Keith Strudler: 300 Million Good Reasons To Care

The happiest guy in baseball right now is Manny Machado. Followed by Manny Machado’s agent.  That’s because the 26-year-old short stop just signed the richest free agent deal in the history of American sports – $300 million for 10 years. That passes A-Rod’s $275 million deal that was once viewed as the Hindenburg of all sports contracts. There are some notable differences between the two deals, including the obvious that Rodriguez was 32 at the time. More on that later. Machado’s deal takes him from LA to San Diego, where the historically mediocre Padres are making a significant push towards success. Machado chose San Diego over a host of suitors, including the Chicago White Sox, Philadelphia, and anyone else who saw themselves one superstar and one massive check away from a World Series.

There may be other winners from Machado’s payday – most notably free agent outfielder Bryce Harper, who’s also 26 and now stands alone atop most team’s wish lists. With Machado off the market, there is conjecture that Harper may now command up to $350 million for the same 10 years, which would make his contract the biggest of all time – free agent or not. So think of Manny Machado as the first house that sold on the block at really high price. Now the rest of the players have a new comp.

That said, Machado’s and eventually Harper’s big paydays may be something of an anomaly, at least by baseball’s current trend line. More so than other pro sports in the US, baseball operates in something of a delayed gratification model. In other words, athletes may play for years before finally getting a huge payday. And mind you, that’s working on the premise that multimillion dollar annual salaries are not huge paydays. But because of the league’s collective bargaining agreement, which is only slightly less complicated than nuclear physics, teams can employ athletes for years without having to get into anything approaching a bidding war. In other words, the idea of fair market value is only achieved by those who’ve lasted the test of time. Which is why we’ve often seen athletes later in their careers getting big paydays – almost a reward of what the’ve already accomplished instead of what they might. It’s a bad system that rewards ego centric owners with deep pockets.

But baseball’s recent deep dive into analytics has changed the employment model. Instead of paying for known but aging commodities, owners increasingly are building teams of younger players, often with artificially depressed salaries, that win more than traditional teams who spend like a family at a Disney. Which is why teams like the Yankees haven’t been able to simply buy more championships like they have in the past – the system simply doesn’t allow it.

All of which has encouraged teams to spend less and reward free agents far less generously than in the past. So more and more aging athletes, expecting to finally cash in, are finding themselves bound by tight bankbooks and the reality that teams can spend fewer dollars on players who aren’t allowed to ask for more. It’s kind of like how most companies will always manufacture overseas where minimum wage is literally a foreign concept. And that is why baseball players may go on strike sooner than later – and even if they don’t, why negotiating the next collective bargaining agreement may be a bit like talks in the Middle East. Elite baseball players are increasingly leery of being artificially underpaid during their best years, only to be replaced by someone younger and cheaper once they finally can negotiate fairly – a process only exacerbated by the influence of analytics technology.

So why should we care about this, especially when the headline is that someone just got $300 million to play baseball? And in a sport where the annual minimum wage is still a career’s earnings for many Americans. Because in some ways, baseball’s quandary is not so dissimilar from our own. For example, how many people find themselves in the latter part of their careers being replaced by someone younger and cheaper? How many people outperform their current contract at work, only help someone else get a raise? How many people get stuck in a salary band, working until the company promises to unfreeze promotions only to fall victim to restructuring? How do we make sure that free markets are free but still fair? That’s the question for baseball right now, a sport that’s free market in name only. But it’s also the question for all of us, a whole lot of whom may someday be replaced by a machine that works for a whole lot less. And that’s why we should care about baseball salaries, even if it seems like we shouldn’t.

I don’t think Manny Machado is too worried about all that. Right now, he’s got 300 million reasons not to be concerned.

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