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Note: This article originally ran on June 3, 2010.

Do athletes make too much money?  The quick reaction to this question is “yes”.

Let’s take a deeper look.  As usual, I’ll use baseball as an example.

The news media reports the big signing bonuses of the first round draft picks – but fail to report that the size of the bonuses drop precipitously throughout the draft.  In the later stages of the draft, a player might received a bonus of a couple thousand dollars – or no bonus at all.  But then they jump into the minors at a hefty salary, right?  Well, if you consider $1100 per month to be a lot of money.  That’s the MAXIMUM a player can earn in his first season, if he signs a minor league contract.  (A very small number of elite prospects sign Major League contracts with different rules).  The salaries increase as you move up through the system, but it’s very difficult to get rich playing baseball in the minor leagues.  Many players have another job in the off-season.

In this year’s draft (which begins on Monday night), 1500 players will be drafted by baseball teams each year. Hundreds more are signed as foreign free agents. The active roster for a Major League team is 25 players (expanded to 40 in September). That means that there are 750 active major leaguers for most of the season. In theory, this could expand to as many as 1200 in September if everyone expanded thie rosters to 40 players (which is not the case).  Obviously, the vast majority of minor league players are never going to make it to the Major Leagues.  Most of the players who do make it to the highest level won’t stick around very long.

What we’re really looking at when we see the “rich” athletes are the elite performers.  But elite performers in nearly every industry are very well compensated.  Find me one of the top 750 bankers in the country, and I’ll bet she makes a few bucks.

Athletes are entertainers.  When we look around the world of entertainment, we see a lot of highly compensatated stars – people who make as much money working on one movie as A-Rod makes for a season of work.  Yet, people seem much more willing to point at A-Rod as overpaid, but not so much at Tom Cruise or Taylor Swift (no, we’re not Taylor haters – we like her).

Why is this?  I’m really not sure.  It may be the perception that actors and singers work at their craft, whereas athletes are just using their “God-given” talents to play a child’s game.  If you subscribe to this theory, watch some of the “human interest” stories during the Olympics.  You’ll hear about kids putting in long hours of practice from the time they were knee high to a grasshopper in order to hone those raw God-given gifts into polished skills – beginning the “apprenticeship” aspect of their career at a very young age.

A typical baseball team has a payroll of about $100 million.  For the same cost, you could produce a Hollywood movie with a couple of big name stars.  I personally see more value in 162 baseball games than in one movie.  People complain about the cost of tickets to sporting events, but in a lot of baseball stadiums, you can actually buy a ticket for the same price as a movie ticket.  The difference is that the baseball team has a detailed price structure based on seat location and the desirability of the game.  When you buy a ticket to a movie, you pay the same for bad seats to a horrible movie as you do for good seats at the best movie of the year.  How’s that for logic?

Are athletes overpaid?  Nah.  Are elite performers in various industries overpaid?  Perhaps – but people pay for elite talent, whether it’s in baseball, acting, or investing.

Did you find this article interesting?  Then you might also like my article regarding whether or not college athletes should be paid.

According to most observers, the biggest losers in the new collective bargaining agreement between the NFL and the NFL Players Association are the rookies.  There will be a new cap for rookies.  A team will be alloted a bucket of money to distribute among rookie contracts based on the slotting of their picks (the team with the #1 pick will be allowed to spend more money than the team with the 18th pick, for example).  A team could choose to spend all of the money on their top pick and non-tender their others pick, if you wish (along this is not likely to happen).

There has been much complaining about unproven rookies making more money that veterans who have been in the league a long time.  While we can argue all day about whether athletes are overpaid, within the existing context of player salaries, I really wonder if this is an attempt to solve a problem that doesn’t exist.  I have a couple of concerns with the new rookie cap.

It removes accountability for owners.

You know the best way to keep rookie salaries from spiraling out of control?  Have owners put their foot down and refuse to pay.  Pass on a guy who wants too much money and make a safer, cheaper, pick instead.  This happens in the baseball draft all the time, when prospects drop due to concerns about signability (baseball draftees often have a lot more options, since many of them are high schoolers or have college eligibility remaining). 

