Friday, February 12, 2010

Lincecum, like (most) the rest of us, is risk averse

The following is a text message conversation I had with a buddy:

Tony: Do you know anything about Lincy’s signing that I don’t? I don’t get why he accepted it.

Rory: I think Lincecum wanted the security (at least some) all along. He wanted at least 2 years rather than maximizing his per season salary.

Tony: Why did he decline the 3 year deal then?

Rory: I think he would have won but now he has a guaranteed $23MM rather than guaranteed $13MM (or even $8MM if he’d lost). In year 3 and 4 of arbitration he can more maximize his salary via arbitration because he will have been around longer and the more arbitration years you go through the higher percentage of your free agent value you get. In two years (assuming he still is dominating) he can go year to year with the Giants at like $16-20MM a year. Or…He can sign a 3 or 4 or 5 year deal for a lot of money and buy out one or more free agency years. Or just bank the last two years in arbitration and sign a huge contract as a free agent. I thought the deal was fairly balanced…good for both parties.

Tony: Ok. But if he gets $16MM in year 3, that is the same as if he took that 3 year deal basically. And it would have been guaranteed, and then get wrapped up long term.

Rory: No. The 3 year deal (which was $47MM) would have been $10, $13, and $14MM. He wanted the security, but also to get higher annual values year 3 and 4 of arbitration.

Tony: Oh ok. That makes sense.

Shortly after this conversation I read Rob Neyer’s post about it where he took an excerpt from Tangotiger for the math. Long story short, we all agree. Lincecum took the deal because of the “high-risk unchartered waters” that Tango mentioned. For one, there’s no certainty Lincecum would have won his case. As Neyer said, he likely would have. But if everything that is likely always happened, people wouldn’t get disappointed nearly as often in life. And let’s face it, all of us get disappointed a fair amount in this crazy world. It’s also likely that Lincecum will continue to make 30-33 starts and pitch extremely well. But if he doesn’t because he’s hurt or any other factors we can’t imagine now, he’s considerably fattened his bank account.

It's probably safe to assume all of us believe and are strongly hoping that this young phenomenal Ace is going to continue to defy the critics (who are now very few) and his physical limitations given his stature for years to come. But with the outside chance something unforeseeable happens, he’s still going to be a very rich man compared to the rest of us. And with the way he’s pitched in his first 2.5 seasons, I believe he’s earned that.


Rory: Read that. More or less what I was getting at with you via text.

1 comment:

  1. Yea, I'm not sure why he accepted this either. I don't think he wanted to go arbitration, and he doesn't seem too worried about the prospect of injury. I think in the end, he knows he'll be cashing in soon enough...and $20 over two years until then isn't bad pocket money.

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