What if MLB players were paid on commission?
Here’s a non-rhetorical question for you: What’s the purpose of paying baseball players?
The answer seems obvious — so they’ll play baseball — but Major League Baseball is a weird institution, burdening itself not just with the mandates of a business but also with the balancing act of an entertaining competition. Following baseball daily, you might conclude that the purpose of paying baseball players is to add a layer of strategy, variety and entertainment to team-building. If this is the purpose, then the system is working. Payroll management drives most modern baseball strategy: It’s behind multiyear rebuilds, trading for international bonus slots, extensions for pre-arbitration players, keeping star prospects in the minors to limit their service time, virtually every trade involving established major leaguers and every discussion of “best” and “worst” contracts. If that’s the purpose, then it justifies baseball’s increasingly complicated, non-free-market salary rules: the tiered luxury tax penalties, the bonus restrictions for international free agents, revenue sharing and, of course, the stair-stepped earning rights of pre-free-agency players.
But the obvious answer should be the right answer. The point of ballplayer compensation is to compensate ballplayers. I don’t want to rush past this: The point of ballplayer compensation is to compensate ballplayers, and a good system would fairly and efficiently pay the most valuable ballplayers the most money. The current system does not do this. Instead, it artificially restricts player salaries until those players are veterans, at which point some lucky few reach free agency or get close enough to free agency to sign lucrative extensions while still pretty good. These lucky few get a huge, disproportionate share of player salaries. Then they get older, most of them get worse, and by the end of their contracts, a lot of them are resented as burdens to their own teams by their own fans (who have been trained to view salaries primarily as strategic hindrances).
Meanwhile, an unlucky bunch of players — those who fade early, develop late or sign early extensions rather than tread the unnecessarily risky path to free agency — get a disproportionately small share. Josh Donaldson has been one of the five best position players in baseball over the past six seasons, but he bloomed late, and those six seasons all came before his free agency. Now, on the cusp of free agency, he has a weird shoulder injury, he’s 32 years old, and one way or another, teams will be wary of this player in his decline phase. There’s a decent chance that Donaldson retires having made about a fifth of what he has been “worth” on the field and significantly less than, say, Pablo Sandoval or Ian Desmond.
What we’re saying is baseball’s is an extremely complicated and inefficient way of distributing money to players, and it seems to create unfairness and sadness all over the sport.
“The man who has it all, millions and millions and at least 40 more coming, is crying,” a newspaper column about Vernon Wells once began. Wells was a very good ballplayer for a long time. His only sin was getting paid out of order. We should fix this.
Our plan to fix this
Pay players after the fact based directly on performance. Everybody is working on commission. Baseball players are all professional golfers now.
How it works
Here’s the simplest version: Half the league’s revenue is put in a central fund, contributed proportionately by teams based on market size. This money is for player salaries. For math purposes, call it $10 billion in revenue and $5 billion for player salaries. There are 1,000 Wins Above Replacement available in a major league baseball season. (This is how “replacement level” is set, at both Baseball-Reference and FanGraphs.) Divide the $5 billion salary pool by 1,000, and that’s what a win is worth — in this hypothetical $5 million. (Or use something other than WAR, or a revised model of WAR that incorporates clutch performance, or whatever gets through collective bargaining. Of course, nothing like this would ever get through collective bargaining, but let’s push on.)
Every player on a 40-man roster gets a base salary at the major league minimum. Beyond that, a player’s salary is entirely determined by his performance, paid out of the central fund so that cheapo, small-market teams don’t risk getting hammered by over-performance. This is true of minor league veterans claimed off waivers and thrown into a bullpen in July, and it’s true of Mike Trout and Albert Pujols. If a team wants to bid more than the going rate for a win, it may, but based on a player’s performance, the team must pay the overages out of its own budget, not the league’s central player-salary fund. Player compensation will never dip below the floor guaranteed by the central fund.
(A more complicated version: All of the above, except draft picks would still be under club control until after the sixth season. An even more complicated version could also pay these players reduced salaries per win until they hit free agency, but the entire system of suppressing young players’ salaries is insane and should be scrapped. I could offer other, even more complicated versions — this is a whole new economic model and would probably end up running 800 or so pages — but I’ll spare you.)
Three reasons it works
1. Fans would like players more. A lot of us have always had a fraught relationship with player salaries. Call it envy. Or don’t. The point is, it’s a lot of money for players who, when they’re making that money, disappoint us a lot of the time. We’ll never solve — nor should we — the “a lot of money” issue, but by directly linking pay to performance instead of to GM predictions of performance, we cut way into the disappointment issue.
“The uphill is always harder than the downhill is easy,” my dad once bemoaned on a backpacking trip with his 8-year-old son, which is how I always think about the Vernon Wells problem. Consider, instead of Wells, Ian Kinsler, who signed an extension with the Rangers two years into his career and another one four years after that. He has been traded twice since, but wherever he landed, he has been one of the best bargains in baseball. His salary has never been higher than $16 million in a season; according to FanGraphs’ player-value model, he has never been worth less than $19 million in a season. In 2011, his performance would have justified a $50 million salary. He has earned just under $100 million to date in a long career, and he has been “worth” $300 million with his play. Even in the years after he could have qualified for free agency — after the salary-suppressed six seasons big leaguers play under — he has been “worth” more than double the $77 million he has earned. Do fans give him, the anti-Vernon Wells, a standing ovation every time he steps to the plate? They don’t. We mostly only care about the ugly uphill.
