Nov 18, 2010, 6:51 AM EST
In today’s New York Times Michael S. Schmidt reports that U.S. investors, many of whom are unconnected to Major League Baseball, are setting up training academies in the Dominican Republic with the sole purpose of profiting on draftees’ signing bonuses:
Recognizing that major league teams are offering multimillion-dollar contracts to some teenage prospects, the investors are either financing upstart Dominican trainers, known as buscones, or building their own academies. In exchange, the investors are guaranteed significant returns — sometimes as much as 50 percent of their players’ bonuses — when they sign with major league teams. Agents in the United States typically receive 5 percent.
Some of the investors in this game have some tenuous connection to Major League Baseball, such as former Yankees’ crown prince Steve Swindal, but Schmidt reports that most are just random profit-seekers, such as “a real estate lawyer from New Jersey, a dentist from California and a computer salesman from upstate New York.” In essence they’re American buscones who, instead of finding a random kid to flip to a Major League team, are working on a bulk model.
I can put on my commie hat — yes, I own one — and declare, with at least some degree of honesty, that all development of young baseball talent involves exploitation. At least in the way that term is technically defined. Even a prospect from an upscale Southern California suburb is “exploited” in that his talents are obtained and then used by Major League Baseball so that it might profit off his labors in an amount that exceeds what he is initially paid while he is simultaneously prohibited from taking his labor elsewhere. On some cold level he is an investment vehicle for agents and teams, and we obviously have no problem with this.
But this is different. Different than Major League teams setting up their own academies. Different than baseball setting up an international draft. At least in those instances baseball is or would have a longer game in mind, in that they would seek to recoup their investments by having players develop into prospects and one day have productive careers. And, even if the vast majority of players don’t make it, there are public relations and regulatory means through which Major League Baseball could be compelled or persuaded to make sure that the circumstances under which they house and train these kids are adequate, safe and ultimately beneficial to even the non-prospects. I mean, Felipe Alou or someone of his stature could shame baseball into doing the right thing by these kids if it was found that it wasn’t.
But who — besides Michael S. Schmidt — is watching some real estate lawyer from New Jersey, a dentist from California and a computer salesman from upstate New York, none of whom have a reason to care a lick about these kids after they’re signed or, in most cases, passed over? What motivation do they have beyond maximizing signing bonuses and keeping costs low in the meantime?
None that I can see. And even if the lawyer, the dentist and the computer salesman Schmidt mentions are running clean tight ships, the nature of investment for investment’s sake is such that, eventually, there will be a race to the bottom in an effort to maximize profits. I mean, the first guy who bundled mortgages was probably pretty prudent about it. He probably kept good files and made sure that only top quality paper got sold. Things, however, eventually got out of hand. Because that’s what happens when the only goal is to turn a profit in the short term.
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