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Examining Luck’s Business Decision

January 7, 2011

 

Much has obviously been made of Andrew Luck’s decision to skip the 2011 NFL Draft and return to Stanford University for one last season. Opinions touch on lots of aspects of the decision from business to academics to enjoying school. In my opinion, I don’t think anyone can fault someone for wanting to finish a college education and enjoy one more year with friends. College football is not the NFL. It’s more fun. It’s not a job. Luck will hang out with his buddies for one more season, and football will still be a fun love and not a forced job. In the meantime, he’ll get his degree. Great for him! So, let’s evaluate the business decision.

 

First And Foremost, He’s Not Actually Leaving $50 Million On The Table

People who are yelling that Luck is passing up $50+ million in guaranteed money need to slow down. As many people have stated, both the NFL and the players seem to agree that there needs to be a rookie wage scale. Pundits who recognize this fact estimate that Luck is passing up $20+ million guaranteed. That’s still a lot of money, but let’s remember Sam Bradford in pointing out that Luck will most likely be the first round pick barring career ending injury. Bradford even injured his shoulder and was picked first. Finally, those analysts and people who are comparing this to Matt Leinart need to stop. Leinart may have been a highly touted college QB, but he had questions about his NFL capabilities even when he was supposed to go #1 and decided to return to college. There have been no such questions about Luck. He’s an NFL quarterback and will be next year as well.

Further, assuming that Luck has a happy and healthy career, he really only misses out on one year in his late 30s in which he makes around $20 million because he’ll still get his $20+ million guaranteed next year. By the way, Tom Brady will be paid an average of $18 million per year in his new contract, so Luck would have to have an outstanding career to even reach those salaries. Assuming that he will make plenty of annual salary after his rookie contract, the array of marketing contracts, post-career broadcasting opportunities, and off-field investments will keep Luck a rich man and can make up for one lost season.

Finally, let’s remember a quick lesson from economics, there is marginal benefit from each additional $1. The first $20 million has a much different impact than the fifth $20 million and so on and so forth. Thus, even if Luck misses out on one $20 million season at the end of his career and doesn’t sit in a broadcast booth to earn it back, it won’t impact him significantly if he’s been making a lot of money for 15 years. He will live comfortably, and he’ll be able to provide for his children, their children, and so on.

There Could Be A Lockout

There’s also the issue of the lockout. It may still happen even though we all want to believe that it won’t. Why take a chance and not be able to play football because rich people can’t figure out how to share billions of dollars. Financially, sitting during a lockout and playing college football is equivalent. Zero dollars are made in each scenario, but at least you’re still playing football, working on your craft, and getting better while you’re in college. Luck probably has access to people with information, and if he thinks that a lockout is possible, school is a good investment for the mind and the football skills.

The Carolina Panthers May Be More Dangerous Than One More Year At Stanford

The number one pick will always go to a losing team, but typically, that losing team will still have some structure. Importantly for the 2011 draft, the team will have a head coach in place who the player will meet and become familiar with. In the most extreme circumstance, the player can even sit out and refuse to go to the team.

This year, the Carolina Panthers lack stability in that they don’t have a head coach. Luck doesn’t know what he’s getting himself into. He’d also be going to a tough division where his team is far, far behind the other teams in the Saints, Falcons, and Buccaneers. On his latest podcast with guest Trent Dilfer, Bill Simmons discussed the importance of the system to the quarterback’s success. Luck doesn’t know what system he’d be getting himself into and whether he can succeed with the chosen head coach and his philosophy.

As well, on the topic of injury, we have to assume that Luck is comfortable with his most important teammates – his offensive line. They’re a veteran bunch who have only allowed six sacks in each of the last two seasons. That’s basically only one every two games. Of course, any one sack can be “the one” for Luck, but he’s taking a calculated risk. In fact, it would probably be riskier to play for Carolina. Between starting quarterbacks Jimmy Clausen and Matt Moore, the Panthers gave up 46 sacks last year. That’s second in the NFL only to Jay Cutler of the Bears. Luck faces a much larger risk of injury in the NFL in his first year than he does in college football in his last year. Those arguing that any team which picks first will allow many sacks should also slow down. A bad record doesn’t always mean a bad offensive line. Carson Palmer started 16/16 games for the 4-12 Bengals this season but was only sacked 26 times. Ryan Fitzpatrick started 14/16 games for the 4-12 Bills this season but was only sacked 24 times. On the contrary, Cutler started 15/16 games for a 11-5 Bears team that won its division but was sacked 52 times! Maybe next year will provide a safer home for Luck.

There Is A Bit Of Insurance

One final and quick thought. We know about players taking out insurance policies in the case that they suffer a career threatening or career ending injury. Luck will most likely take out a similar policy. Although it won’t make up for all potential lost income, it will provide for a hefty chunk of money.

To conclude, I of course love Luck’s personal decision, and I also very much agree with his business decision. If he were not such an NFL-ready player, maybe he’d be advised differently. If he were a running back, wide receiver, or offensive tackle, maybe he’d be advised differently. He’s not these things though, so his decision is a good business decision for his personal circumstances.

– Jason

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