Letting Go of a Sunk Cost

According to the Kansas City Royals’ website, their opening day starting right fielder will be Reggie Sanders, which is fine…for now. Sanders isn’t taking time away from Emil Brown or David DeJesus (two better players), Joey Gathright would provide about as much power as skipper Buddy Bell, and Shane Costa isn’t ready yet (if he ever will be).

The problem will arise when Alex Gordon embarrasses AAA pitching and moves up to claim the job at third base (if he hasn't already on opening day). Assuming that Mark Teahen hits anything like he did last year, and is currently hitting this spring, he will inevitably move to the outfield. When this occurs, one of the three current outfield starters will be displaced. DeJesus plays center field, and there’s no way that Teahen could be asked to step in there, so that leaves Sanders and Brown. Although it should be Sanders, my bet is that Brown will be relegated to the bench.

Why? Because Sanders is still owed several million dollars.

We’ve all heard arguments that a team didn’t sign a player to X amount of dollars to be sitting on the bench. This flawed thinking ignores that fact that the money owed to a certain player is completely irrelevant when considering playing time. That salary is a sunk cost, or a cost that has been incurred in the past and will never be recovered. Often times, sitting on the bench is exactly what these players should be doing.

An example could be purchasing a movie ticket only to find out halfway through the picture that the movie is terrible . While deciding on whether or not to leave, you have a friend point out that you’ve already spent $8 on the ticket, so you might as well sit through it. That $8 is a sunk cost, as the theater will not reward you your money back at the end of the show for enduring the horrible Ashton Kutcher movie you just saw. You now have two choices: lose $8 and leave (to salvage the rest of the evening), or lose $8 and another hour of your life watching something that isn’t entertaining. Notice that either way, you lose $8.

How does this relate to Sanders? Before last season he signed a two-year, $10MM deal with the Royals which, upon signing, should have become irrelevant when making on field decisions. No matter what, the Royals are on the hook for $5MM to Sanders this season, so why would you want to further hurt your team by allowing him to start over better players? It should be noted, however, that this scenario is operating under a couple of assumptions:

• Sanders (or any player) does not perform at a suitable level when compared to other players available. Basically, if the opportunity cost of using your “sunk cost player” is that a more valuable player is not utilized.
  
• The team is not trying to flip this player before the deadline. Some of these players could pale in comparison to other players, but may still be useful. It could prove to be beneficial for a team that will not make the playoffs (like the Royals) to keep a player in the lineup if he can be swapped for anything that may be of future use. Obviously, this becomes a moot point if the player would not provide value to any team.

The last assumption is a particularly fine line with Sanders since he is in the last year of his contract. If he has not yet suffered his inevitable once-a-year injury and is hitting for decent power, he could be good trade bait (never underestimate how much a GM will pay for a name they’ve heard) for a team wanting to more or less rent him for a second half push. However, if Sanders is on his way to duplicating last season’s .246/.304/.425 fiasco (as we are assuming he will be for the sake of this argument), he should quickly find himself on the bench. I’m not trying to pick on the Royals here, either, as I think that the Angels (Gary Mathews, Jr.), Cubs (Alfonso Soriano, Jason Marquis), and Dodgers (Juan Pierre) will all face similar decisions as some of their new acquisitions get further into their deals. Plus, it’s all but inevitable the Brian Sabean will immediately sign Sanders to a 10 year deal once this season is complete.

No matter what the end decision with Sanders is, the Royals should have learned that it isn’t wise to commit $10MM over two years to an injury-riddled 38 year old…just like you learned in our example that it isn’t wise to commit $8 and 2 hours to anything involving Ashton Kutcher. Now the only question that remains is whether or not teams be willing to let go of a sunk cost.