#947: Some-of-the-Money Ball

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This planet money from NPR. Do you want us to introduce you in this story with you -ASEBALL walkup music no no no no we don't need that now okay we we might do it to you anyway just warning you okay okay really the only two options but one day a couple of years ago he was at the batting cages practicing and he got this message on Lincoln Lincoln story with legs three years ago Logan was playing college baseball he was eligible to be drafted by Major League Baseball team and if you happen to turn I I met Logan Ice at baseball spring training that's the practice time before baseball season starts you've been with the Indian the League's making Bupkus and most do not have a giant signing bonus you see baseball is a winner-take-all career there is a very small chance of making huge amounts of money but more importantly there is a huge chance of making almost no money and as far as logan ice knew those only during the season no pay for spring training no pay for the off season so logan salary is just around eight thousand dollars a year not eighty thousand twenty million dollars per year but the way this works new players like Logan don't go straight to Cleveland's main team the one you see on national TV on Indians ended up drafting Logan they liked him so much they paid him an eight hundred fifty thousand dollar signing bonus which is a lot of money but the one where guys are making millions no logan had to go and prove himself he got tossed in with the hundreds of other players playing on the Cleveland if things went well for Logan he could make so much money that that bonus would look like birthday card cash they're big leaguers playing Logan's position right now who make and make the majors they pay off huge earn millions and millions of dollars but for the vast majority of minor league players that never happens they toil away in the minor take all salary situation his friends message said that this company will quote help baseball players financially by pooling risk and invest thinking. Hey I want to say it's around sixteen hundred Aa I think is what it comes out to be something like that that's sixteen hundred dollars a month but Indians feeder teams they're they're minor league teams Logan got sent two teams like the Mahoning Valley scrappers the Lynchburg Hill cats the Akron rubber ducks where the salary is not millions and last year in Africa what was your living situation so I was living on the couch for support for NPR comes from Newman's own foundation working to nourish the common good by donating all profits from Newman on the TV on the night of the draft the baseball experts really liked Logan Logan is they saved one of the best all around catchers in this draft a switch hitting a little while lived in the hotel for a little while they give you a couple of nights how much you making if you can divulge her give me a range of zone food products to charitable organizations that seek to make the world a better place more information is available at Newman's own foundation dot org I wanted to reach out because Logan's old friend explained that he was working for this new company that had an idea for how players might be able to deal with this super uncertain commiserating about a particular minor league assignment Logan and gotten sucks that you got stuck in Mahoning valley last year which that he's one hundred percent right anyways listing in each other so logan's reading this and he's thinking this sounds fishy yeah no I I was the first thing I tell them eight thousand six is but that doesn't account for living that doesn't account for shipping your car out that doesn't account for food granted they feed you a couple of meals a day saying hello and welcome to planet money I'm Kenny Malone and I'm Tom Goldman Tom Goldman covers sports for NPR. I should three APP drafted by the Indians in two thousand sixteen s Logan is twenty four years old he plays catcher and he's built like a catcher he square and muscular picture like a nine volt back in as like some of those recruiters and stuff that you automated message like yeah like that long do you remember what it said though I could maybe pull it up but see what I got here so he said Hey Logan it's been a minute it's also a small world because I was in the message was from an old baseball friend someone he hadn't seen in a while so there was some small that you're always a tough to find what do you think of Osu's backstop these got savvy I think he's got athleticism and agility behind the plate like this is one of the better college catchers out there you'll make less than one not amazing not amazing Charlie's point is that even if you're one of the most promising players in the world sure there is a chance you will become one of the richest people in the companies pitch to players like Logan Ice is this wouldn't it be nice if you and some of your fellow baseball players could somehow share the risk of this brew ars grave I'm in I think everyone's excited about the happy about that this is Charlie Olson he's Pandora's co-founder the problem is Logan and to some degree all minor leaguers are kind of like living breathing lottery tickets when they pay off parking garage for evidence exchange and incriminating photos can you confirm what's incriminating about the newsletter found some deep dark secret that once title winner-take-all career that you've chosen this idea is called an income pool and it's pretty simple like logan just get together with a handful of other players in country there is also a chance your future baseball earnings will be almost nothing you might get injured you might hit up streak of bad luck you might just not be as good as everybody thinks so the GEICO career today on the show an economic idea that could change the way baseball players and the rest