Not willing to pass on Joe Smith (who is demanding $50 million) to settle for Bob Jones, who is willing to take $25 million?  Guess what?  This means that Joe Smith is worth $50 million to you.  Suck it up and write the check.  Otherwise, let him drop a few spots and have your rivals pay the big bucks.

No upside for rookies

The new CBA calls for rookies to sign contracts for four years, with a team option for the fifth year.  In baseball, a player gets arbitration when they have accrued slightly less than three years of major league service.

If you blossom as a pro and out-perform your contract, there’s no reward.  You’re still going to make the same money.  This doesn’t sounds so bad, except that teams can cut a player who under-performs their contract.  In other words, the teams are protected against under-performance and at the same time don’t have to pay for over-performance.

Some writers say that teams need to be able to lock players up for five years because of how much money and effort goes into coaching.  Just a second … are these also the same writers who talk about a top pick being able to step in and start on day one?  These are contradictory statements.

There needs to be some sort of escape for the rookies.  Perhaps something as simple as baseball’s arbitration system, which would kick in after a player has three years of service.  Perhaps an “overachiever” pool of money to be divvied up each year.  Perhaps allowing playing time to trigger free agency earlier (maybe a sliding scale that gives a 7th round pick more “credits” toward free agency than a 1st round with the same amount of playing time – since the 7th rounder overachieved more than the 1st rounder?)

Taking money away from deserving veterans?

Sure, there are some underpaid veterans in the league.  Guys who have paid their dues with many years of stellar performance in the league.

Then we see the Cardinals giving $63 million over five years to Kevin Kolb.  Kolb has done a helluva job of carrying a clipboard for the Eagles, but has he really earned that contract any more than, say, Andrew Luck (the presumptive #1 overall pick in the 2012 draft)?  Sure, Kolb has “potential”, but at this point in his career has more inteceptions (14) than touchdowns (11).

Get back to me when you stop talking out of both side of your mouth, owners.

A lot about politics these days has devolved into partisan discussions that at best are bending the truth and at worst are hyperbolic to an extreme that would make a bell curve blush. We all know it doesn’t accomplish much, except maybe to boost the ratings of the associated extreme news services – Fox and MSNBC being the most obvious. Perhaps instead of asking “what does it accomplish?” we might be better off asking “why does it happen?”

Money.

That’s the most obvious reason. We all feel it. Statistics are showing it. More than ever the US is about the have’s and the have-not’s. I vaguely remember back in the 80’s in grade school learning that the three basic socio-economic divisions in the US were the lower class, the middle class, and the upper class. I learned that the upper class comprised about 5% of the population and consisted of the filthy rich all the way down to folks making maybe $150K or more (it was the ’80’s, after all). The middle class was the biggest chunk of the population, people making anywhere from the high 20Ks to the 150K barrier of the upper class. Probably 60-70% of the country could be described as the middle class. I would guess that the majority of people that will read this article will identify as both growing up and currently being middle class. Everyone else was lower class, yet there was hope – with hard work anyone could achieve the American Dream. Remember that? Everyone’s parent’s told them that, right? “Work hard and you can be anything you want.” Does it feel like it works that way now, in 2011? It doesn’t to me. You have to work hard, plan really well, and be very lucky, it seems like. A “good” college education can easily cost $40,000 a year, and an education with an Ivy League diploma attached is well over $100,000 a year. I’ve blabbed about money all this time, but what’s my point? Not a single one of the US senators or representatives in office today is in the middle class.

That’s right, none of our elected representatives can say they actually represent us in economic terms. Where as they’ve gotten 2.6% cost-of-living pay raises every year, some reports say the average salary has actually gone down in the last 10 years. It’s not like we have financially average people getting elected into office and suddenly becoming rich thanks to the $160K+ a year salary with full medical benefits- and add to that the fact that your average politician can easily make a few hundred thousand a year with speaking fees after they retire. Want to know what profession more congresspeople had than any other, before entering office?