That’s what this system does: It creates a lot of players who are underpaid, whom we take for granted, and some players who are overpaid, whom we grow to hate with every bitter nerve in our body, and we call that an economic wash. But it’s not a wash emotionally! It has introduced a lot more bitterness and seething and anger into the world, and it has given 90 percent of players a reason to feel sad; either they’re hated, or they’re underpaid. Simply put, the current system benefits some individual players but not the collective body.
2. Teams would, I hypothesize, be willing to pay more in the aggregate if they didn’t have to take on all that risk. For one thing, teams are right now, this moment, paying for insurance policies on the players they’ve committed to. That’s money that isn’t going to players, but that teams have demonstrated they’re willing to spend on players. So we know they’re willing to spend more than players get.
Beyond that: You’ve maybe heard of the concept of “loss aversion,” in which folks “prefer avoiding losses to acquiring equivalent gains. Loss aversion implies that one who loses $100 will lose more satisfaction than another person will gain satisfaction from a $100 windfall.” This implies that GMs — or, perhaps more accurately, their owners — would be less willing to sign players as the level of risk goes up. In baseball, the risk is very high. You can’t predict baseball.
So change the system. Pay players for what they did, and by definition, teams get what they paid for. Everybody’s happy. Nothing’s a gamble anymore.
3. Major League Baseball has become a sport not just about which players can play baseball best but about which GMs can GM the best. This is what’s at the heart of modern tanking: The game on the field doesn’t matter as much as the front office’s plan. That plan turns players into “assets” and reframes their contributions as “surplus value;” every player represents either “cost certainty” or “sunk cost.”
Maybe that has happened because the audience really loves business school jargon or because fans love the meta game. I, of all people, can appreciate the relatability of the general manager, and I (a nerd) really do love the meta game and the MBA aspects of it. But I’m skeptical this is what the much, much, much larger audience of baseball fans likes about the sport. I think most fans like watching good baseball players smash into each other in a baseball competition, and they hate clever accounting.
Removing baseball players from their price tags — while still paying them what they’re worth — would put the focus back on the field. Good GMs wouldn’t be the ones who could shift resources around most efficiently but the ones who could identify good players and recruit them, who could build an organization in which players thrive and are happy and who could help players become better players. Players, meanwhile, would no longer pick teams primarily based on which GM overvalues them the most; instead, they’d look at which team offers them the best opportunity. Something like last winter’s Shohei Ohtani pursuit, except without the outrageously capped salary, or like college sports, without the exploitation.
Three reasons it might not work
1. It’s harder for players to buy houses if they don’t know how much they’re going to be making this year, next year or the years after.
More broadly: It’s one thing to suggest a radical change that mostly affects baseball schedule-makers. It’s a lot more sensitive to suggest a radical change that would affect hundreds of baseball players’ earnings and that would inevitably cost some individual players (especially the ones who get hurt) a lot of money. This whole idea is intended to be good for players, to reward the best players and to increase overall spending on players. But I suppose all that wouldn’t matter to the individual losers in this scheme.
2. We don’t really have a foolproof method of valuing players, and we’d be constantly arguing about whether any model of WAR (or any other stand-in stat) was good. Of course, as it is, players are being paid based on these same vague notions of value, but before they perform rather than after. But under the current system, GMs are weighing players’ contributions and negotiating with those players about how much those contributions are worth — and they can include any criteria that might have value. They get to use judgment. If we paid them after, that contribution would be decided by a heartless statistic, a common, fundamental complaint of performance-related pay in other fields: “The performance of a complex job as a whole is reduced to a simple, often single measure of performance.” This sounds like a nightmare, to be honest.
3. Even today, when performance incentives are limited to a handful of measures (e.g., games finished, innings pitched, All-Star Games made) and are a small fraction of player compensation, they often lead to drama. It’s not uncommon for a player to feel that his team is shortchanging him on appearances to keep an option from vesting, for example. They would do this for every single plate appearance that a player doesn’t get. This sounds like a nightmare, too.
The current system, for its flaws, does have a significant benefit: Once the contract is signed, the player and the club are on the same side. The player’s success benefits the team, and money is, on a day-to-day basis, simply not something that has to be negotiated any longer. By having teams contribute to and players get paid from a central fund, we’ve tried to set up a system in which that relationship remains. But if the Yankees bid $10 million per WAR for a free agent, they’d have some incentive to limit that player’s chances to produce WAR, perversely.
4. The whole idea is insanely complicated! Sam, what are you even talking about?
OK, sure. I get that.
I like watching baseball players. They do things that are beautiful, that remind me of those things I used to imagine myself doing but could never actually do. I admire their endurance, their commitment, the way they have fun together as a team. I am entertained by the suspense of their performances. For this, I am happy to pay them money.
My money is then laundered through about six layers of negotiation until it ends up in some player’s pocket. I’m happy the player has it. But the laundering has fundamentally changed how we view the players. We are constantly asking not whether the player is good but whether he is worth it. The player becomes equipment — a depreciating tractor, sputtering. We yell at it when it doesn’t start. We talk about its resale value.
I don’t know if there’s a real way around this. Some teams are always going to have more money to spend, every team is always going to have some limit to how much it can spend, money is always going to be a scarce resource, and players will eat into that resource.
But there’s lot of money in the game, the players deserve to get their share, and there’s a principle here that’s worth chasing: Compensation isn’t for our entertainment but for compensating.