Houston Astros first base prospect Jon Singleton made sports headlines on Monday when he signed a contract before ever playing a day in the major leagues. He signed a deal that will pay him at least $10 million over five years and possibly as much as $32 million over eight years (which would buy out his first year of free agency).
This is a huge improvement in his finances, as players in AAA (highest minor league level) typical make $30,000 - $40,000. The players in your local low-A league (Midwest League in my case) often make less than a cashier at Wal-Mart. Ever wonder why minor league teams have a program that has players stay with families in the community? It's not because of the "cool" factor for fans. It's because the vast majority of these players couldn't afford an apartment and struggle to afford food. You hear about the handful of guys at the top of the draft that get big signing bonuses, but these are the exceptions. There are more than 1500 players drafted every year, and once you get beyond the first 250 or so, most of them are signing for $10,000 or less. When the player joins his minor league team, the maximum salary he can earn in his first season is $1100 per month.
But enough about the general state of minor league salaries and back to Singleton specifically. Singleton's deal immediately got strong negative reactions from two vocal players.
Former Astro Bud Norris has this to say:
"Sorry but this Singleton deal is terrible. Wish the [sic] Jon listened to the union and not his agent."
Former major league pitcher and current baseball analyst Mark Mulder (obviously not related to the X-Files fictional character) also chimed in:
"Just saw the contract this #astros prospects signed. Either he doesn't believe in himself to be great or he has a terrible agent who wants the 4%."
Commenter Wes had this to say:
"Making decisions based on worst case scenarios is not rational."
Of course, we all practice strategies to avoid worst case scenarios. I'm 39 years old and in reasonably good health. It's extremely likely that I will live until I am at least 65 years old and more likely I'll live into my mid 70s. The only reason why I would buy life insurance is to avoid the worst case scenario of dying earlier than expected.
Nobody in my family has ever had a major house fire. It's very unlikely that my house will burn down. Seems silly to have homeowner's insurance, doesn't it? (OK, my mortgage lender actually has a strong opinion on the matter, so it's not like I have a choice.)
Is Singleton leaving potential money on the table? Yes. If he blossoms into a very good major leaguer, he could perhaps earn $45-$65 million in this time span. (For baseball geeks - if Singleton hadn't signed the deal, the Astros would kept him down a couple more days to ensure that he wouldn't be a Super 2, thus suppressing his year 4 year salary. For other people who have no clue what I'm talking about, you can read this primer regarding baseball salaries. Note that 22% if 2+ year players are now Super 2s). Mike Trout will make $88 million over his first 8 years, but Singleton is no Mike Trout.
But what's the worst case scenario that Singleton wants to avoid? Working at Wal-Mart, Taco Bell, or Best Buy until he's 70 years old and eating pork-and-beans out of a can in his old age. By taking the $10 million and being reasonably smart with the money, he can ensure himself a reasonable level of comfort for the rest of his life even if baseball doesn't work out.
But it's basically a slam dunk that a touted prospect like Singleton will have a long and glorious career, right? Um, no.
Case 1: Injury
Mark "The Byrd" Fidrych burst onto the scene in 1976 as a 21 year old pitcher for the Detroit Tigers. The eccentric pitcher won the hearts of the Detroit faithful while going 19-9. He won the Rookie of the Year award, finished second in the Cy Young voting and 11th in the MVP voting. Call Cooperstown and have them start working on his Hall of Fame plaque, right?
Fidrych pitched 250 1/3 innings that year. He pitched 81 in 1977, 22 in 1978, 14 2/3 and 1979, and 44 1/3 in 1980. At the age of 26, he was done. Injuries had taken their toll.
Case 2: Performance
Hitting a baseball is hard. Even the best prospects fail.
Jesus Montero was a consensus top 5 hitting prospect prior to the 2011 season and a top 7 prospect prior to the 2012 season. He was a catcher with questionable defensive skills. Many thought that he wouldn't stick behind the plate, but there was no question that he'd be able to hit. Many had him ranked as the best hitting prospect in baseball.
What happened? He didn't hit.
Montero had a nice debut in limited action for the Yankees in 2011. Then he was traded to the Mariners for Michael Pineda (yes, the pine tar guy). Even taking the park into consideration (Seattle's park is bad for hitters) he was a below average hitter in 2012, which is not good for a guy whose only real skill was hitting. Then he got even worse in 2013 and was sent down to the minors. Then he got busted for performance enhancing drugs and got suspended.
All of this motivated Montero to show up for 2014 spring traning ... fat. The Mariners general manager said that the organization no longer had any confidence in Montero. The crown jewel of their minor league system was now a complete afterthought. Montero is still young and is having a nice year in AAA Tacoma. He might make it back to the major leagues and make a lot of money. Or he might not. Over parts of three seasons, Montero has made about $600,000. That's a lot of money, but it's not enough to retire on. If Montero washes out, he's going to be washing dishes at the neighborhood diner - and he'll be wishing he signed a Singleton-like deal when he was still a hot commodity.
Brandon Wood was a top 5-10 prospect prior to the 2006 and 2007 season seasons. He was touted as a future home run champion. The "can't miss" prospect hit 18 career homers and is currently playing for the independent Sugar Land Skeeters. This is not a positive career development. Wood's career earnings are around $1.5 million.
Will either of these situations affect Singleton? Probably not. His expected earnings would probably be more by not signing the contract. However, there's also that chance of something going wrong. The difference between $32 million (max value of contract) and $45-60 million is that Singleton will buy a smaller mansion. The difference between $10 million (minimum value of contract) and $600,000 (Montero example) means that Singleton would have to get a real job.
Imagine, for a moment, that I give you $10 million (you're welcome). You can keep the $10 million, or gamble on a coin flip. I'll give you 2:1 odds on the coin flip. If the coin comes up heads, you'll walk away with $30 million in free money. You can't hedge your bet in any way.
Do you take the $10 million and walk away? Or do you take the insanely good odds and gamble?
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