Josh Johnson Earning His Contract

Justin Morneau has the highest WAR in baseball right now, but you probably knew that. Know who is second?

Josh Johnson. With another dominating start last night, the Marlins ace has now thrown 122 innings and is running a 2.33 FIP. Yes, that’s likely to rise over the course of the season (his HR/FB is just 3.8 percent), but for the first half of the season, he’s been basically unhittable.

However, this post is not to praise Johnson as much as it is to ask his agent “what were you thinking?” Six months ago, he signed a four year extension with the Marlins that will pay him $39 million through 2013. He would have been a free agent at the end of the 2012 season, so he gave up two years of free agency in order to sign the deal.

Two other pitchers with the same amount of service time signed long term contracts this winter as well. Felix Hernandez got $78 million over five years, and Justin Verlander got $80 million over five years, both getting about 60 percent more in annual salary than Johnson in addition to an extra year on the end of their deal.

Johnson didn’t have the same track record as either of those two, but he did have – and still has – similar talent levels. He’s out-pitching both of them right now, in fact. If Johnson had not signed a long term deal last winter, he’d be staring at one of the largest arbitration payouts in history this winter, and he’d have enough leverage to command a deal equal to those signed by Hernandez and Verlander a year ago.

Instead, he left a lot of money on the table. A lot. Here’s what he said at the time of the deal:

“I’m excited,” Johnson said. “It sets up me and my family for life. One of the best parts is knowing where I’m going to be the next four years. I won’t have to hear about any trade rumors or anything like that. I’m happy to be in South Florida.”

Johnson was clearly motivated to avoid going year to year, valuing long term security and peace of mind so highly that he signed a contract that makes him one of the most underpaid players in the game, relative to his ability. The next time you hear someone say that players are just all about the money nowadays, remind them of Johnson and his contract. Just like the rest of us, players value a variety of things, and they make decisions on where to work based on a variety of reasons.

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Dave is the Managing Editor of FanGraphs.

17 Responses to “Josh Johnson Earning His Contract”

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  1. Michael says:

    Off the top of my head, I believe he’s scheduled to make $7M next year, an absolute coup for the Fish.

    The biggest concern was injury, but as we know, a lot of Tommy John surgery guys come back improved and don’t suffer long-term problems with regards to the surgery (not all, but a lot). I spoke to his agent in the offseason and he mentioned that, even with a season-ending type injury, JJ was going to get arbitration. What he wanted was the security of the second year, and when the Marlins caved on that point, the deal seemed to be a breeze.

    Looks like it’ll be a good deal for both sides: the Marlins get ace-level productivity on the cheap for three and a half more years, and Johnson gets the security of knowing where he’ll be working and still gets paid plenty of money.

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  2. TheUnrepentantGunner says:

    I feel like I should probably expound on this somewhere other than the comments section, but I’ll take a brief gander here.

    Josh Johnson made the right move, as did Evan Longoria. Period.

    The agents in this case, are hurting only themselves, but not their clients. I don’t dispute Dave’s point that if they had waited one more year, the expected value of their contract went up.

    Dave sort of alluded to why Josh did what he did, and this really needs to be hammered home EVERY time some young player takes a below market deal that provides some security.

    The simplest explanation i can provide, is that the marginal value of each dollar earned really starts to decline and decline fast.

    Even think of your life, because in this case it is accurate. Say you make $35,000. You would happily take a 80% chance of making $70,000 versus a 20% chance of losing your job?

    Why? Well for starters, the expected value makes the calculation not even close. Secondly, losing your job might not be so bad. Beyond some level of unemployment, you might find a comparable job, and besides, the jump in lifestyle from $35,000 to $70,000 is truly significant. Each $10,000 more at lower levels of income can really add up for what should be obvious reasons.

    If you run the same calculation at say, $175,000, with an 80% chance of doubling your money but a 20% chance of finding a new job, then the decision becomes harder. For starters while $350,000 is still a meaningful jump over $175,000, losing your job now hurts alot more, than the extra $175k might if you wait it out a year. You have so much more to lose.