Lawyer.

Yup, that universally reviled job that your average person looks down on more than prostitutes. Ever heard this one? Why does the law society prohibit sex between lawyers and their clients? To prevent clients from being billed twice for essentially the same service. Think about it, there’s a reason jokes like that exist … then realize that over 1/3 of the people running the Federal Government are lawyers. That’s not the most mind-bending issue to me, either. These are people that spend millions of dollars for a job that pays slightly upwards of $160K. Not only that, but a large portion of their job is to sit and listen to people paid 100K a year tell them why their corporation or organization should get a law written that benefits them. Yup, lobbyists average salary is over $100K a year.  It doesn’t help any that lobbyists are very often “retired” politicians or former political workers.

So who speaks for us? The Tea Party? They should really be called the “Me” Party. Google “who leads the Tea Party?” and the names that pop up the most are Sarah Palin, Michelle Bachman, and Ron Paul. Of those three, only Paul isn’t using every other second in front of the microphone to push social issues from one side of their mouth while saying the government should get out of our lives from the other side. Heck, it’s been reported that one of the major reasons the Tea Party has actually survived this long is because the Billionaire Koch brothers have poured funds into it. The next time you see a Tea Partier claiming they want government out of their lives you might just ponder on the fact that a couple of billionaires who have a lot to gain with less government are funding that movement.

Don’t get me wrong, I’m not a socialist. I’m also not a pure capitalist. Corporations have proven time and time again that they will put human well being – including human lives – behind making a profit. The idea of capitalism – essentially greed – is good if and only if there is oversight and laws to keep those who don’t have money from getting squashed by the few who do have it.

Think about this final point – oil companies are making record profits the past decade. Billions of dollars, most of it going to a handful of men. Yet they are still getting millions in subsidies and tax breaks from the Federal Government. This past May, along almost strictly party lines, Republicans voted against ending those subsidies. Republican apologists will say that they’re needed to keep the price of gas low, if the subsidies are ended gas would go up. Doesn’t capitalist theory state that the market should be setting the price? Rather than give the money to the oil companies, why not help the poor out with tax breaks on gas paid? The reason is obvious to me: money. Big Oil has hundreds of lobbyists – making more money than most of us will ever make- telling politicians – also making more money than most of us will ever make – to keep those subsidies.

Trickle down? More like trickled on.

Max Monet smiled and pondered the old adage – “it’s an ill wind that blows no good.” The ill wind of this recession had certainly been profitable for Max.

The real estate market had turned sour quickly, with many properties selling for small fractions of their going rate just a year earlier. Max had quickly snapped up two adjacent properties.

Camp Serenity had once been a popular place to get away from the hustle and bustle. The numbers of visitors had fallen off dramatically when urban sprawl brought with it new corporate neighbors.

Hopkins Distributing was one of those neighbors. The warehouse once had trucks coming and going at all hours – providing a steady source of employment for the residents of the town.

When the recession hit, the corporate suits at Hopkins decided that the facility was superfluous and shut it down. It was too late for Camp Serenity – the Hopkins facility had forced it onto life support years ago.

Most observers looked at these properties and saw failure. Max Monet saw potential. He made bids on both properties, and was soon the proud owner.

A couple of months later, Max Monet hit the road on a marketing tour. The product he was selling was Camp Serenity. Camp Serenity was touted as a think tank for the new generation of humanities scholars. Get away from the rat race for a while and focus on your writing, your art, or your research. Participate in seminars in your field of study. No fees were charged for room and board.

In an economy with so many unemployed liberal arts majors, Max would have certainly signed up quite a few prospects – but Max had sweetened the deal. When Camp Serenity was marketed across the region, it had sex appeal. Max had brought his staff with him – the group of men and women who would lead the seminars and serve as resources for the other residents of the camp. They all had graduate degrees, but had been unable to land jobs in their field of study. They were also a remarkably attractive group – almost as if they had been chosen more for their looks than their academic credentials.