of US think about how we get paid should I call you Zach or should I call you Cowabunga or one zero it's much better you wrote on read it that the planet money newsletter is like meaning a noir detective in the his shoes so still stuck in the minors still making up kiss and then Logan and these players would make a deal if one of US makes it to the majors and did you know how people sign up pure orgy slash planet my newsletter you nailed it all right the company that was sending you're a first round let's make the numbers bigger and more exciting your first round pick as a first round pick you have expected future MLB earnings of forty five million in messages to try and get in touch with Logan ice is called Pando P. A. N. D. O. and here's a version of the pitch Pando was making to Logan let's actually exit big then that person will kick back part of his big money to the rest of us in the pool where baseball can be zero sum when your best friend gets called you do and what if this pooling risk thing what if it is a thing what is a completely new way to look at not just baseball but any winter Pando is gonNA take a ten percent cut of our pool so that's one percent of Tom's additional money essentially that's their business model but but theoretically this is great eligible to be a client of Panos Okay so yes Kenny you have to be in the minor leagues at least but okay so let's just say you and I are interleague irs yes here's how this would work and and we need hundreds of people for our pool it could be as small as just you and me making a deal yeah so then then Tom and I make this agreement wait for me like I'm stuck in the minor leagues with my Crappy Minor League salary and it is now subsidized by Tom's giant big league contract and maybe Tom Mix thirty million dollars a year up and you didn't now of a sudden when your best friend gets called up a little bit of you did panda thinks this income pool idea would work for all kinds of else but the company is just a few years old and starting out with baseball and we spent a ton of time asking Charlie Olson questions about how this would actually work for example first thing that could happen in pulling to a player as you make stupid Uku cash in the big leagues yes ironically if Logan makes stupid boo cash in the big league your odds are like a coin flip you're you're you're outcome is going to be some version of a coin fifty percent of the time you're gonNA average ninety million dollars amazing fifty percent of the time suddenly a millionaire even though I'm in the minor leagues and the contract runs until my career is over or until I paid twenty million dollars into our pool playing in the major leagues and once I reached that one point six million level all kick ten percent of the money I make after that back to the pool with him actually all the conversations happen to the batting cage Logan was pretty intrigued by this idea and he had tons of questions initially but he says it really kind of boil down to one question in particular so that's a version of the income pool plan pitched over the phone to our real minor leaguer logan ice shoot now I think I had a couple of conversation great but it isn't actually costing me anything yeah because Pando isn't charging they're only taking a cut once somebody makes it big and and I guess kind of the the and we need to set up the terms of our pool and we could we could set whatever terms we want but there there's a kind of standard contract that baseball players use and to explain it filthy rich and I'm giving I'm giving people money and I'm helping them like I'm helping them so much more than that money's hurting me if that was the worst thing that could happen to me team and if they happen to make big they wouldn't resent paying into the pool that's why Logan decided his first phone call would be to one of his best friends in baseball I was GONNA make the big leagues and we're in this pool together here's how this would play out Tom will not have to pay anything until he is earned one point six million dollars together and Logan says this friend he seems to take it all in and then he responds just basically says I'm betting against myself I'm game so logan had to figure out what kind of people he wanted in his pool there's a practical strategy which is like Logan wants calls him up gets the guy on the line and starts this heartfelt pitch I'm trying to build a pool for a bunch of dudes so like we we help each other is there a level of baseball player that is too low to join pool no there's there's nothing that's too low so what about right now Kenny Malone in studio idea Pando and Logan in this case are asking some of the most confident people on the planet professional athletes who want the bad in their hands with the word aim skill level around the same odds of making the Big Leagues Logan Ice also wanted people he actually liked he wanted people who felt the same way he did like they were joining it I find this particular part of pin does plan like so compelling because like in order for this idea to work there need to be professional they're out in the long run like financially like if I were to make it I'd be more than happy to hand you whatever I make make your life better that's like that's a very personal pitch all I guess I'm fast four and a little bit when I got on the part do sketch like I'm going to be blunt with you like this seems like a Ponzi scheme this this there's no way this is because like the idea that having a backup plan that is the fraction of someone else's salary would somehow make a professional athlete tried to make it big not betting against myself there's no way I'm not doing it and I'm like I was I was more frustrated like I put my heart out there a little bit and because we're friends I was legitimately trying to and then nobody else in his pool does he would theoretically be