Astros Officially Create the Sign-and-Promote with Jon Singleton

For the last year or so, the Astros have reportedly been offering various long-term deals to some of the young players in their organization, using the carrot of guaranteed millions to try and buy out a couple of free agent years. Up until now, no one had signed the offer, and Evan Longoria remained the record holder for fewest number of days of service before signing a long-term deal. However, with first base prospect Jon Singleton, the Astros have now codified the first deal that officially includes a Major League call-up as part of the package.

According to Jeff Passan of Yahoo Sports, Singleton’s deal is for $10 million guaranteed over the next five seasons, beginning in 2014, with three team options that could push the total value of the deal to $35 million. By getting seven more years of team control after this season, the Astros are essentially buying one free agent year in advance — they would have owned the rest of 2014 anyway, plus six full seasons afterwards — and signing this deal now allowed Singleton to get promoted without worrying about the Super-Two deadline. Had Singleton not signed the deal, he likely would have spent several more weeks in Triple-A.

It goes without saying that this deal is a huge potential boon to the Astros. If Singleton turns out to be a quality player, he would have gone well beyond $35 million in his arbitration years and first free agent season, but if Singleton busts, they’re only out $7 or $8 million above and beyond what they would have paid by going year to year. Risking $7 or $8 million for a chance to save upwards of $30 million — let’s assume a high-quality slugging 1B would have earned ~$40 million in future arbitration earnings and another ~$25 million for his first free agent year — is a total no-brainer for a team like the Astros. There’s a reason they’ve been trying to get nearly every player with any modicum of talent to take deals like these. These deals lean very heavily towards the organization’s favor.

But for Singleton, this represents a significant guarantee. As an 8th round pick in the 2009 draft, he signed for $200,000, so he hasn’t been living in poverty as a minor leaguer, but between taxes, agent commissions, living expenses, and his admitted drug addiction, it’s safe to say that he probably doesn’t have a lot of that money left. In fact, when discussing this particular deal, we cannot ignore Singleton’s past words.

“At this point, it’s pretty evident to me that I’m a drug addict,” Singleton told The Associated Press over breakfast on a recent day near the Astros’ camp. “I don’t openly tell everyone that, but it’s pretty apparent to myself.”

First baseman Jon Singleton spent a month at a rehab facility last year to battle marijuana addiction. “He’s still young and still learning about baseball and about life,” Astros GM Jeff Luhnow said.
Vividly so.

“I know that I enjoy smoking weed, I enjoy being high, and I can’t block that out of my mind that I enjoy that,” he said. “So I have to work against that.”

On the one hand, one could argue that giving a self-admitted drug addict $10 million in guaranteed money makes this deal even more of a risk for the Astros. After all, his resources available to purchase marijuana just went way up.

But I think there’s a flip side to this coin as well. The Astros have now provided Singleton with a significant, contractually-guaranteed financial motivation to stay clean. There’s now a tangible financial cost to failing a drug test, and he can measure exactly how much those drugs would cost him if he failed a test and got suspended. Where the cost was previously abstract, pushing back his timeline to reach arbitration at some point in three or four years, it is now laid out in black and white exactly how much money Singleton will lose if he gets caught using drugs again.

As outsiders, I think this is a case where we know even less than usual about the amount of risk a player should be willing to carry in exchange for future potential gain. While players should not be lining up to take these kinds of deals, I find it hard to tell an admitted drug-addict that he should bet on himself staying clean and living up to his potential. Maybe for Singleton, having his future potential earnings spelled out in a long-term contract will be just the motivation he needs to stay clean.

In this particular case, I find it hard to suggest that Singleton sold his risk too cheaply, because we just can’t really know what his own personal risk tolerance is, or should be. Given his past, perhaps taking $10 million now really will be better for him than going year to year would have been.

The opposite could be true as well, of course. I think, in a situation like this, we lack the requisite information to suggest that there was clearly a better path for the player. In this case, if asked whether this deal was a good idea for Singleton, it feels like “I don’t know” is the only response I’m comfortable with.





Dave is the Managing Editor of FanGraphs.

168 Comments
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Peter Schoenke
9 years ago

“While players should not be lining up to take these kinds of deals”

Why not? When you have little money, isn’t the upside of getting your first $5 million worth the tradeoff of getting $30 milllion? No one in the minors is a sure bet to get those big dollars .. injury risk and all … and if you take this deal you still get another shot at the big money. Play well and and you’re a free agent. Why wouldn’t you take this deal?

other factors
9 years ago
Reply to  Peter Schoenke

Ok, so if you have a chance to take 1 million dollars now or 50 million in a few years, what do you do?

