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What’s $300 million?

To paraphrase a Mr. Dirksen myth: “A million here, a million there, and pretty soon you’re talking real money.”

New Series 2001 One Dollar Bill Notes Photo by Alex Wong/Getty Images

Ok, while chatting this week in the comments I reminded myself of a study I had done years ago that looked into just how well a person’s family might do across the generations if they had a $300 million kick start. I didn’t hang onto that model, so I got curious all over again and built a new one.

The inspiration is the current conversation about Free Agent contracts, player negotiations, fair values, and arguments back and forth over which side is more evil, the owners or the players? We lose sight of what, exactly, we are talking about. We gloss right over the number of zeros involved, and the place all those zeros have in the larger world outside of baseball.

I realize that the money is there in sports. I understand how that money gets distilled and concentrated into the hands of those incredibly few people blessed with the talent, luck, and opportunity. This is not to begrudge them the value of their success and good luck among the entirety of the human population. And, yes, there is a huge amount of luck involved. There are a thousand billionaires in the world, and tens of thousands of people close enough to that who could pool their money and buy an MLB franchise IF they cared, and IF one became available for sale at the right moment of their lifetime. And there are tens of thousands of people with superior athletic ability who could be in MLB instead of some who are there now, IF they had cared to become a baseball player and IF they had the access at the moment (there are probably dozens of guys in Korea and Japan today who could produce at a higher level than Matt Joyce will in 2019, but Joyce is the one who is here, and was available).

But $300 million is a lot of money. It is astonishing what can happen to $300 million over time. It is a level of security and opportunity that extends across generations and lasts for decades. This is one contract, for one person, for 10 years worth of service, for 8 months labor out of the year, to perform in a recreational pastime at the highest levels of human achievement for the viewing distraction of some small segment of one society. This one contract creates nearly 100 years of benefit for 4 generations of family.

Let’s create some context. We can discuss this on a global scale because MLB is populated by a large contingent of international players. Those players come from other economies with other standards of living. Their relative wealth is not confined to some peerage of Newport Beach, CA. Further, that kind of wealth enables the recipient access to the entire world. They could move to Costa Rica and live out the remainder of their life happy as a clam. They are not required to suffer having their driver take them out of Brentwood so they can purchase their produce at the Gelson’s all the way over in Santa Monica.

According to Global Rich List, $300M would instantly make the recipient the 5,393rd wealthiest person on Earth. Among the top 0.0001% richest people alive, anywhere. That’s ‘one millionth of one percent’. So gather up all the people on the planet who are credited with having any wealth at all (this excludes children, for example), then sort out every 1 hundredth person and dismiss everyone else back to their lives. Now, out of all those still with you, the ones who were every hundredth person, count out every millionth person and send the others home. That remaining pool? About 5400 folks.

7.7 billion humans walking the planet, and we are talking about the same number of people who might gather together and all fit into the outfield seating areas of Angels Stadium. If you had a wall map of Earth, 8 foot high and 20 feet long, you could not purchase a needle with a small enough point that would be sufficiently fine to obscure just that little plot of land occupied by those 5400. And all the rest of the planet across all the rest of that wall would be everyone and everything less fortunate.

Now let’s play a game. Imagine Sam Superba being awarded his $300 million contract. And let’s pretend, for sake of convenience, that the money is all up front. And Sam’s financial experts take that $300M and lock it up in investments, out of which Sam and his family will get paid.

For Sam, his first annual payment will be $10M, to do with as he pleases. This will happen upon his 30th birthday, and will continue on every birth date until his 75th. Sam will not live to see his 76th birthday, so he will no longer get an annual payday.

Sam will have two children. Tommy will be born when Sam is 31 (2020), and Tammy will be born when Sam is 34 (2023). Upon reaching their 18th birthdays, Tommy and Tammy will each begin to be paid a stipend every year, which will continue until their 75th birthdays. Again, neither will reach the age of 76.

