Wednesday, February 16, 2011

Economic of Albert Pujols Applies to Us All!

The Cardinals are considering whether to re-sign Albert Pujols. The deadline is nearing and at this writing I do not know which way that will go. I have heard and read all sorts of arguments why the Cards should and should not sign Mr. Pujols, and none of them have addressed the real issue - economics.

It is NOT about whether he is the best player, his comparisons to a replacement, how many games the Cardinals would or would not win without him or what other comparable players make. It is about whether the Cardinals will make more money off Albert than they spend on him over the contract. The Cardinals are considering the following with and without Mr. Pujols:
Marginal difference in attendance revenue - tickets, food, etc.
Marginal difference in profits from post-season play.
The money to be made as Mr. Pujols breaks Stan Musial's Cardinal records, catches the game's greats in various categories, and finally breaks all-time records.
Ticket sales, media coverage, ad revenues, promotions, merchandise sales, etc, all drive the profitability of Albert Pujols. His productivity is only relevant to the extent it generates those profits.

What does all that add up to, best case scenario, and then what are the probabilities that he will achieve each of those profitable milestones. It is a simple cost-benefit analysis.

Why does this apply to everyone?
Every employer evaluates whether or not the company can make more money than each employee costs the company - a net profit. This also applies to every piece of equipment, facility and other investment the company makes. This is measured in all the ways the company makes or saves money.

Just as it is for Albert Pujols, each of us must evaluate how much our contribution to the bottom line in the company exceeds our cost to the company. The more we bring to the bottom line, the more we will be paid to do that. We create real economic value to the company.

Sure, we can skate by and keep our jobs, but in the end we will be passed by, left behind and eventually let go because we are no longer a profit center within the company.

Albert Pujols is a profit center for the Cardinals. Over the first ten years of his career, the Cardinals have made a killing off Mr. Pujols. They will only sign him if the new Albert Pujols will make them a profit, and so it is for everyone in an economic society.

Let's all learn from this moment and make ourselves stronger in the eyes of those we serve.