It depends on many factors, obviously. Everybody has a risk-averse to some extent. But others not. Maybe that signing bonus IS enough for him to secure his financial future in light of the 500,000+ minimum salaries.

You can’t just make extreme statements and say, “Everybody should take these deals.” Well, no, it’s black and white. Like Mike Trout’s deal. He left a lot of money on the table and it could be argued that his personal limit for risk is high enough that he’s willing to make it through pre-arb until arbitration, when 10 million+ a year IS enough to retire on.

And if the guy has endorsements he may already have a great nest egg built up.

other factors
9 years ago
Reply to  other factors

It’s *not* black and white.Shades of gray with everything.

Johnston
9 years ago
Reply to  other factors

“A man who will see gray once will see gray all the time. A man who sees gray will never see black, nor white either, even when they are there.”

Cool Lester Smooth
9 years ago
Reply to  other factors

Endorsements? no minor league baseball player has endorsements.

Tracy Mcgrady
9 years ago

maybe?

Paul
9 years ago

A ton of minor leaguers have endorsements… The only problem is that they are given gloves/bats/etc. and not thousands of dollars.

Eminor3rdmember
9 years ago
SocraticGadfly
9 years ago

Well, I mean, he could have pizza endorsements, hamburger endorsements, Little Debbie’s endorsements, well, you get the idea.

Gabe Kapler
9 years ago
Bobby A.
9 years ago

Gabe Kapler had a K-Swiss endorsement, with TV ads, when he was a minor leaguer.

Anon21
9 years ago
Reply to  other factors

Not even Bryce Harper, Ruth Reincarnate and Savior Of Mankind?

Cool Lester Smooth
9 years ago
Reply to  Anon21

Before he debuted? I really don’t think he did (although I may be wrong).

Not an MBA
9 years ago
Reply to  other factors

Whether minor league players should or should not take “these kinds of deals” is about the risk premium and discount rates. That’s basically what you’re saying and I agree, but we also have to consider the declining marginal benefit of each additional salary dollar.

Personally, I agree with Schoenke that there’s no reasonable risk premium or discount rate that could justify not taking such a deal–presuming it’s realistic. And it very well could be that some of these deals are not realistic. Your example of $1 million now vs. $50 million in a few years is not realistic, since a) this only considers the discount rate, not the risk premium (which some people admittedly factor into the discount rate, but beta is its own term in the RROI equation) and b) the difference really isn’t ever that large. If we’re talking about annualized returns, no player who could be worth $50 million for one year would be offered a deal that would pay them an average salary of $1 million time-adjusted dollars for that year. Think of how high the bust rate is in baseball. The bottom line here is that the player and the club ought to be able to come to an agreement because the player ought to be more risk averse than the club.

But the players should also accept the deal due to the decreasing marginal utility of consumption. That is, the difference between making $1 million and $10 million per year is a lot closer to the difference between making $10 million per year and $100 million per year than simple math would indicate. What’s the difference between a 3000 acre and a 15000 acre ranch? Between owning your own jet and always flying direct on a luxury charter? That’s why Mike Trout shouldn’t give a shit whether he makes $25 or $35 million dollars per year during his late arb and option years.

Of course, some players value benchmarks like being the highest paid player in the game or really think that they can earn record-setting amounts of money. From the standpoint of positive economics, I guess I can’t judge those players’ stated preferences and their projections of their own value may be valid. But I would make the normative judgement that they shouldn’t value being the highest paid player in the game and that they shouldn’t bet on being an outlier.

Not an MBA
9 years ago
Reply to  Not an MBA

Just saw this already pointed out much further down the comments list…much more expeditiously.

Long-winded post cancel.

RogerClemensNeedle
9 years ago
Reply to  Not an MBA

Can I just say, its nice to see somebody post with true economics and perspective. Baseball fans think they know economics and they dont. Bravo sir.

a eskpert
9 years ago
Reply to  Not an MBA

Diminishing marginal utility of income holds less in cases where utility is derived from the welfare of others. Greater earnings can be greater donations.

El Duderino
9 years ago
Reply to  other factors

Because $50 million is an absolute guarantee! Or, dude could struggle, perhaps in Singleton’s specific case, get suspended again, and end up a DFA candidate because arbitration is too expensive for a player who hasn’t done much.

When you’re talking about enough money to essentially retire in your 20’s, why gamble on making more when if you still do well, you can still make absolute bank and never have to worry about money again.