Thursday, May 02, 2013
Need to lockup players?
I don't get David Schoenfeld, and I don't get Rob Neyer. Why do the Padres "need" to sign Headley long-term, and why would Headley "need" to do it?
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This reminds me when we bought our mortgage, and the interest rate was at a then-historic low of 5.5%. Everyone was "you need to lock in at 30 years!". Everyone except this one buddy also buying a house, who said he's going with a 5-year ARM, and taking his chances. Five years later, with the rates lower, he did another 5-year ARM, and taking his chances. And things are looking great for him.?
See, these things are perfectly priced so that it doesn't benefit one choice or the other. In average conditions anyway. If you knew you would stay in the house for 15+ years, probably the original 30-year loan works best. If you know you'd move in under 10 years, then the 5-yr ARM and taking chances works best.
***
Imagine a player had a choice to a guaranteed or non-guaranteed contract. Is guaranteed ALWAYS better? No! Would Verlander prefer a three-year 75MM$ guaranteed deal, or a 100MM$ non-guaranteed deal? Verlander might think so highly of his body, that he figures that he could take his chances on the 100MM$ deal. Offer the same to Strasburg, and maybe he goes for the guaranteed deal.
It's about managing risk, and it's also about what you know, and what the other guys doesn't know (and it goes both ways).
Verlander for example might be conflicted: he might have supreme confidence in his body that it won't break down (but the Tigers and the rest of the league can't take that level of certainty, so they have to discount that part in a guarnateed deal). But, Verlander may also have the risk aversion of Jered Weaver, so that he won't be able to make an otherwise rational decision. That is, it's possible that his risk aversion is so great, that it obviates the extra knowledge that he has about his own body.
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So, I don't get this "need" that someone gets signed long-term. It may be in the best interests of both parties that they do it, and both sides will figure that out, and it'll get done. Like Tigers/Verlander, Mariner/Felix, and so on. And maybe both sides agree that a deal can't get done, like with Cliff Lee and Greinke. Waiting to sign doesn't necessarily make it better or worse for one side or the other. On average, waiting benefits no one, as it has just as much chance to hurt one side as it does the other.
Therefore, there's no "need" that something must happen now.
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