Thursday, December 14, 2006

Baseball, Wealth, and Rationality

One of the fine things about being a baseball fan is that during the off season, I get to think about baseball. Now, obviously I think about baseball during the season, too. But in the off season, I get to think about baseball without the distraction of actual baseball games.

Fans have long called it the "hot stove league," sitting around a hot stove during the winter, speculating about what happened in the past, what will happen next year, and what their team should do about the burning issues of the day.

Which brings us to money. Baseball players make a lot of it. Even not-particularly-good players make a ton of it. The minimum annual salary for a Major League ballplayer next year is $380,000. That's just for being on the team: $380K even for sitting on the bench and scratching occasionally.

Now, I realize that when one talks about money, and particularly about large amounts of money, rationality rarely enters into the equation. It's easy for me to sit here on my couch and say that Barry Bonds should play baseball for a mere $10 million a season, when he feels he needs $16 million. Really. For those of us not involved, it is hard to imagine how $10 million vs. $16 million makes a difference, particularly when one pocketed $90 million over the previous five years.

Heck, even if I hadn't banked $90M (and I haven't!), it seems like $10M would be just fine.

My wife, with the prestigious MBA, would probably say that it's like tulips, Cabbage Patch Kids, Beanie Babies, and Internet stocks: supply and (irrationally inflated) demand. With some ego thrown in on the side.

Which makes you realize that timing is very important. You can make a nice living in the tulip market today, but nothing like you could in the 17th century. And you can make a nice living on Internet stocks today, but not like you could in the day.

But because of this timing issue, it's important to remember that just because the commodities in question were highly valued (and apparently, overvalued), we should not necessarily devalue those in the same business outside the bubble. I got to thinking about this today reading some humorous commentary on current baseball contracts. My favorite is the section about what Willie Mays' agent would say if Mr. Mays were a free agent in a market like this after one of his greatest seasons.

And at the same time, it's probably important to recall that those who profit off a bubble are not necessarily wiser or more worthy than those doing the same thing in a different era. I admire some of the people who created some of the technology that begat the "dot-com boom," but they were not necessarily smarter or somehow better than those who labored in different fields or at different times. By the same token, I know a lot of people who made a lot of money just for being in the right place at the right time. And I know that some of them are not nearly as capable as some of their contemporaries.

So it's important that we not judge people by how much money they have, or how much people are willing to pay them at any given moment.

It is always hard to compare people (baseball players included) from different eras. But that's the most amusing part of the hot stove league. Because discussing who was the best player of all time is fun, and the discussion has no definitive answer. And because worrying about where your team is going to pick up a better first baseman can only take you so far on a cold, rainy day.

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