Fernando Tatis Jr.'s Payday Loan

Last week’s announcement that the San Diego Padres had signed Fernando Tatis, Jr. to a 14-year, $340 million extension was exciting for baseball. For one, it was nice to see a team, especially a small market team like the Padres, committing so much to a marquee player, particularly after an offseason that saw so many teams embracing austerity. Guys like Francisco Lindor and Nolan Arenado were traded for peanuts, just to avoid having to pay their salaries, so this was a refreshing change. It also helped introduce Tatis, an exciting player who many don’t know about because of his youth and his team, to the wider public.

There was just one fly in the ointment, reported a few days after the deal itself was announced: Big League Advance, a financial firm that invests in young baseball players, will end up with a sizable cut of the Tatis deal. The details are unclear—some of the headlines have used numbers that seem purely speculative—but the business model of BLA is straightforward. In exchange for upfront payment to young minor leaguers, the firm takes a share of that player’s future salary, should they make the big leagues. The company’s CEO, former big league pitcher Michael Schwimer, likens it to venture capital for the minor leagues:

“It’s the exact same thing as a Silicon Valley startup, where if you’re a tech investor, you’re going to invest in a hundred tech startups hoping to find the next Facebook or Google or whatever. You’re going to lose money on 90 percent of them. But the 10 percent should pay for them, plus a lot more money than you lost. We know we’re going to lose money on the vast majority of deals we sign with players — we know that. But we hope to hit on a few guys who are wildly successful.”

This arrangement strikes some people as iffy. Many agents have issued warnings to players about deals like this, and the MLB Players Association has expressed some concern. And it’s easy to see why. The precise details of Tatis’ deal are not public, and the company will not divulge them, but if you use the numbers he provided as a general outline, BLA might offer a player $100,000 for 1% of future earnings. For Tatis, that would be $3.4 million, without even including any other deal Tatis might sign in his career, or a return of 3400% on BLA’s investment.

But these profits are not really the issue. After all, the money BLA paid Tatis when he signed the deal in 2017 was not a loan—if Tatis had gotten injured, or flamed out, or simply lost interest in baseball, he would not have to pay anything back. So the risk to Tatis (and other players) is small, and the amount he owes only looks big because his contract is so big. In other words, he’ll be able to afford it. And, if we are to accept the comparison to the VC market, the huge rate of return is necessary to pay for BLA’s investments in other players.

Another criticism of BLA is that it supposedly preys on impressionable young players who might not understand how MLB contracts work. Some agents have accused them of focusing on players from Latin America, who are often younger, less financially concern, and less familiar with the language, so potentially more vulnerable. Another prospect who had a deal with BLA, Francisco Mejia, sued the company, claiming he was misled (although he later dropped the suit and retracted those claims).

These are serious concerns, and they reflect real structural issues. Minor leaguers ARE underpaid, and Latin American players are often drafted very young. But both of these are the results of choices made by the MLB itself, not BLA, and there’s an air of paternalism to assuming that a player cannot understand a contract just because he doesn’t speak English. It also doesn’t seem likely that any of these factors applied to Tatis. His father played baseball for 14 years and earned over $17 million, so he likely understood the structure of baseball earnings better than most. And even if he didn’t offer financial support to his son, Fernando Jr. got a $825,000 bonus when he first went pro, so he was not in the financially precarious position that so many minor leaguers find themselves.

So then what’s the issue? Why do people have misgivings about a deal like this? Are they just reactionary defenders of the status quo?

No, but you might be fooled by this if your politics lack a class analysis. The issue here is the outsized power of the holders of capital, in this case the finance industry. When Tatis took the deal from BLA, he said it was to use the money “to give himself every possible chance to succeed.” He used the money to hire a personal trainer, eat better food, and improve his living situation to he could better focus on baseball—all things that every prospect would presumably enjoy. But because of a proprietary algorithm devised by some 30-year-old who could raise $100 million investors, Tatis was chosen for this opportunity and other players were not. Perhaps it was the very fact that Tatis was selected by this algorithm that gave him the competitive edge to break into the major leagues so young and succeed.

Even if we suppose that the BLA algorithm is perfect—that it is merely identifying players who would succeed independently, and potentially improving their lives in the meantime or even expediting their success—it is still functionally turning labor income into capital income. Money that Tatis earned by virtue of his on-field performance gets partially diverted to investors. This is, apparently, the only way people are allowed to have nice things.

Time and again we are told that some desirable thing is too expensive. Health care, college education, fair pay for minor leaguers, etc. All of these simply cost too much money. And yet the minute investors find a way to profit from them, the money floods in. Because is the issue is not affordability, but ensuring profits for those with capital.

In his public comments about the company, the CEO likes to talk about providing security for minor leaguers—the same way health insurance CEOs talk about providing health care, or bank CEOs talk about helping small businesses. Of course, if it really wanted to help minor leaguers, the MLB could just impose some kind of tax on high-earners like Tatis, and redistribute that money towards better minor league salaries and facilities. But not only have they not done that—they have actively resisted any efforts to improve pay for those in the minor leagues. The only way to do it is the only way anything gets done under capitalism: by making sure the investor class can take a cut.