The Worth of Greatness: Pujols
Albert Pujols is the greatest player in baseball right now... we can all agree on that. In his first 10 seasons, Albert has earned rookie of the year honors, he's won 6 silver sluggers, 3 NL MVP's (finished second 4 more times), 2 gold gloves and is currently one of 6 players in ML history with a combined +.300 BA, +.400 OBP and +.600 SLG (the other guys you might have heard of - Ruth, Williams, Gehrig, Foxx and Greenberg). He's on his way towards overtaking Lou Gehrig as the greatest first baseman of all time.
This much is true but the tougher question is what is this once in a generation player really worth?
Is he worth the astronomical sticker price, reportedly 10 years and $300 million or is Kenny Williams right, are we asinine for even considering the thought of paying a baseball player $30 million per season?
I started this piece attempting to rationalize Albert's demands by comparing that $30 million salary to some of the greats - Ruth, Williams and Mays. The first thing I did was look at Ruth's salary in 1930 ($80,000) and index it for normal inflation (3% long-term historical rate of inflation). The "real" value of that contract would be a whopping $851,271; not what I had expected. My knee-jerk at this point was that I should probably start thinking about other topics... but I pressed on. At this point, I should probably give credit where credit is due - I obtained a lot of my information from a fascinating blog post written by Michael J. Haupert called "The Economics of Baseball." Here, I was able to mine a lot of data.
One thing I noticed right off the bat was that Mr. Haupert had a database for historical franchise values. With this data (and using a more current value for average franchise value which I pulled from a 2009 article published in Forbes called, The Business of Baseball), I was able to ascertain a "baseball inflation" figure to link to player salaries. Over the past 90 years, franchise values have risen at a rate of roughly 7% (rounded down). Apply that rate to Babe Ruth's salary - Babe Ruth would be worth roughly $35 million today. Great, I was on the right track, right? Well, thirty years later in 1959, Ted Williams was making $125,000; applying the same principle, he would be worth $3.68 million. The further you get from the 1920's and 30's (post live ball when baseball began to hit its stride), the more skewed these numbers get. It wasn't until the late 1970's and 1980's that we began to see real growth in player salaries and that spike in salary is directly related to the removal of baseball's reserve clause, striking down its anti-trust status and introducing the world of free agency.
Since that time, average player salaries have risen from $18,568 in the 1960's to $2,165,627 in the 2000's.
I think that the reason the anti-trust status was struck down is because baseball had been exploiting its players for years and the imbalance between steep growth in franchise value growth and stagnant salary growth of players had to have something to do with that. For that reason, the applicable reference point is probably the 1930's- Babe Ruth and his $35 million in today's "baseball inflated" dollars.
In conclusion, I think that Pujols is worth the sticker price in terms of per year salary; he's one of the greatest that has ever lived and if Babe Ruth would be worth $35 million in reference to the value of his franchise, Pujols is worth $30 million. I'm not sure if the length of the contract is reasonable; it was a rarity to see anything other than one-year deals prior to free agency so there won't be any data to support a ten year deal (sorry Albert). Truth be told, I can't fathom a 40 year old first baseman being worth $30 million so I think that anyone willing to offer a ten year deal is willing to bite the bullet on the back end. It might take some creativity for the Cardinals to make it happen (a reported equity stake has to sound good to Prince Albert) but if he walks, they have no one to blame but themselves. They took a gamble that they would be able to afford to extend him later (rather than paying him closer to market value now in hopes of signing him long-term while he is under control) and now Albert might feel a little bit pressured or shamed, thinking that he might want to cash in for himself and for free agents to come.
This much is true but the tougher question is what is this once in a generation player really worth?
Is he worth the astronomical sticker price, reportedly 10 years and $300 million or is Kenny Williams right, are we asinine for even considering the thought of paying a baseball player $30 million per season?
