Choosing a Path: A Young Ace’s Problem

After signing his new seven year, $215 million extension, Clayton Kershaw is officially the highest paid player in baseball, becoming the first player in the sport’s history to crack an average annual salary over $30 million. And, because he also got the right to opt-out of the contract after the fifth year, there is a pretty good chance that this won’t even be the largest contract of Kershaw’s career. With a few more dominant seasons and relatively few health problems, Kershaw could hit free agency again at age 30 and command another monster contract. By the time he retires, Kershaw could very well have earned more than $400 million in salary.

For contrast, let’s take a look at Chris Sale. While Sale doesn’t have Kershaw’s reputation, he’s actually #2 in baseball (behind only Kershaw) in ERA- since he debuted in 2010, and it’s not like he’s outperformed his peripherals in a significant way; he’s #6 in FIP- and #3 in xFIP- over the same time period, so no matter you prefer to analyze a pitcher’s performance, Sale rates as one of the game’s best starting pitchers.

However, Sale chose to cash in early in his career, and signed a long term extension with the White Sox last spring. The deal guaranteed him $32.5 million over five seasons, and then gave the White Sox a pair of team options, so if both are exercised, the total deal will pay Sale approximately $58 million over seven years, with the potential for a little more than $60 million if he finishes highly in the Cy Young voting during any season during the contract. Like Kershaw, Sale is in line to hit free agency after his age 30 season, and like Kershaw, he simply needs to stay healthy and keep pitching well for the next few years in order to set himself up for a monstrous paycheck that will carry him through his 30s.

However, through their age 30 season, Kershaw is in line to have career earnings of approximately $175 million, while Sale is going to be in the $60-$65 million range. Kershaw is a better pitcher than Sale, but the dramatic difference in price dwarfs the difference in their abilities, and reflects the fact that Kershaw was able to negotiate his deal with the leverage of impending free agency, while Sale traded in some future earnings for the right to get guaranteed money earlier in his career.

Given the difference in total salaries earned, it is easy to say that Kershaw made the right decision in betting on himself, while Sale probably left a lot of money on the table. However, we’re making those comments with the benefit of hindsight, and if both pitchers had blown out their arms in 2013, Sale would have been the one with a guaranteed paycheck coming. Given the rate at which pitchers have to visit the surgeon’s office, it can be a logical decision to choose to become very rich now instead of hoping to become absurdly rich in a few years.

If you were to list the three young pitchers in baseball who might have a chance to follow in Kershaw’s footsteps, you’d probably start with Stephen Strasburg, Jose Fernandez, and Matt Harvey. Each have been dominant hurlers at the big league level at a young age, and to date, all three have avoided signing multi-year contracts with their current club. Strasburg is the closest to free agency, as his current track would put him on the market after the 2016 season, while Harvey and Fernandez are on pace to reach free agency after the 2018 season.

Besides talent and some early Major League success, these three also have something else in common, or more accurately, someone else. They are all represented by Scott Boras, whose clients have rarely signed long term contracts before they hit free agency, as Boras believes these contracts are often too heavily slanted in favor of the organization. Boras has done some long term deals before a player reaches free agency — Elvis Andrus with the Rangers last year, Jered Weaver with the Angels and Carlos Gonzalez with the Rockies in 2011 — but his stated preference is to follow the Kershaw model and bet on the player staying healthy and performing well in order to negotiate from a place with more leverage.

However, both Strasburg and Harvey have already required Tommy John Surgery, and it is certainly possible that the experience could convince either or both to pursue a little more long term security at the expense of maximizing overall dollars earned. Fernandez, perhaps, could look at the fate that befell both pitchers and decide that getting a nice paycheck now isn’t such a terrible idea. After all, the lost season for Strasburg is a great example of how an early injury can have a snowball effect on a pitcher’s arbitration earnings.

Because of the lost 2011 season, Strasburg reached arbitration having only made 75 career starts, so he simply didn’t have the gaudy career numbers needed to argue for a big first time arbitration salary; he settled with the Nationals for just a $3.9 million salary in 2014, nearly half of what Kershaw got in his first round of arbitration. The arbitration system is based on raises, so a lower first year total will also hold down Strasburg’s future arbitration earnings as well. Even if he stays healthy and pitches well over the next two seasons, he can probably expect to make about $30 million over the course of his three arbitration eligible season. Including the $22 million he’ll make in the first year of his deal with LA, Kershaw will have taken home $41 million for his three arbitration years. As good as Strasburg and Harvey look like they could be, that lost year of performance is going to keep them out of Kershaw’s range in arbitration payouts, and thus, give Boras less leverage to keep his clients away from free agency.

After all, it’s easy to play the wait-and-see game when you can sign a two year, $19 million guaranteed deal like Kershaw did after his third season. Strasburg doesn’t have that guarantee, and with his health history, a five year contract that still allowed him to reach free agency before he turned 30 might be an appealing option, even if it did delay the chance at a massive contract for an additional two years.

There is no obvious best path for every pitcher. No one knows enough about predicting future pitcher health to advise every pitcher to either sign early or let it play out, and for each of these young aces, they should weigh the pros and cons of security now versus striking it rich in free agency, or at least getting close enough to it to use it as a serious bargaining chip. The allure of following in Kershaw’s steps might be appealing, but Sale’s decision probably doesn’t look so bad to a couple of young arms who have already had their elbows operated on.