Patrick Mahomes's $503 million contract offers a crucial lesson in value creation and economic freedom

28 July 2020
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In the midst of a global pandemic, halfway through 2020, 24-year-old Kansas City Chiefs quarterback Patrick Mahomes inked a $503 million contract with the franchise.

To be accurate, it's a 10-year extension - that'll see him through 2031 - to the tune of $447 million. Add this onto his current contract, along with a few other incentives and bits, and you reach the half-billion mark. By whichever standard you measure "massive," this contract is truly in a league of its own.

As of July 6, 2020, Patrick Mahomes is one of the richest men in sports, ever.

The Chiefs are betting on increased returns in terms of TV revenue in coming years, to help facilitate this contract over the long run. Given the ever-growing hunger for entertainment, especially in the US where professional sports is on a revenue-level that other sports around the world can only dream of, it seems to be a fairly secure bet.

In societies with more economic freedom, and the concomitant economic growth and more disposable income, people want to spend that income on various forms of entertainment. The NFL standout as one of those. With COVID-19 threatening the very existence of a 2020-21 NFL season, the sport - and all the accompanying sponsorships and trade deals - are still secure enough for the Chiefs to offer a contract of this size and length to Mahomes.

One of the most empowering effects of the free market is that of specialization, and further of value creation. In societies that lean more toward freedom, there exists more scope for people to pursue different vocations and to be rewarded for the work they do, if others find value therein. In societies that lean more toward control, people are forced into manual labor more often than not. While correlation of course does not imply causation, the kind of driven, entrepreneurial, freedom-loving environment that the US is, means there is more potential for people to make a living - in this case, a very, very successful living - out of being an athlete.

Some may voice their view that Mahomes "doesn't deserve" a contract of this size. But whether he "deserved" the money is not for any of us to decide - it is the concern only of those who offered him the money. We can pronounce judgments, of course - but only those involved in the transaction should take on their shoulders whether the deal is justified or not. The beauty, and fundamental individual agency of freedom, once again exemplified.

Another aspect of freer markets - and voluntary trade - that deserves to be highlighted is the concept of trading value for value. Whether "value" takes the form of time, infrastructure, expertise, or simple money, when any of us engages in trade with someone else, we seek to gain value from the interaction.

This exact concept applies in the case of Mahomes and the Chiefs. Mahomes wants to build a dynasty - having won one Superbowl already - and the Chiefs want to secure a QB of unparalleled ability to build around for as long as possible.

Given the physical problems players encounter as they get older, and given that the length of the contract will tie the Chiefs to one QB for much longer than usual, some might think this is reckless on the part of the Chiefs. But, from another perspective, it indicates a willingness to invest, to take a risk, and to apply long-term thinking.

Speaking on ESPN's Get Up!, on the subject of the expectations that will come with a deal of this magnitude, one of the all-time NFL greats Randy Moss said, "He's always been able to play at a high level. He's up for that challenge. In a short career, he has wowed us." This deal sets the expectations, and demands, on both Mahomes and the Chiefs for years to come - both must continue performing to a level that will match a contract of this size.

Given how much he has already achieved - league MVP in 2018, and Superbowl champion and MVP in 2019-20 - it's accurate to say (from an outside perspective) that Mahomes is someone who greatly values qualities such as hard-work, drive, and ambition. I think it’s clear he wants more than "just" league passing and touchdown records - he wants to win (more) championships. He wants to earn, and be remembered as, one of football's greatest-ever quarterbacks. His characteristics are something we should all try to emulate, no matter whether what work we do, for any size of paycheck, large or small.

On working out at 7 a.m. the day after signing the new contract, Mahomes said, "Still got [championship] rings to collect." I'd say many people's sense of life has been deeply bruised by everything that's happened in 2020; Mahomes's drive, and his new contract, can be used by many of us as motivation for the things we still seek to attain and accomplish.

The names of Kobe Bryant, LeBron James, and Tom Brady are known the world over as sports stars of renown. Their sporting achievements, as well as the money they've earned through their athletic endeavors, are something many admire, and rightly so. If Andy Reid and the Chiefs manage to build well around Mahomes, every sign points to him creating his own dynasty in Missouri.

Given the raft of bad news we've had in 2020, and the devastating effects we've witnessed when governments shut down economies, Mahomes's historic contract extension with the Chiefs should rightly be celebrated and something to use as inspiration, for all of us in our individual endeavors.

This article was first published on Foundation for Economic Education on 10 July 2020

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