Albert Pujols is an American professional baseball player. During his years in St. Louis, he put up Hall-Of-Fame numbers. His tenure there also earned him one of the largest contracts in baseball history, at least up to that point.
He was awarded a 10 year, $250 million contract. It was not the St. Louis Cardinals who gave him that money. Instead, it was the Los Angeles Angels.
Today, after near 10 years with he team, the Angels decided to release Pujols.
Many consider Pujols to be the best right handed hitter in the history of baseball (at least until Mike Trout passes him). His time in St. Louis made him a local hero. He was instrumental in bringing a couple championships to the city.
The Cardinals are known for being one of the more successful organizations in baseball. Throughout their history, they won the second most championships and have loads of Hall-Of-Fame players. Pujols will likely be added to that list when he is eligible.
However, even though he spent the last 10 years with the Angels, is HOF credentials were established in St. Louis. In spite of the big contract, the numbers bear it out.
According to Baseball Reference, Pujols had an OPS+ of 170 with the Cardinals while compiling a 108 with the Angels.
For those who do not know this sport, that means that he was 70% better than a replacement player (which is considered to be average) as a Card while only being 8% better in L.A.
Topping an average player by 8% is hardly worth $250 million, even in the absurdity that is professional sports.
As you can imagine, when the Cardinals refused to come close to matching the contract Pujols eventually signed to go elsewhere, they are bashed by their fan base and the media. However, we the numbers clearly dictate, this was a smart move. Pujols remaining in St. Louis would not have brought the Cards another championship. Instead, it would have cost them a lot of money.
This is an applicable situation to what we deal with in our investing lives. Sometimes, what looks like a windfall initially ends up become a nightmare. Angel fans were thrilled when they got the top player on the free agent market a decade ago. Nevertheless, as his production dropped and the team couldn't make moves because of his contract, the love from that deal disappeared.
It is easy in hindsight to see this was a bad deal.
Of course, the Cardinals saw it in foresight. They did not come close to offering a 10 year deal on a 31 year old baseball player. No matter how good a player he is, age will catch up to him. The Cardinals offered 5 and, as stated, were roasted for their approach.
The deal was not an instant nightmare. During his first year, he did put up a 138 OPS+ which is not bad. It was below the numbers he regularly put up as a Cardinal but still very acceptable.
He would never come close to that level of production again.
Sports fans tend to be short-sighted. They look at things in terms of how it will impact the team in the upcoming season and that is all. Few take the time to consider the long-term implications of moves.
We see the same thing around here. Many focus upon what is taking place right now, failing to see how things will look down the road. Returns that start off small can often grow due to the compounding nature of things. Of course, many sell before they get to that point.
Even if something is worthy of Hall-Of-Fame recognition, it does not mean it is something that we want in our portfolio.
How did Pujols become the highest paid player in baseball for a while. By consistently putting up numbers that the team could count on. He was a steady producer of big returns.
This did, however, stop. He then became an unwelcomed member of the team, resulting in his release before his contract ran out.
There is a lesson in there for all of us. Greatness is not being a one-hit wonder. We need to focus upon consistent returns generated over long periods of time.
We also know there comes a time when the same approach does not work. Perhaps the skills declined a bit and one cannot do what was done before. Thus, altering things is crucial.
Pujols wanted to remain the same superstar player he was. Unfortunately, his skills deteriorated in such a way that he became a liability to his team. Since he wanted to be that big bat, he ended up providing minimal production.
This is something that happens in all walks of life. We all have to be onguard for it.
