What were the Phillies thinking when they extended Ryan Howard?

I wrote this blog post back in 2010 at a blog my friend and I shared. That blog is no longer active and alive in the world so I decided to re-publish it here for posterity sake. 

Original publish date: May 2, 2010

It's been a few days since news broke that the Phillies had signed a 5-yr extension with their 1B Ryan Howard.

Details of the deal:

  • Term: 5 yrs plus 1 yr team option ($10M Buyout)
  • Money: $125M (includes $10M Buyout)
  • It begins: After Howard's current deal is up after the 2011 season, when Howard is 32
  • It ends: After 2016 season (or 2017 season with option exercised), when Howard is 37 (or 38)

I have been confused to no end about the amount of money given to Howard in this deal not to mention that number of years involved - All for an aging hulkster who can't hit lefties, lacks plate discipline and patience, and depends solely on his power for his value to the team. I'm not here to talk about WHY this deal is good or bad. I'm here to talk about, or rather theorize what the Phillies (GM Ruben Amaro) was thinking when he made this deal.

1) Huge play on inflation of the US dollar: Let's face it. The US government is printing money quicker than any time in history. There's bound to be some inflation in the future. I think Ruben Amaro is banking on an HUGE inflation rate - somewhere in the neighborhood of 100-200% per year.

Here are the present day value of the contract based on inflation rates of 3%, 100%, and 200%:

3%: $110M
100%: $10.3M
200%: $3.4M

There you have it. If inflation is 200% per year for the next 7 years, Amaro is a genius, only paying Howard $3.4M of today's dollars.

2) Casey Close, Howards' agent, has blackmail on Ruben Amaro: This kind of stuff happens all the time in the movies. Why not in real life? Casey Close has pictures of Ruben Amaro getting hot-n-heavy with with Mr. Met. If those pictures got out, he would be the laughing stock of not only Philadelphia but the entire baseball community.

3) Ruben Amaro wants to proves baseball's stat community wrong: Ruben Amaro said in an interview recently that he does not value the opinions of sabrmetricians (sabrmetrics is the study of baseball statistics). In a huge 'All-In' moment, Amaro bets his teams' financial future on 1 player. Even though Howard's extension has received much criticism from the baseball community (both stat-heads and executives), Amaro truly believes in his player and he is willing to put his reputation on the line.