First, a disclaimer. This is a guest post - I have not been hired by SBN or anything.
Tom Hicks paid way too much for A-Rod. There's no way A-Rod is worth $25 million a year. Scott Boras used his 2d12 enchantment magic to trick Tom Hicks. The fact that it took a decade for salaries to catch up with A-Rod's contract for Texas is evidence that it was a huge mistake. Gigantic lumberjack Paul Bunyan and his equally Brobdingnagian blue ox formed the Grand Canyon, the Great Lakes, and built Mount Hood. While this may sound like the Sesame Street game of "One of These Things is Not Like the Others," it's not. All of these things are just like the others.
While Tom Hicks may have a well-deserved reputation for haplessly using the team's resources, the most-cited example is also the worst one. A-Rod's 10 year, $252 million contract was actually what a reasonable estimate of A-Rod's expected value from 2001-2010 would be.
Going back into 2001, a marginal win on the open market was worth roughly $2.5 million. A conservative estimate at the time would have been roughly 5% growth of that figure a year. That's actually a bit more conservative than what actually happened over the decade, as 5% yearly growth would result in a win being worth a hair under $4.1 million for 2011, when most estimates have it about half-a-million more. But let's stick with 5% growth as a reasonable guess for the Rangers to make in December, 2000.
The next step is to make a projection of A-Rod's contributions from 2001 to 2010. Using ZiPS, I went back in time and projected A-Rod as of the end of the 2000 season (not a difficult exercise as I'm set up to project any player at any point in their career).
Year WAR 2001 9.2 2002 9.2 2003 9.1 2004 9.0 2005 8.8 2006 8.8 2007 8.3 2008 7.6 2009 6.5 2010 5.5 -------------- 82.0
A-Rod didn't quite hit that figure (BR and FG average at 68 WAR), but he did lose some WAR from his move to 3B when he was still a competent SS (average of UZR, TZ, and BIS has him at +5 runs a year on average while in Texas at short). Add in the marginal win value and you get:
Year WAR $/Win $TOT 2001 9.2 2.5 23.3 2002 9.2 2.6 24.3 2003 9.1 2.8 25.4 2004 9.0 2.9 26.3 2005 8.8 3.0 26.9 2006 8.8 3.2 28.2 2007 8.3 3.4 27.9 2008 7.6 3.5 27.0 2009 6.5 3.7 24.1 2010 5.5 3.9 21.7 -------------------------------- 254.9
ZiPS isn't exactly known for being aggressive, either - I get a lot more e-mail grumbling about how mean ZiPS is than complaining about over-sunny exuberance.
Simply put, the reason A-Rod's contract was an outlier was because the circumstances surrounding A-Rod in the free agent market suggested that any contract given should be an outlier.
As a result of A-Rod breaking in at an extremely young age, he hit the market after his age 24 season. Teams simply don't get to bid very often on players on HOF trajectories at age 24. In most situations, when you're signing a player to a 10-year contract, you're looking at paying for seasons in which they're pushing 40, which greatly reduces the expected future value of the contract. Just to illustrate the difference age has on the value of a contract, here is what ZiPS expected for A-Rod's 2001-2010 assuming different ages:
2001 Age 10-year WAR 25 82.0 26 71.5 27 62.7 28 56.6 29 50.5 30 46.9 31 40.6
Essentially, if, in 12/00, you're offering a 10-year contract to a player 6 years older than A-Rod that played exactly like A-Rod, the expected value drops in half.
While ZiPS projected A-Rod to be worth his Ranger contract, it projected A-Rod, at the time of the new, 10-year, $275 million contract with the Yankees, to be worth less than half the cash he would earn from 2008-2017.
While A-Rod was in Texas, the team spent $68 million on replacement level players and if you add full-timers at 0.5 WAR or less, the team spent $139 million in 3 years on players that weren't pushing the team towards the playoffs. If I buy a great house for $300,000 and pay $200,000 to a drunk guy with a flamethrower to burn it down, it's the second transaction that puts me into the poorhouse, not the first.
Dan Szymborski covers baseball for ESPN Insider. He has written about the sport since 2001 for the Baseball Think Factory, where he is an editor. He is the developer of the ZiPS Projection system, and has also worked as a reporter and a consultant. You can find his ESPN archives here and follow him on Twitter here.