The Cubs Win the Pennant! The Cubs Win the Pennant!

In three years, when the Cubs win the NL Central, we'll look back to a little-noticed signing back on Monday as the watershed event.

Continuing a trend that has been documented here before, Theo Epstein and Jed Hoyer locked up future star first baseman Anthony Rizzo for the next seven -- and possibly nine -- years. The $41 million contract provides Rizzo with a big raise over his 2013 salary of $498K, sidesteps four years of arbitration and buys out year one of free agency. It also allows the team to retain Rizzo's services in 2020 and 2021 for $14.5 million each year, a mere pittance by then if Rizzo is even a twinkle of his current potential.

In case you're wondering why the fuss, this is it: The 240-pound Floridian has been a hot prospect since Theo drafted him for the Red Sox, Hoyer traded for him when he worked for the Padres and then again when they joined forces in Chicago.

In his 125 Major League games with the Cubs, Rizzo has vindicated his supporters, hitting .282/.344/.482 and 24 homers -- about a 33 home run pace. The lefty has abused pitchers from both sides, home and away, and in the dog days. And he's just 23.

A decade ago, Rizzo might have elicited yawns. Shake a tree and a slugging first baseman falls out. Pujols, Teixeira, Thome, Helton, Delgado, Morneau, Konerko, Palmeiro and the list went on. Today though, first base is no longer the premium offensive position. After Votto, Gonzalez and Fielder it drops off precipitously to the likes of Ike Davis and Eric Hosmer. 

So if he's such a stud, why sign away his future? For reasons we've documented before having to do with the marginal utility of money. Rizzo is now guaranteed $41 million even if he spontaneously combusts tomorrow. The millions he might be leaving on the table mean a lot less to him than the millions he is now guaranteed. Starting today, the Rizzo clan is set for life. Nix the deal and break his leg, and it could all go away. In effect, big league clubs are selling their young stars insurance, and keeping the premium for themselves. In addition, they avoid the psychic pain of arbitration battles.

It's another data point in a growing trend in MLB. Before the season, the D-backs inked Paul Goldschmidt to a similar contract. Allen Craig passed up arbitration and a year of free agency in his new deal with the Cardinals. The Brewers are already thrilled with their investment in catcher Jonathan Lucroy. He delivered 4.1 wins against replacement in their deal's first year (batting .320), recouping their $10 million guarantee, and then some, in the contract's first year.

With Rizzo and fellow 23-year-old shortstop Starlin Castro locked up through 2019, a boatload of money for free agents and a farm system stuffed fat with prospects, the Cubs' future is so bright they'll need sunblock. They're bottom feeders this year, but don't let that fool you. Epstein and Hoyer are building a solid club with creativity and cost-efficiency at Wrigley and they're going to win some pennants before the decade is out.

Take the Money and Run

Let's do a thought experiment, like Einstein used to do, but without the Greek letters. Suppose you knew that over the next seven years your unique ability would likely be worth $33 million to your employer. That's life's lottery ticket, wouldn't you say?

If things go right, you could be worth even more -- like $68 million. But if something goes awry, your career will fizzle after the first $900,000 earned.

In other words, it's pretty likely that you'll be able to guarantee that your grandchildren will be rich even if you never work another day in your life. But you're one ACL away from missing out on all of that.

Now suppose your employer comes to you in the middle of your second year, at which point you've earned less than a million dollars, and offers you $25 million over the next five years. There's a very good chance you'd be leaving millions on the table -- up to $43 million.

Would you take the deal?

If you're like me, or Evan Longoria, you sure would. The reason is diminishing marginal utility.

Diminishing marginal utility means the value of a million dollars is immense for the average college professor, plumbing supplies salesman or nurse. It would change most of our lives. But the marginal utility of a million dollars to someone with 20 million already in the bank is significantly smaller.

That $25 million offer catapults you into the "set for life" category just as $33 million or $68 million does. It relieves you of the financial risk of flaming out.

Think about it this way: you probably pay homeowner's insurance knowing in advance that you're unlikely to recoup your premiums over your lifetime. Still, you'd rather pay $100 a month-- an amount you can afford -- rather than risk losing a quarter of a million dollars when a freak hurricane flattens your Ann Arbor home.

Four years ago, the Tampa Bay Rays inked rookie third baseman Evan Longoria to a six-year deal for $17.5 million. (Subsequent team options could make the contract worth $44 million over nine years.) Longoria was ecstatic about the deal then, two weeks into his Major League career.

"Knowing now that I'm pretty much set for life, that's just very assuring to me," he said.

Today, it's the Rays who are thrilled. Even with the dampening effect of arbitration, Longoria would probably have made his $17.5 million by now with a bigger payday ahead for year six. Those three years of options that kick in when Longoria would have qualified for free agency will pay him $26.5 million over three years, a fire sale price for a player worth 24 wins in his first four seasons. In all, the opportunity cost of that contract was somewhere in the vicinity of $32 million for the slugging third baseman.

But suppose Evan, who after all had 50 at bats when all the hands got shaken, hit instead like Eva during his big league career. He'd be back in SoCal today, but he'd be surfing with the dudes on the best dang board in town, thanks to $17.5 million guaranteed. He'd live in a big house and drive whatever car he wants. He'd have done all right.

So what we have, in effect, is a baseball team selling an insurance policy to a young potential star.

We've seen this before, most recently two weeks ago when the Brewers signed Matthew Lucroy to a similar deal. Expect this to become the norm as teams recognize the potential savings and players cash in on the guaranteed riches. And everyone can thank diminishing marginal utility for this latest development.
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