Tommy will have two children, again at the ages of 31 and 34. And Tammy will, likewise, have 2 children at 31 and 34. Every generation of Sam’s heirs will have the exact same repeating sequence. One child at 31 and one child at 34. Each heir will start getting a stipend at 18 and ending at 75.

The very fist stipend, to be paid to Tommy when he reaches the age of 18, will be $1M. As you can work out for yourself, this happens 18 years after Sam gets his first payday. This $1M sets the starting point for ALL stipends to ALL heirs (and will rise accordingly with COLA, which we will define below, starting with that first payment). This means that Tammy’s first stipend, when she turns 18, will be $1,092,727. Tommy will also be getting $1,092,727 that year. And so on.

With all that established, now we play with the money.

First, imagine that the original $300M is invested in such a way that it yields a 6% annual, compounded, return. And we compound that return AFTER we deduct from the fund any payments to Sam and his heirs. (Yes, I could compound BEFORE, which would make the following results even more amazing.) Second, we assume a 3% annual Cost Of Living Adjustment for everybody, Sam and every heir who ends up receiving income. Third, we assume no service fees or commissions or taxes. I could figure that out but it makes an already complex spreadsheet even more complex and this tale is not worth that much work. If I go to that trouble, I will pay out BEFORE compounding AND change the story to $500 million and play with the return and COLA. Instead, we will just deal with the grosses.

So here is the game: how much money does everybody make and how long does all that money last? Do you have any guesses?

The answers are pretty astonishing.

Sam, himself, will realize payouts totaling $965,014,572.

Tommy and Tammy will, combined as Generation 2 payees, realize payouts totaling $317,634,173.

Sam’s 4 grandchildren, Generation 3 payees all, will realize payouts totaling $494,747,050.

Of the 8 great-grandchildren, Generation 4, only 4 will gate paid out any money before the money is exhausted. They will tally $47,839,817.

The money starts in 2019, and the money runs out in 2116. That’s 98 years worth of payouts!

The Grand Total payouts for Sam and 10 of his descendants is $1,825,235,613. That’s almost two billion dollars.

Remember...for one contract, for one person, for 10 years worth of service, for 8 months labor out of each of those 10 years.

Now back to perspective, starting (again) with the use of Global Rich List.

That first $10,000,000 payout to Sam in 2019, all by itself, immediately makes him among the Top 0.02% of the richest people in the world. After his second payment, he moves up into the far more rarefied air of the Top 0.007%. When he is done, he ends up among the Top 0.0001%.

Tommy starts out at age 18 among the 0.56% richest people as of 2019, although by that year 2037 the global numbers will certainly have changed. When Tommy and Tammy expire, they would have been among the Top 0.0003% of the 2019 world’s richest people.

Combined, Sam and his heirs will receive as much income as 54,757 median households of modern Germany, a 1st-world industrialized global-leading economy.

Combined, Sam and his heirs will receive more income than the 2017 GDP of 30 entire nations (according to the United Nations numbers, Saint Lucia on down to Tuvalu).

Combined, Sam and his heirs will receive the same amount of money in payouts, as Forbes estimates Arte Moreno’s entire franchise to be worth in today’s market. And more than 22 other MLB franchises are worth today.

Combined, Sam and his heirs will receive the same amount of money in payouts to cover the entire parks, recreation and library budget of the City of Anaheim for 402 years.

Combined, Sam and his heirs will receive the same amount of money in payouts to buy a $100 laptop to every man, woman and child in 74 entire countries (from Cyprus on down, not counting The Holy See).

Sam is a rare human being. One of only 1400 or so able to demand payment to perform at the levels necessary to compete in Major League Baseball. And his time at that level is short compared to most other careers. His every action of his entire MLB career is subject to super-slow-motion high definition scrutiny and criticism and permanently embedded into the history books of civilization. It’s life under a microscope, intrusive and demanding. And if Sam is good enough, part of his reward is that this level of intrusion and demand remains to the end of his days. You and I don’t qualify. Not even close. Sam is getting what the market, as framed by the system, mandates. It’s Sam’s reward for all that.

But, still, $300 million is a hell of a lot of money.