I started this piece attempting to rationalize Albert's demands by comparing that $30 million salary to some of the greats - Ruth, Williams and Mays. The first thing I did was look at Ruth's salary in 1930 ($80,000) and index it for normal inflation (3% long-term historical rate of inflation). The "real" value of that contract would be a whopping $851,271; not what I had expected. My knee-jerk at this point was that I should probably start thinking about other topics... but I pressed on. At this point, I should probably give credit where credit is due - I obtained a lot of my information from a fascinating blog post written by Michael J. Haupert called "The Economics of Baseball." Here, I was able to mine a lot of data.
One thing I noticed right off the bat was that Mr. Haupert had a database for historical franchise values. With this data (and using a more current value for average franchise value which I pulled from a 2009 article published in Forbes called, The Business of Baseball), I was able to ascertain a "baseball inflation" figure to link to player salaries. Over the past 90 years, franchise values have risen at a rate of roughly 7% (rounded down). Apply that rate to Babe Ruth's salary - Babe Ruth would be worth roughly $35 million today. Great, I was on the right track, right? Well, thirty years later in 1959, Ted Williams was making $125,000; applying the same principle, he would be worth $3.68 million. The further you get from the 1920's and 30's (post live ball when baseball began to hit its stride), the more skewed these numbers get. It wasn't until the late 1970's and 1980's that we began to see real growth in player salaries and that spike in salary is directly related to the removal of baseball's reserve clause, striking down its anti-trust status and introducing the world of free agency.
Since that time, average player salaries have risen from $18,568 in the 1960's to $2,165,627 in the 2000's.
I think that the reason the anti-trust status was struck down is because baseball had been exploiting its players for years and the imbalance between steep growth in franchise value growth and stagnant salary growth of players had to have something to do with that. For that reason, the applicable reference point is probably the 1930's- Babe Ruth and his $35 million in today's "baseball inflated" dollars.
In conclusion, I think that Pujols is worth the sticker price in terms of per year salary; he's one of the greatest that has ever lived and if Babe Ruth would be worth $35 million in reference to the value of his franchise, Pujols is worth $30 million. I'm not sure if the length of the contract is reasonable; it was a rarity to see anything other than one-year deals prior to free agency so there won't be any data to support a ten year deal (sorry Albert). Truth be told, I can't fathom a 40 year old first baseman being worth $30 million so I think that anyone willing to offer a ten year deal is willing to bite the bullet on the back end. It might take some creativity for the Cardinals to make it happen (a reported equity stake has to sound good to Prince Albert) but if he walks, they have no one to blame but themselves. They took a gamble that they would be able to afford to extend him later (rather than paying him closer to market value now in hopes of signing him long-term while he is under control) and now Albert might feel a little bit pressured or shamed, thinking that he might want to cash in for himself and for free agents to come.
Well written OCP. I agree with everything except better than Gehrig? Not sure about that just yet.
ReplyDeleteThere is only one player worth what Pujols is demanding, and that's Pujols. The back ends of all these deals are stupid. Pujols agent should just ask for what he really wants which is ultimately the 300m. I mean who really cares about term as long as the money is guaranteed. But everyone is afraid to call it what is because it's seriously scary. But here are the facts;
ReplyDeleteThey'll probably get about 6 more great years out of him- so it's 50m over 6. Scared now?, I am- yes I said 50 over 6, and talk about inflation, the late 70's early 80's were nothing compared to that. But by signing the guy for 10, that's what you are realistically getting. And again, there is only one guy that should get that, the one that's asking for it.
He's on his way, Hersh... not there yet by a long shot. See Griffey Jr, Ken.
ReplyDeleteSo true, Lefty. Every one of these long-term deals is terrible on the back end and it's crazy to think that teams do them but the Yankees keep writing the checks so you've gotta bite the bullet to get these players. Is it right? I don't know... I don't know what the solution is (short of capping salaries).
Regardless, I think that baseball is in a great place... and the big salaries aren't the problem. Contract or force some of the small market teams to compete. It would be nice to see the Pirates spend a little more money... I'm thinking that you could link revenue sharing to payroll expense in some way to limit profit.