And indeed they had been. A large number of people who would have been on the fence about the idea of Camp Serenity under normal circumstances had been putty in the hands of the staff. Heck, they were unemployed anyway – why not escape to Camp Serenity and try to write the great American novel?

There was one small catch to the free room, board, and tuition. Each resident had to do a bit of work-study each day. The residents were served a hot breakfast before heading to the Hopkins building to begin the morning shift at 8 AM. The shift was done at 10 AM, and they were free to focus on their intellectual pursuits until lunchtime.

The afternoon shift began at 1 and finished up by 3, in time for a daily lecture. The residents could attend a lecture in their own subject area, or cross over to learn about a new topic. Not surprisingly, the most attractive staff members attracted the largest crowds. They probably could have read the phone book aloud and still have people coming back every day.

After the lectures and subsequent discussions, there was plenty of time to work on individual intellectual pursuits, small group discussions, or even a nap. By 6 PM, the group reported back to the main hall for supper.

After supper, they headed back to finish off another short shift. The two hour shift ended at 9, and everyone had free time until they decided to go to bed.

The schedule was a bit different on Sunday. No work – just lectures and time for individual study.

Max had been mildly surprised when three residents had secured book deals for novels written entirely within the confines of Camp Serenity. He supposed that it actually was a good environment for intellectual pursuits. Most importantly to Max, though, it was a way to squeeze 36 hours of labor out of people for minimum cost. The barracks cost virtually nothing to maintain, and the fare at the dining hall leaned heavily toward cheap, filling meals, with on occasional steak dinner thrown in to boost morale.

From time to time, when reading the advice columns, I read articles about parents who are concerned that they are spending too freely in retirement and will have little money to leave to their children when they die.  Sometimes, there are even letters from grown children who are concerned that their inheritance is being spent.

My personal thought on this is that children are not entitled to an inheritance.  I’ll make an exception for young children left under the guardianship of others when you die.  In this case, it would definitely be good if you were able to leave some money (such as life insurance proceeds) to cover the cost of raising the children.  But if your children are grown, married, and established in their careers, should they really be leaning on you for financial support?  Probably not.  They should really be flying under their own power at that point.

Some people seem to be under the impression that financial assets are the most important thing parents can leave to children.  I sincerely hope that I am remembered for more than a financial bequest after I die.  I’m hoping my children will be able to look back at life skills they have learned from me and memories of times we spent together.  If money overshadows the non-financial gifts, I’d consider that a colossal failure.

For those of you who are worried about spending yours kids’ inheritance – don’t worry about it.  It’s your money, earned by decades of hard work.  You’re certainly entitled to spend it to enjoy your retirement years.  Take that trip to Europe you’ve always dreamed of (or whatever it is you’ve always dreamed of).  You may be pleasantly surprised to find out that your children actually prefer that you spend the money on yourself.

If you’re one of the kids who worry that your parents are spending money that is “rightfully yours” – I’d recommend spending 99 cents to buy the song The Will by Mark Chestnut.  Listen to it a few times and maybe your perspective will change.

If I had a million dollars, I’d be rich.

Well, that’s what Barenaked Ladies would have you believe. In actuality, a million bucks doesn’t stretch as far as it once did.

If you were indeed rich, how would you spend the money?

First, I’ll set down a few rules.

First, let’s assume that you have already donated a sizeable chunk to charities and taken care of your family.

Second, let’s make these without any thought as to what your spouse or kids would think of the decision.

Yes, this is a nice, breezy little “we can always dream” article.

Where to Live

I’d definitely want two homes. I’d want a summer home in the Florida Keys. I like the laid back atmosphere in the Keys, love being surrounded by water (which is odd, considering that I can’t swim), and most importantly, I intensely dislike cold weather. Lay under a palm tree reading a book and listening to Jimmy Buffett. Yeah, that’s the life.

Summers would be spent in the mountains of Colorado. Sadly, I’ve only been to the mountains once, but I absolutely love them. I’d spend lots of time hiking in Rocky Mountain National Park and shooting the wildlife and scenery with my digital camera.

