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Compounding Interest in the NFL

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Yesterday, I explained how the Patriots trade for Randy Moss was a very low-risk, high-reward venture. That wasn't the only move the Patriots made that made me think about personal finances.

On Saturday, the Patriots made another trade that surprised me. The team traded their #28 draft pick to San Francisco for their next year first round draft pick and a fourth round draft pick in this draft. For those unfamiliar with how sports drafts work, it's a lot like the deli counter - the lower the number, the better. San Francisco had the #11 this past year and while they are projected to be a better team, very few people expect them to have a pick later than #20 next year.

The Patriots coach had this to say about the draft and in particular this trade, "...we got some picks for next year that put us in a pretty strong position whether we actually decide to exercise those or use them to acquire other players or whatever they are, but that's good currency..."

What was that last word? Currency. Draft picks are a form of currency in sports that can be traded for talented players or used to select valuable prospects. What the Patriots did here is simply invest the #28 pick for pick that will likely be less than #20 next year as well as the #110 pick in this draft. This #110 pick was traded for Randy Moss as I mentioned yesterday. It's another case where the Patriots were willing to live like no one else today, to live like no one else tomorrow. Looked at from the San Francisco side, they basically broke out a credit card to get what they wanted today. They will pay this debt off with their draft pick next year - but with a lot of built-in interest.

Last updated on April 28, 2011.

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6 Responses to “Compounding Interest in the NFL”

  1. Wylie says:

    I too am a Patriots fan and share many of your hopes that a winning team with a professional clubhouse could bring out the best in Randy, but I have to say I did a double take when we picked up him and ‘stomp your head’ Merriweather at the same time. I wonder how many babies we have to help grow up.

    But if they pull it off…

    Redsox, Patriots back to back #1!!!!!!!!

  2. silverbax says:

    I think the Patriots made some good moves but I think the risk with Moss is a lot higher than people are accounting for. It’s sort of like hiring Enron execs to run a company – yeah they might be great, but there’s a 50/50 chance they’ll bankrupt another company. Moss’s career has never been as good as when he played in the shadow of the veteran Chris Carter, and that’s the risk factor. The Pats are gambling that Moss’s years in Minnesota and Oakland after Carter’s departure won’t be the reality.

  3. Lazy Man says:

    I’m not sure that Moss had 50/50 chance of ruining the Patriots. He’s one player, it’s not like they are replacing the coach and the QB.

    Also, the risk with Moss is minimized by the fact that they gave up very little for him (a 4th round pick doesn’t make some teams) and doesn’t have a big guarenteed salary. They could say goodbye to him in game 2 if he’s not working out and still be okay. It’s like taking a bet where you have a 50/50 shot at a million dollars. However, if you lose, you give up $10. Anyone would take that.

    I don’t recall Moss being a problem when he was with winning Minnesota teams (I could be wrong here), but when you are on a terrible team with a terrible QB, I can understand his frustration. It’s the level of frustration that convinced Barry Sanders to just leave the sport entirely. I think there’s a 50/50 chance that winning will heal all wounds.

    And if nothing else, this says to Tom Brady, “Sorry about the Branch thing last year. We aren’t going to let that happen again.” I’d much rather have a very happy Tom Brady and a malcontented Randy Moss, than a disappointed Tom Brady and no Moss.

  4. silverbax says:

    I hope it works out for Randy – I’ve always liked him. But there was a reason he was traded from both Minnesota and the Raiders. It could work that Randy needs the structure of New England’s system, and I respect the Patriots GM moves. I also think it’s smarter to spend money on an existing player than a rookie, and I’ve never understood why teams throw so much money at draft picks who haven’t proven they can play at the pro level.

  5. […] begin the month of May, I compared Compound Interest and the NFL. I brought up how the Patriots traded the #28 pick of the current draft for San Francisco’s […]

  6. […] Those interested in more of a personal finance article about the NFL Draft could read my previously written article on Compounding Interest in the NFL. […]

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