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What we mean when we say $100 million is a ‘bargain’

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The first response I usually get to a post like our post about the Ronald Acuña Jr. extension — a post which notes that the Braves are getting an extraordinary bargain for a supremely talented player — is “So what? It’s their choice? No one forced them to offer it. No one forced him to sign. Why are you complaining?”

Often these sorts of responses come from people who tell me they’re in business or finance or from people who lean libertarian in their world view and political and/or economic predilections. I’d like to address that point and I’d like to do it in a way that I hope speaks to such critics a bit more directly.

No, there is nothing wrong with two sides agreeing to a deal that they find to be mutually beneficial. I never said there was. It makes perfect sense for the Braves to try to lock their superstar up on as friendly a deal as possible. It makes perfect sense for Acuña to agree to take at least $100 million and secure himself and his family for generations. There is nothing wrong, in isolation, with this deal and I’d never say there is anything wrong with it in isolation.

But it does not occur in isolation, right? There are other factors in play that may make us think differently about any given deal and whether it’s good or bad or whether it’s worthy of criticism separate and apart from what the two parties to the deal sought and obtained.

If you doubt this, just think of a stock sale. Let’s call the company BigCorp. Say I own a share of BigCorp and sell it to you for $10. That’s our right! No one is forcing us to do this deal! No one can tell us not to! Why should anyone worry, criticize or complain? Well, they might worry, criticize or complain because a share of BigCorp is part of a market and we’d never talk about the wisdom of any sale of stock without reference to the market. Might we worry about a share of BigCorp going for $10 if we knew more about that market?

For example, what if BigCorp is selling for $10 because the market is crashing and the guy I’m selling my share to is bottom-feeding? What if the guy buying my share of BigCorp is doing so on inside information? What if he knows it’s really worth $25 for reasons I don’t know about and he’s ripping me off? If so, that’s a problem, right?

No one who even pretends to know the first thing about business would attempt to assess our $10 BigCorp sale without reference to the market and what’s going on with it. We’d want to know the history of that stock and similar stocks. We’d want to know if the sale is evidence of larger distress in the market, larger surges in the market or if it’s the product of unfair dealing in some way.

It’s no different with baseball players. Sure, baseball players are human beings, but they are also part of a market. They’re part of a labor market. Just like my sale of BigCorp this deal is fine in isolation, but it’s sort of worthless to say such a thing without looking at the trends and the integrity of the market in which the deal has occurred.

I’d submit to you that it’s more appropriate to look at Ronald Acuña Jr.’s new contract more like we’d look at a stock sale in a plummeting market than anything else. A plummeting market for superstar baseball talent that used to go for much, much more. As we noted when Mike Trout signed his extension, compared to baseball revenues, superstar players are making far, far less than they once did. Even on a $430 million deal Mike Trout will take home a far smaller cut of baseball revenues than Alex Rodriguez did when he signed his big deal in 2001. Acuña is going to max out, ten years from now, at less than half of Trout’s annual salary and $8 million less a year than A-Rod made nearly 30 years earlier, and that’s before inflation. Even if Acuña is only half of the player experts think he might become the degree of the bargain the Braves are getting for him is rather insane.

Acuña’s deal, however good it looks in isolation, can only be seen the same way we’d view a sale of BigCorp trading at less than half its historical norms. If that happened in the stock market, you’d be concerned. You’d worry greatly about the state of the market, would you not? You’d worry about what secondary effects that sick market might have and how it might impact the economy as a whole. And you’d be right to, because nothing that occurs in an even remotely complicated system occurs in isolation.

Now, to be sure, I suspect most of my business/finance/libertarian types don’t care about labor markets like they care about any other markets. Labor markets consist of workers and workers are human beings and human beings are far more unpredictable and expensive than machines and raw material expenses and the sorts of inputs that are far more easy to deal with. Put simply, labor is a bother to those who are trying to make money in a market. But if you’re going to analyze everything else in the context of market dynamics, you have to analyze labor the same way.

Whatever the case: if you simply say “$100 million! That’s a ton of money!” or “Hey, they agreed on their own free will!” and suggest to others that they’re wrong to take issue with Acuña’s deal, you’re missing the bigger picture. If you do that, you’re no more astute about the baseball labor market than a person buying a share of BigCorp for $10, ignoring everything else going on and saying “Hey! Nice!” I suspect you business/finance/libertarian types make fun of folks like that for their ignorance. I’ve been on the receiving end of that myself when I’ve missed important facts when talking about, say, finance or what have you. I’m no expert.

Ask yourself if this is you when it comes to baseball’s labor market. Ask yourself if you’re really that ignorant of what’s actually going on or if, instead, you really just don’t care about the baseball labor market.

Freddie Freeman has elbow surgery

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Freddie Freeman‘s elbow began barking in the second half of the season and he was a shadow of himself in the month of September. The Braves rested him for half a minute in the season’s final week but he still played 158 games in 2019. They said he was good to go for the NLDS but he was clearly limited, going 4-for-22 in the Braves’ series loss to the Cardinals.

Today the Braves announced that Freeman underwent arthroscopic surgery on his right elbow on Wednesday. The team said today that the procedure involved the removal of three fragmented loose bodies and the cleaning up of multiple bone spur formations.

It’s not clear if more rest down the stretch would’ve made a difference for him — and it’s not clear that the Braves had options at first base for the postseason that were substantially better than even a limited Freeman — but it’s clear that not having Freeman feeling like himself in the heart of the order was a problem.

Freeman is expected to be good-to-go for spring training.