Leverage Is A Fallacy
In the real world of baseball, the Orioles recently agreed to terms with Yovani Gallardo on a $35 million contract. Then they ran their classic bait-and-switch physical, cried “shoulder,” and leveraged Gallardo down to a $22 million guarantee. This is not the first time the O’s have killed a player’s leverage. Usually they go on to sign with another team for much less money.
You’d be hard pressed to find any 30-year-old pitcher without some kind of radar blip in their shoulder or elbow. In his prime, Gallardo threw 93 mph. This was back when 93 mph rated among the hardest throwing starting pitchers. Now he throws 90. There’s a pretty decent chance that whatever’s wrong with his shoulder is already assimilated into his game. Furthermore, given the contracts signed by Ian Kennedy and Mike Leake, decline appeared to already be priced into the original $35 million figure.
Gallardo and his agent should have anticipated the Orioles. They should have laid groundwork to co-opt the false leverage gained by the Orioles with the physical. Before any figures are exchanged, it’s the agents job to say, “we know you’re going find something when you run your physical. Let me be clear, we aren’t renegotiating.”
That statement doesn’t mean what it says. Here’s the sub-text. If you, the Orioles, find something in my client’s physical, we’ll budge. A little. Like a very tiny bit. Maybe we’ll accept a small percentage of the contract as very easy to trigger incentives. It depends what it is too.
Put another way, do you think Scott Boras would have taken a $13MM reduction in guaranteed pay? Doubtful.