    Thus when you get to Josh Johnsons level, it shouldnt even be an issue. lets say conservatively that 60% of his money goes to income taxes, agents fees, and other things that just tend to pop up as a ball player, and that the lifestyle necessitated to ensure some level of privacy mandates he spend $250k a year.

    The reality is that over 4 years, he will still be left with upto 13-14 million. Even conservatively invested, even in these terrible interest rate enviroments, you could still have a drawdown of probably at least ~=350k a year even after he retires, and never worry too much about inflation or invasion of principal.

    Unlike say a top business executive (who faces other risks), the mortality of baseball players are known (non Mr Moyer division of course). The odds of you playing past your 40th birthday are quite small, and the odds of a career ending injury (like mark prior) are non-trivial.

    Even if there was a 80% chance he cost himself some extra money, the fact is that if you manage your money right, at some point it doesnt make a huge difference if your retire with 15 or 25 million in the bank. Both should ensure a very nice lifestyle, even in a worst case scenario, allowing the player to propser even as his future career is likely to be far less prosperous.

    I realize you could purchase insurance, or other things, but in this case i think for both Evan and Josh Johnson they did the right things for themselves.

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    • Dwight S. says:

      I agree, and I would do the same thing he did. The fact is when you’re a pitcher at any given point your next pitch could be your last. What if he waited and he blew out his arm last season to the point where his career was over? He would’ve been screwed. I know when you’re a professional athlete you shouldn’t always have that mentality but it’s hard not to, especially when you’re a pitcher. I know I would rather know I left $40 million on the table when I already have $40 Mill locked up than to walk away with nothing if I blew out my arm. But that’s just me.

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    • Sean L says:

      Really well said. It’s hard to think in those terms when you’re not a freakish athlete making 7 figures, but the fact is the mortality rate among pro athletes is definitely higher than it is among high-level corporate executives. JJ can’t bank on $7 million a year until he’s 60 because his body’s not going to hold up for that long. In the best-case scenario, he could play until he’s 40, but any number of injuries could cut his career well short of that. Mike Duke, on the other hand, can still make $30 million at age 61 because he doesn’t need to throw 95 mph to run Walmart.

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    • MikeS says:

      This comment is much more eloquent than my thought of “He gets $39 million over 4 years to play baseball and somebody thinks he got a bad deal?”

      There’s really very little argument to be made here other than “It’s not about the money, it’s about respect.” He has generational wealth – his grandchildren would be hard pressed to burn through this money if it is managed properly. If it’s not managed properly it’s probably not much more difficult to squander $80 million than $40 million. You just buy 2 gold plated helicopters instead of one.

      If the money is a game of “who’s got more” he loses. If it’s truly about security, he wins just as much as King Felix, A-Rod or LeBron.

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      • TheUnrepentantGunner says:

        such an underrated point. the fact is antoine walker could go bankrupt while making 100(!!!) million dollars over his career, and ryan leaf of all people still has every dollar he ever made from his pro contract (he lived off endorsement deals when he played and now only touches the interest of his playing days money).

        with that said, the idea of a gold plated helicopter sounds freaking awesome.

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    • B says:

      I think Dave makes a good point, as do you, and every time my boss comes to me to ask me my thoughts on where Lebron is going (I have none, I really don’t care about non-sporting events like free agency/the draft, etc), I think about all these same issues. Athletes are making these decisions based on the exact same criteria as any of us would – where do we want to live, how much each dollar is worth to us vs. how much the security of it being guaranteed is worth, and any other countless number of variables based on our own personal preferences. That people are speculating what Lebron is going to do strikes me as absurd – he’ll do whatever he thinks is best for him. We don’t know what that is.

      All that said, I do have one objection. In most cases, I think the “Johnson took a deal that made sense for him” argument is completely valid. In some cases, it’s not the same as the Lebron situation (projecting our own thoughts/preferences on to someone else), and you brought up one case I believe IS different – Longoria.

      “Josh Johnson made the right move, as did Evan Longoria. Period.”

