Ryan Howard’s Extension

In the four seasons from 2006-2009, Ryan Howard has accumulated 16 wins, according to http://www.baseballprojection.com/war/h/howar001.htm . If we look at all players born since Babe Ruth, for the same age group as Ryan Howard, that puts him in the top 200 players, along with teammates Chase Utley and Jimmy Rollins.

Ryan Howard was already signed for the 2010 and 2011 seasons before he signed his latest extension. Therefore, we are looking to see what happens to the great player in the third through seventh seasons following his established performance level. Focusing on the 178 great players born between 1895 and 1971, the list is headed by Willie Mays at 37 wins, Babe Ruth and Lou Gehrig, each at 36 wins. Here’s how these great players aged:

Age 27 to 30: 21 wins
Age 31 to 32: 9 wins
Age 33 to 37: 11 wins
Age 38 onwards: 2 wins

This does not look good for the Phillies. While a win costs about 4 to 5 million dollars today, each win in the 2012-2016 season will cost somewhere around 7 million dollars. Granting a five-year extension, two years out, to a typical star player should be worth around 77 million$, not 125 million dollars.

Perhaps Howard is a special case. We already gave him a special consideration, seeing that the group average was 21 wins at age 27 to 30, while he was at 16. We’ll give him the following two further considerations: let’s set the minimum win level for the previous four seasons at 20 (which brings us down to 87 players), and a minimum win level of 8 wins for the next two seasons (which implies that we expect Ryan Howard to be healthy and very productive for the next two seasons). That leaves us with 61 players, with the following results:

Age 27 to 30: 25 wins
Age 31 to 32: 12 wins
Age 33 to 37: 16 wins
Age 38 onwards: 4 wins

We are being extremely generous to Ryan Howard with our comparables. We’ve got the four prior seasons totalling 25 wins (compared to the 16 for Howard’s last four seasons) and 12 wins for the two upcoming seasons (of which Howard has played only one month so far). And under those very unrestrictive parameters, the expectation is to get 16 wins for the five years that Howard signed. And if we increase the cost of a win to 8 million dollars per win, that’s 128 million dollars for five years.

Therefore, in order to justify this contract, we have to take the most optimistic position we possibly can on every parameter we have considered in order to justify the extension as a fair deal. And when you are that optimistic, you probably have a big chance of it blowing up in your face.

Given that we’ve shown that, on average, this deal was not good, the question remains: what are the odds the deal will turn out to be good? It’s a bad deal to buy a lottery ticket… unless you are the winner. Looking at a more restrictive pool of players (minimum 16 wins in the previous four years, at least 4 wins in the next two years, paying 7 million dollars per win), we have a total of 161 players in our pool (who averaged 22 wins in the 4 previous seasons), of which 20% generated at least 18 wins in the five years that we are focused on. And generating at least 18 wins is worth at least 125 million dollars. The odds are therefore as follows:

50% chance of deal being worth at least 10 wins (for an average of 18 wins)
25% chance of deal being worth 4 to 9 wins (for an average of 7 wins, or a value of 50 million$)
25% chance of deal being worth 3 or fewer wins (losing over 100 million dollars in value)

This means the Phillies have a 50/50 shot of either breaking even or facing an albatross. Ideally, you want a 50/50 shot of having a good deal and 50/50 on a bad deal. And that’s presuming that Ryan Howard was a superstar who averaged 22 wins, not 16.

***

There’s 101 players born since Babe Ruth, limited by the following:
– 2400 or more PA in the 27-30 age group
– at least 16 wins in the 27-30 age group
– at least 4 wins in the 31-32 age group

The totals for these 101:
– 22 wins at age 27-30
– 10 wins at age 31-32
– 11 wins at age 33-37

Here’s everyone born since Mike Schmidt (29 of those 101 players), ordered by best to worst at age 33-37:

27-30   31-32   33-37   Player Name
32	17	34	Schmidt	Mike
27	19	22	Henderson	Rickey
20	10	21	Palmeiro	Rafael
20	11	21	Sosa	Sammy
35	11	20	Boggs	Wade
16	9	18	Butler	Brett
16	14	18	Thome	Jim
27	6	18	Yount	Robin
17	10	17	Gwynn	Tony

19	15	16	Biggio	Craig
21	14	16	Ripken	Cal
28	13	15	Bagwell	Jeff
24	6	12	Murray	Eddie
28	12	10	Giambi	Jason
21	11	10	Hernandez	Keith
22	8	10	Thomas	Frank
21	10	10	Williams	Bernie
22	10	9	Trammell	Alan
18	6	8	McGriff	Fred
16	8	8	White	Devon

17	6	7	Salmon	Tim
18	10	6	Puckett	Kirby
22	8	3	Belle	Albert
30	7	3	Griffey	Ken
19	8	2	Cirillo	Jeff
16	5	2	McReynolds	Kevin
19	10	1	Murphy	Dale
16	7	0	Vaughn	Mo
18	6	-1	Barfield	Jesse

So, you have a one-third chance of being Jim Thome, a one-third chance of being Frank Thomas, and a one-third chance of being Mo Vaughn.

Ryan Howard was paid like he had a 100% chance of being Jim Thome.