Oh, and Colorado has one distinct advantage over other locations – it also happens to be the home of my favorite baseball team. I’d plunk down the cash for season tickets right behind home plate. None of those fancy skyboxes for me – I want to be able to hear that batter arguing with the umpire.

The House

There is one aspect to my dream home that has never wavered over the years – the presence of a large library. When I say large, I mean something that would rival the libraries in some small towns. Not only do I love to read, but I’d happily lend tomes to visitors. The library would have a media center with a couple of high end Power Macs.

I’d definitely want to grounds to be landscaped with synthetic turf in order to minimize the maintenance. They make some very realistic synthetic turfs these days. Grass is overrated.

The rest of the details are relatively unimportant.

The Cars

Lamborgini? Porsche? Mercedes Benz? Nah, just keep a Ford Taurus in the garage and I’ll be happy. My first car was a Taurus (had 96,000 miles when I bought it), as is every car I have bought since.

Could I spend lots more on a fancier car? Sure. But I see a car as a way to get from point A to point B. If I’m going to waste a lot of money, it’s certain not going to be on a luxury car.

Hobbies

What would I do with my spare time? Well, as mentioned above, I would read, hike, watch baseball, and listen to Jimmy Buffett. But I’d do other things, too, right?

I’d definitely try to make the cut for Jeopardy. I don’t watch a lot of TV – and even fewer game shows – but Jeopardy has been a longtime favorite of mine. I wouldn’t necessarily have to win – competing would be enough fun.

On there is one other thing. I want to go into space. Not just as a tourist, mind you. I want to take a space walk – tethered to civilization by just a thing line. I can only imagine the thrill this must give astronauts. The only downside is that I’m not much of a handyman, and most spacewalks involve fixing some sort of equipment.

Maybe I could hold the ladder for the other guy.

What would you do if YOU were suddenly rich?

One of the most heated debates in college sports is whether or not college athletes should be paid.  Proponents point to the millions of dollars that some programs reap in tickets sales and merchandise.  Surely these schools should pay their athletes?

Today, I’ll make the argument that college athletes should not be paid.

Who Gets Paid?

If you take a step in the direction of paying athletes, one of the first questions is who gets paid, and how much? 

Let’s use football as an example.  Do Tim Tebow and Alexander Robinson (Iowa State running back) get the same salary?  Is there a pay scale based on yardage or some sort of complex formula?  What’s the value of a punter or a long snapper?  When are salaries set?  There are a lot of blue chip prospects who have disappointing college careers – so surely we don’t want to get locked into a pay scale at the time they sign.

Then comes the fun question of whether or not athletes in all sports should get compensated.  Should the backup fullback on the football team get a paycheck, but not the world class decathlete, simply because the football team turns a profit and the track team doesn’t?  What about the All-American volleyball player on a top 5 team?

It’s Not a Profit Deal – Really.

While many individual programs turn a profit, this is true of very few athletic departments as a whole.  In situations where football and basketball make a profit, their profits often make the gymnastics and tennis teams viable.  If football and basketball stop subsidizing these sports, they will likely die on the vine. 

Fielding a competitive team is not cheap.  A football team has 85 players on scholarship – meaning that their tuition, fees, room, and board are paid for.  If you have a child in college, imagine multiplying that  cost by 85.  Then there is the cost of coaches (do head coaches earn their salaries?), facilities, travel, lodging, etc. 

Supply and Demand

Student employees are often paid less than their skills would dictate in a free market.  This is because college campuses are awash in talented individuals, all competing for a limited number of jobs.  This is particularly true with positions that are internships that serve as gateways to lucrative careers. 

And that is precisely the role of an elite college athlete, of course.  Bear in mind that the “job” of college athlete is high desired, not only for the prestige of playing at the college level, but also for its pipeline to the pros.  For every athlete who cracks a college roster, there are many more who never sniff a scholarship – most of whom would gladly play a college sport in exchange for “only” a scholarship. 