      Well, maybe, maybe not. I’m sure signing a deal at the time Longoria did was the best move for him. However, I believe there was room to get a better deal and still sign it at the same time. Longoria’s contract is that absurd – to use an analogy, it’s like if you go to buy a car, and buy one that you want and get a price that makes sense for you….but the dealer would have been willing to sell it for a lower price than you actually purchased it for, you (or in this case, your agent) just didn’t negotiate well enough. I wouldn’t necessarily say you made the “right move” in that case.

      Going back to the topic….is it possible Johnson could have gotten more from the Marlins at the time he signed the contract? I don’t know (haven’t given it any thought) – if not, sure seems to me like the “right move” for him really was the definitive right move.

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      • TheUnrepentantGunner says:

        I think you might have changed my mind on Longoria. Then again, the Rays and Marlins are both.. ummm, thrifty. I am pretty sure Josh Johnson wasnt getting a better deal from them with that security. Longoria probably could have had the deal 1 year shorter, but thats just a guess.

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      • B says:

        The contract alone in Longoria’s case is really cheap (as it should be, since he signed it basically right when he got to MLB). Honestly, if it didn’t have the options tacked on (or the options were player/mutual options with better payouts or something), it’d be much more fair, but if nothing else, they put it over the top. The Rays essentially took no risk whatsoever with tons of potential for reward without considering the options. It was what, $17M guaranteed over 6 seasons or something? A top prospect like Longoria, even if he “busts” (relatively speaking, since usually top prospect busts still at least provide something), would STILL be worth around that given standard arbitration payouts….

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    • Steve says:

      agree on Josh Joshnson, disagree on Longoria.

      I am very much in support of everything you just said, understand the concepts, etc. but….Longoria could have accomplished everything you just said and NOT conceded so many option years at the end of his deal.

      there is a happy medium where Longoria could have set himself up for life AND gambled on the big payday. he could have sold his 6 team controlled years for a bargain price and maybe one year of FA for say, $35. The Rays would be getting a great deal, and he’d still be setting himself up for a huge payday in free agency.

      instead, he gave away options on THREE years of free agency.

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      • TheUnrepentantGunner says:

        you might actually be right on this. I didnt realize it was 3 full years of free agency. I was pretty sure it was 2, and since he was young he could still land a monster contact. but 3 is a bit excessive.

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  3. geo says:

    His agent was thinking exactly what he said at the time: He wanted to get him a contract that basically mirrored Zack Greinke’s, because he felt Greinke was a comparable. He was basically right and he got what he wanted. Greinke’s contract, signed just before the 2009 season, is four years, $38 million, and he also gave up two years of free agency.

    Interesting how Johnson has responded to his new contract – pretty much exactly the same way as Greinke responded to his.

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  4. Paul Singman says:

    Gambling is not something one should do with one’s life, especially if it involves staying healthy and a pitcher. I was very happy for Josh when I heard of this signing, and I think the fact that he’s pitched so well only takes away a small part of the security he feels. Who knows, maybe the sense of security is even allowing him to pitch better.

    In other words, this contract is not in Longoria territory.

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  5. Sam says:

    How can you write this article without mentioning the obvious? Tommy John surgery.

    He took less money because he’s perceived as more of an injury risk. And because the previous missed time he missed with injury set him back in arbitration, which is why he got less than half of what Verlander and Hernandez got in their first year of arbitration.

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  6. CesarV says:

    So two basic things, one the injury. Second, if he’s healthy he can get his new contract with a base around 20 mill, which will give him only a 15 to 20 million differential vs. Verlander and Felix. Verlander and Felix are/were 1) healthier (no injury history), 2) more heralded prospects, 3) accrued more playing time 900 innings vs 400 4) had given about 60% more value to their respective teams 80 million vs 50 5) NO STATE INCOME TAX IN FL.
    I think he did a great job for himself.

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  7. Deacon Drake says:

    Greinke’s value was compromised by his anxiety issues and playing for KC; Johnson’s by the elbow and playing for the Marlins.

    Both Seattle and Detroit are in a “win now” environment and were dealing healthy elite pitchers (more leverage) that would have gone for 20 million at free agency, so of course they were willing to negotiate high.

    Did anybody know JJ was THIS good?

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