There's something known as the Billionaire advantage. While most of us who have investments earn 8-9% a year (ex. S&P), billionaires earn 13% on average.
I'm convinced this is how Kraft is looking at things:
"We all agree to make him the highest paid at $32.5m per year, but he wants $65m in guaranteed money up front as a signing bonus. We only want to give him $40m immediately and another $20m in a year, with the remaining guaranteed money in his 6th year."
For Kraft, effectively, a $65m payout becomes a $68m payout because he knows he'll earn $3m on the amount he doesn't pay immediately. The same thinking goes for Gonzalez. He can make 10% on the $60m he gets immediately (before taxes).
$3m may seem like nothing to us, but if Kraft has a policy that says, I'm only shelling out $300m in cash per year, because if I do $400m this year like the Seahawks are doing (and extended the payout into the future), that's a whopping $52m I'm foregoing in investment gains.
Effectively, the Seahawks owner not only paid $100m more than what Kraft would pay, in this scenario, but actually he paid $113m more.
There is a time value to money spent on the back end.
The more significant effect though is that having the money now is the ultimate guarantee. Hence all of contracting for future work.
I would love for you to pay me for the work, do the work to my own standards, never be evaluated (because there is no more at stake,) then maybe leave before my contract is up — or threaten to, unless you pay me again. Then I would live for you to also pay an inflation adjustment even though the original amount was determined knowing that inflation exists and maybe pay me again if I do my job competently.
ownership *should* invest the monies that are not part of the cap dollars spent, and they should get the best return they can with an appropriate risk (all investment carries risk). So in a one-on-one sense, any “billionaire’s advantage” would benefit ownership, which is wealthier than a given player,
This is a good analysis of the Patriots’ relationship to a single employee.
Now, what if all the players get together, make a union, and argue as a union for the player cut of earnings?
Of course, this describes the world we’re in. The salary cap/CBA dictate the extent to which the “billionaire effect” can pertain, because it forbids the team spending more than a given amount in a year. The rest is ownership’s money.
So the pressure advantage, such as it is, based solely on the theory that the billionaire gets better investment returns, can be looked at as a real thing.
But it is the most minor of reasons to push payouts into the future. The main reason is to manage cap hits. For example, you can give a bonus when your cap spend is lighter, resulting in more to spend next year. it’s baked in that you value a future dollar differently from a 2026 dollar.
If the team spends to the cap, the distribution within the roster is a competition among players, not a matter of investment gains of the owner vs. 1 player.
If your goal is the best roster, your main objective to get to that goal is to make sure you spend the full 301 m this year, and the cap amount allowed in the future.
No, the NFL and its clubs are not billionaire-funded nonprofits with millionaire employees. That would be the Center For Football in the Public Interest.
But the dynamic you’re talking about happens league-wide through the CBA, which defines how much $ goes to ownership and how much to players.
It’s only when you underspend the cap by $100 m year in and year out, that a club diverges from the model. That’s where you say an owner is doing it wrong & screwing his customers.
But yes, as a player, you want to be guaranteed the best possible terms in perpetuity. One way to do this is have all the money up-front (certainty of payout) but charge a premium for money spent in the out years.
Owners also have a say, and do not want to pay up front for everything, leaving no incentives and no flexibility to move on.
Then the next time you’re in the same position — this time for reasons of your own making — people will still call you a miserable, cheap bastard. They’d be as wrong then as they’d be now. But it would be true that you were a stupid bastard.
