The Insurance Policy That's Paying Off

Astros prospect Jon Singleton is a millionaire ten times over. Keep that in mind as we recap his story.

A year ago in this space, Singleton made his debut. He had just been called up from the Minors by Houston after agreeing to a five-year, $10 million contract.

His signature was a pre-requisite for the promotion. Other prospects had rejected similar deals and the Astros had left them to marinate on the farm while the big club flirted with 100 losses.

As that post discussed, teams like offering talented prospects guaranteed multi-million dollar deals because, if they've scouted right, they pay off big, plus they eliminate the mess of arbitration and provide relatively low cost-certainty.

Some players like these offers because they're guaranteed, and as previously mentioned, the marginal utility of the first couple of millions is significantly greater than the opportunity cost of the subsequent millions they might be leaving on the table. In effect, young ballplayers are using future earnings to buy insurance policies against a flameout.

Consequently, the number of these arrangements has been increasing of late.

Without the contract, Singleton would have eventually made the Majors after tearing up Triple-A in the first half of 2014. He would have earned a pro-rated portion of the rookie minimum, or about half of roughly $500,000. Without leverage until year three, he'd have earned roughly the same the following year. Entering arbitration eligibility in year three, he would have begun commanding larger percentages of his market value, eclipsing $10 million in a single year if he were to perform as expected.

Sounds like a terrible deal for him, except it hasn't worked out that way.

The holes in Singleton's swing were big enough to drive a Major League breaking pitch through, leaving the 23-year-old with a .168 batting average and a demotion. Singleton didn't make The Show in 2015, and while he's king of Oklahoma City these days, the first-place Astros are no longer in the experimentation phase. For now, Jon Singleton is a Minor Leaguer.

Which, ironically, is good for him in an odd sense: The insurance policy is already paying off as he collects his $2 million-a-year.