These athletes are having their expenses paid while a talented coaching staff attempts to ready them for a career as a professional athlete.  While it is true that athletes are proving value to the university, the university is also providing invaluable services to the athlete.  Stephen Strasburg, the top pick in the 2009 baseball draft, owes much of his $15 million contract to the coaching staff at San Diego State.  The conditioning coach at SDSU nicknamed him “Sloth” because he was so out of shape when he arrived on campus.  If you think that SDSU should pay for the services of athletes like Strasburg, should they also be paid by athletes who benefit from the coaching?

Did you find this article interesting?  Then you may like my article that asks whether athletes are overpaid.

“There you go, Mr. Casey,” I said, ripping the check out of the checkbook.

The car dealer glanced down at the check.

“It was good doing business with you again, Mr. Maxwell.  I’m sorry that we couldn’t work out a finance deal this time.”

“Maybe you’ll have that zero percent deal the next time I need to buy a car,” I replied.  I shook the man’s hand and walked out of the dealership.  Car dealers can get a bad reputation, but Casey was a straight shooter and didn’t put people through the ringer like some other dealers did.  He ran a small family dealership – he lived comfortably, but was not rich.  Perhaps he could have lived a bit higher on the hog if he was more heavy handed in his negotiations, but Casey seemed rather happy with his life.

Seventeen days later, I received my statement from the bank.  Oddly, the check for the car had not cleared.  I was concerned that Casey had somehow misplaced the check, so I gave him a call.

“There has been no problem, Mike,” he replied.  “We received the funds on the eighth.  There’s no problem on our end.  It sounds like this might be a bank error.”

I got off the phone with Bob Casey and immediately called the bank.

“I’m looking up your account, Mr. Maxwell,” replied Miranda Johnson, the teller.  “I’m not seeing any checks to Casey Auto.”

“How can that be?” I asked.

“Oh, it’s really not that unusual,” she said.  “The federal reserve acts as a clearinghouse for checks, and sometimes there is a lag.  It seems that the one half of the transaction has been completed, but the other half has not.  They typically fix the problem within a few weeks.  I’m certain that it will be straightened out soon.”

Miranda’s words allayed my fears, and I put the matter out of my mind.

A month later, when I received my next bank statement, the check to Casey Auto had still not cleared.  Even more puzzling, not a single check had cleared my account.  I immediately grabbed the phone and began calling the companies who had received the checks.  Like Bob Casey, all of them had received their money.

This time, even the unflappable Miranda Johnson was a bit flapped.

“This is definitely a bit unusual, Mr. Maxwell.  I have never seen it take this long for the fed to fix a problem – and the fact that none of your checks cleared is especially troubling.  I’ll give a call to my contact at the Fed and see what she can find out.”

Miranda’s colleague, unfortunately, was also not able to find the root cause of the problem.  From the perspective of the federal reserve bank, the checks had never existed – and yet, payments had been received.

Three days later, a gentleman from the FBI was at my door when I arrived home.

“Mike Maxwell?” asked the man in the suit.

“Yes, that’s me,” I replied.

“I’d like to ask you some questions about a grand larceny that was committed.  May I come in?”

“Grand larceny?” I asked, confused.  Agent Brisbane followed me into the house.

Once inside the house, Brisbane pulled several photocopies out of his briefcase.

“Do not recognize these?’ he asked.

“Of course,” I replied.  “Those are some checks that I wrote.”

“Indeed,” he replied.  47 checks for a total of $44,318.41, drawn on the account of a Ms. Rose Tinsdale.”

“What?” I replied.  “Rose Tisdale?  Clearly this check was drawn on my own account..  See, that’s my checking account number.”

Indeed, it was my account number.  However, the bank’s routing number was wrong.  Somehow, the printer has transposed two digits, and my checks were being drawn against the account of Ms. Tinsdale.  Ms. Tinsdale had been in ill health and had not kept her finance current.  It was only when she died that her children realized that someone was “stealing” money from her account and notified the FBI.