Thread by @RomeenSheth

An absolutely wild contract story:

In 2001, Bobby Bonilla retired from the New York Mets.

But the Mets will fork over $1,193,248 to him every July 1st until 2035 (!)

Here’s how he pulled it off:

1/ Bobby Bonilla played in the majors from 1986 to 2001.

In his 16 years in pro baseball, Bonilla racked up some incredible stats:

- Batting Average: 0.279
- On-Base Percentage: 0.358
- Slugging Percentage: 0.472

(If you’re not a baseball fan, those are 🔥numbers).

2/ Bobby was at his peak when he was with his first team in Pittsburgh in the late 80s.

He led the league in base hits, won 3 Silver Slugger Awards and made 4 All Star Games in a row.

3/ Naturally, all eyes were on him.

Bonilla was a bonafide super star.

The early 90s had teams lining up to give Bobby serious cash.

4 teams (the Phillies, Angels, Cardinals and Mets) offered him $25M+ in free agency.

4/ Bobby picked the Mets and signed the richest contract in the MLB up until that point in time.

A 5-year $29 million deal (~$53M deal in today’s money).

Side note: Athlete money in the 90s PALES in comparison to what you can earn today.

5/ Unfortunately for the Mets, the relationship didn’t really pan out.

Bobby spent the first 3.5 seasons of his contract with NY but then got traded.

He hopped around, and then was ultimately traded back to the Mets in 1998.

6/ The Mets released Bobby in January 2000, but still had $5.9M they owed Bonilla.

This is where they took the gamble.

Instead of paying Bobby $5.9M, they negotiated a "deferred annuity payment plan" with him.

7/ What does that mean?

In plain english - the Mets told Bobby they wanted to delay paying him until 2011.

In exchange for the wait, they would accrue interest on his 5.9M for every year from 2000 to 2011.

They would then pay him in 25 equal installments from 2011 to 2035.

8/ Why would the Mets do this?

2 reasons:

1. They wanted to free up cash - this gave them some more salary cap flexibility

2. They were in bed with the “great investor” Bernie Madoff. They believed investing with Madoff would generate enough return to finance Bobby’s deal.

9/ Boy were they wrong.

The Madoff house of cards folded in the biggest ponzi scheme in history and Bobby’s $5.9M payment became $29.8M!

$29.8M / 25 years = $1.2M payment per year.

Bobby is going to be one of the highest paid Mets’ baseball players until he’s 72 😂😂😂

10/ The kicker is Bobby structured ANOTHER similar deal with the Baltimore Orioles.

Not many know this but, Baltimore owes him $500k / year through 2028.

They started paying him in annual installments in 2004!

11/ The Mets have paid Bobby $13.1M so far.

Over the next 14 July 1sts, the Mets will pay him another $16.7M (!)

12/ So what are the lessons here?

Four big ones:

1. When the deal is “too good to be true” for both sides, 1 side will lose.

2. Conceptual “good” ideas can become practical “bad” nightmares

13/ Lessons continued…

3. Surround yourself with a good team - Bobby’s agent knew most athletes go broke post retirement. He structured the deal perfectly.

4. Risk is what you don’t see. Nobody could’ve predicted they were a part of the biggest ponzi scheme of all time.

14/ So as we close out July 1, 2021...cheers to another Bobby Bonilla Day!

Remember - it pays to be good, but sometimes it pays more to be lucky.

In Bobby Bonilla’s case, that luck turned into $30M 😏

15/ If you enjoyed this thread, give me a follow

➡️@romeensheth⬅️

I tweet about startup lessons, folks I interview on my pod and cool business stories a few times a week!