that not all shares will be sold.

In any case, baseball players, like the rest of us, would play the game for nothing if we could.  I doubt that a player like Manny Ramirez, a goof if ever there was one, signing a guaranteed 8/160MM contract would “take it easy” and not play to his potential.

Therefore, I don’t buy the moral hazard theory here.

If it was you and me at our sucky jobs, that’d be another thing.

http://www.portfolio.com/culture-lifestyle/culture-inc/sports/2007/04/16/The-Jock-Exchange

Hat tip: Victor

I wonder if this became commonplace, if it would have a serious impact on which players teams called up. If the whole ‘Wisdom of Crowds’ logic is applied, then people will flock to the players with the best chance of making it, which teams could make a self-fulfilling prophecy by trusting that the fans know what they’re talking about.

It would be really interesting to see what would happen with borderline triple-A players who may get called up to fill a gap due to injury or the like, and how they’re valuated. I wonder how much that would impact the view of the ‘value’ of a replacement player, which is one of those things the sabermetric-minded have trouble agreeing on.