paying a lot of money to the pool and then getting nothing out of it that's the worst thing that can happen to me as I'm all players who can live with this cognitive dissonance to be able to believe in their hearts they will make it big and yet somehow also understood tom one of us one of us is going to make the big leagues which one is more likely you tell me I'm GonNa say me okay because Charlie just ruled you is that as fair okay so to professional athletes one of the employees at Pando told us he's run into some resistance from agents who represent baseball players they're worried if an income hand that they will probably not and actually that's one of the big questions around income pooling is it a problem to introduce the idea of failing both benefiting from you know that particular person's success in that moment and if I were fan watching I probably would be concerned about that Yeah Panos Ceo I think that for the casual fan there is something that they might think about old series on the line they're asking them to also consider that the odds are fell never actually have that chance or any chance in the majors that's right and we should say this is a concern major league baseball has about income pooling would these pools create situations where players would wanna be less competitive her as a what's the worst thing for me as a player that could happen financially with this pooling and Logan's thinking well if no one in my pool makes any money that's not a player might be motivated to see a player on another team succeed sure and yet at the end of the day competition rates for example a brother facing s possible players in his pool guys who can actually make the big leagues but if he goes straight to guys who are way better than he is then they're just going to nope yeah like I thought this was the best thing that you could possibly get in and this is the weird contradiction at the heart of this entire pool is kind of insurance policy maybe the player won't try as hard to make it big and to be honest I find that particular concern compelling national football players and the company is about to try and get pools going for business majors for people graduating with MBA's lead held on less like I don't buy that disincentivize is the athlete however there is a slightly complicated issue that came up in conversation with Charley Olsen L. M. no they're going to be like I can do much better than you in my pool I'm not joining so these income pools are naturally gonNA form with players around this if a pitcher and a hitter are playing against each other and they're in a pool together right right you're saying if you have a picture who's in brother we don't seem to worry about brother being less competitive in order to benefit the greater family but but Charlie's main argument is that if it's money you're worried about it leaks but there was some good news logan got enough other players to join his pool it's up and running there are five players including Logan the pool members money would start flowing back to his pool and according to Charlie when you run the projections for all the players in all twenty-five Pando pools enough players you only get a teeny portion of what your pool made is earning so why would you intentionally mess up to help your pool mates value which hurts your value it'd be the silliest that's Zillow you'd never even see me thrown curve ball I can tell I as long as you are on contract by Professional Baseball Organization you are avail hundred forty players currently in twenty five different income pools and as of this season three of those players have made it to the major leagues played in re words these income polls are on pace to work for a lot of baseball players and Pando is already expanding this idea they've launched income pools for aide yet remember Duggar would have to stay in the major leagues long enough to earn one point six million dollars and that would take about two years but then making it bigger anymore and before Logan had exactly one lottery ticket himself this income pool it has bought him for more is better known to man okay I did exist in the world people are going to have to make up their own mind about it yeah Pando is happening according to Charlie there are now about the first basement hall and now the pitch runner goes swinging pop-up left Centerfield Randolph in and he makes the catch putting away ice for the first out in the bottom of the second logan more and for your daily Economics News Planet Money At night lifetime income in retirement shouldn't learn more at Tiaa dot org slash never run out real Major League Baseball Games one example is a guy named Robert Douger he is now a pitcher for the Miami Marlins and he is in a pool with eight other players who are not getting wiggins says for good portion of the season he had trouble at the plate he had trouble batting and as a result is not really sure what that is going to do to his chances of making the big would make the majors to earn a quarter of a billion dollars collectively and that could mean twenty five million dollars flowing back into pools in other it's just a better deal to be as good as you can possibly be because remember if you're in one of these pools you still get to keep ninety percent of what you earn and if you think about it for Logan like he's in exactly the position an income pool is four he he had this tough year in the minors he's not sure what his odds of actually live with each other Charlie Olson a few arguments about why he doesn't think this is a problem I'm sure we can all kind of agree that there are many ways in which you know this message comes from NPR sponsor Tiaa committed to the idea that while most things in life run out from clean shirts in the morning to a favorite dessert with a batter there is potentially

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