Ortiz's money already had gone to waste

Originally Published: June 14, 2006
By Keith Law | Scouts Inc.

The Arizona Diamondbacks made a solid baseball decision Tuesday when they kicked Russ Ortiz to the curb -- but contrary to what you'll read about this almost anywhere you look, they won't be "eating" $22 million of his salary (which appears to be a new record for the highest dollar amount owed to a player who's been let go). They won't be eating one cent, because the money was already gone. The Diamondbacks ate that money the moment the ink dried on Ortiz's laughingstock of a contract.

Russ Ortiz, right
AP Photo/Matt YorkRuss Ortiz, right, had only one victory since May 18, 2005.
Here's a snapshot of the Diamondbacks' committed payroll expenses for 2007, as of Tuesday morning:

    Shawn Green -- $11.7 million
    Russ Ortiz -- $7.5 million
    Brandon Webb -- $4.5 million
    Tony Clark -- $1.0 million

And here's how it looks Wednesday:

    Shawn Green --$11.7 million
    Russ Ortiz -- $7.5 million
    Brandon Webb -- $4.5 million
    Tony Clark -- $1.0 million

From a financial standpoint, nothing has changed. The D-Backs were going to pay Ortiz his money whether he was on the club or not. The economic term for this is a "sunk" cost: Whether you use the player/item/service or not, you've committed already to the expense.

The decision of whether or not to use the player or product or service is independent of the money committed, because it's already spent. You often see the misunderstanding of sunk costs from people who sign a multi-year contract to use a fitness club, then drag themselves to the gym because they're spending the money anyway -- when the truth is that the money is gone even if they never set foot on a treadmill. The go/no-go decision should have nothing to do with the expense.

Arizona's Ortiz decision is just another go/no-go choice: Since the money was wasted already, was the team better off with Ortiz on the roster or not? Clearly, at this point, the Snakes were far better off without Ortiz. He is no better than replacement level when he makes it on to the field -- which isn't often -- and had drifted further into flyball-pitcher territory even as he moved into the most homer-friendly park of his career in Arizona. Dustin Nippert might not be fully ready for the big leagues, but he's going to do more to keep Arizona in contention than Ortiz is.

Ortiz by the numbers
• Russ Ortiz signed a four-year, $33 million contract with Arizona in December 2004. Here's the dollar breakdown:
Bonus -- $3.5M
2005 -- $6.5M
2006 -- $7.0M
2007 -- $7.5M
2008 -- $8.5M
And here are Ortiz's on-the-field numbers before and after signing the contract:
  BEFORE AFTER
W-L 103-60 5-16
ERA 4.01 6.94
K/BB 1.47 0.77
Opp. BA .244 .324
(As an aside, Ortiz earned a lot of wins during his peak years -- 99 wins during 1999-2004 -- despite not pitching all that well. Often he has been labeled as a pitcher who "knows how to win." Given that he stopped winning last year, his first season pitching for a lousy team, are we just to assume that he forgot?)

Ortiz's contract was a bad idea from its conception. Original errors often are compounded when teams are unwilling to acknowledge their initial mistakes by releasing the players in question. Roughly one-third of all major-league teams have players for the sole reason that they make "too much" money to be released. And that is just plain stupid; there is no greater fool's errand in baseball than waiting for a player who was never that good in the first place to suddenly earn his pay. Unless you can foist the bad contract onto someone else in a trade, which happens very rarely, you're better off releasing the player as soon as a better alternative arrives.

Recognizing the difference between "eating" a contract and releasing a player whose salary is sunk already is a critical skill for any GM. It should be a question on the GMAT (General Manager Aptitude Test), right after the question about when employing Tony Womack would be a good idea. (The correct answer is D, "Never.")

So no, the Diamondbacks aren't going to "eat" Ortiz's contract with this procedural move. You could argue now that they're swallowing it, or merely trying to pass it like a kidney stone. Trust me -- it'll feel better once it's gone.

Keith Law, formerly the special assistant to the general manager for the Toronto Blue Jays, is the senior baseball analyst for Scouts Inc.