Lookout Landing

I'm going to respectfully disagree with each of your points.

A. Inflation simply does not matter when you agree to a contract. If the player and agent care about inflation, it will already be reflected in the $45 million. As for when the player should want that money, if concerned about inflation, he will want it sooner rather than later. Two reasons why: 1) his buying power is greater today than in the future, and 2) he can earn interest on the money to keep up with inflation.

B. Carlos Silva is a sunk cost. You shouldn’t change your spending habits based on sunk costs. It’s more beneficial budget-wise to pay less in the future. This is why I said earlier that back loaded contracts are delaying budget issues. Instead of taking the budget hit this year, when you can safely project the players on the team, you cause budget problems in future years because you have less financial flexibility. It becomes a never-ending cycle and it may catch up to you (Bavasi allowed budget issues to catch up).

C) Businesses have budgets. Businesses routinely go over budget. There is no penalty to go over budget in baseball, except the possibility of running the business at a loss (which we don’t ever know because the numbers are not made public). I never insinuated “there’s no salary cap so you don’t need to worry about your budget going forward.” In fact, this statement is the exact point I am trying to make. It is better to take the budget hit this year so the budget is more flexible going forward. By back loading contracts, you limit your budget flexibility in future years. And if your budget decreases dramatically from unforeseen circumstances, as the Mariners have seen happen, then your budget can become an even bigger issue because you may have succeeded the budget amount before it has been determined (which is especially happening to the Tigers right now).

Here’s my idea: front load contracts.

Let me take Figgins’ contract as an example. 4-year, $36 million with an performance option for a potential worth 5-year, $45 million. That’s $9 million a year on average. Figgins has no incentive to perform except during that 4th season. He is already guaranteed $36 million.

1. Remove the 5th year performance option.
2. Front load the payments at 12/10/8/5
3. Place performance bonuses in the 3rd and 4th season (I won’t speculate what those would be, although a wOBA-based incentive would be neat).
4. Have those bonuses max out at $3 million each year ($6 in total).
5. Add a team option for a 5th year, $6 million.

The total amount of this contract could be worth $48 million. I know it is more than the $45 million, but that 5th year can be refused by the Mariners and the contract max out at $42 million. Either way, Figgins is still guaranteed his $36 million with two incentive-laden years instead of one.

At first you would think this contract is bad for the player and good for the team. However, it is great for both sides. Figgins’ real life contract already has a performance option in the 4th year. But he needs to reach those levels to guarantee a 5th year and another $9 million. The Mariners, declining age, and injuries can all keep Figgins from earning the performance option. With the contract that I have proposed, Figgins can earn up to $6 million of that $9 million without a 5th season (real incentives!). The Mariners, meanwhile, are already paying less in those last two years because the contract was front loaded. The potential extra $3 million each season isn’t likely to kill the budget and they will have a great player worth the money if he does reach those levels.

Even if Figgins doesn’t reach the $3 million in the 3rd year, he can earn the $3 million in the 4th year and the Mariners would be more likely to pick up the cheap option 5th year for $6 to keep the total at $45 million, 5 years. I just don’t see why this kind of thinking doesn’t happen more often. If it does, why would either the team or the player reject something like this?

Any thoughts?

Wilder. - December 5, 2009 reply