"The price of money is what you have to give up to get it..."

One of the concepts that I learned in business school was something called the "price of money," which is often defined as "what money can buy" (i.e., if a banana sells for one dollar, then the price of one unit of money is 1 banana).  Merriam-Webster's online dictionary defines "the price of money" as "the net rate of interest paid for borrowed money."  In other words, the "price of money" is the interest that you could have earned if you had taken the money that you invested in a business or stock and put it in the bank.  Conceptually, this particular definition is not technically correct - we would be more accurate if we called this concept the "time value of money," but regardless, this is how "the price of money" is often defined. Most economists would define the price, or cost of money as "what you have to give up to get it."


I guess I had the "price of money" concept in the back of my mind when I read that the New York Yankees called up their top minor league prospect, second baseman Gleyber Torres to the major leagues (he had his first major league hit in the game last night).  Why do I care about a baseball player for the New York Yankees?  At one point, he was in the Chicago Cubs organization (and I am a die-hard Chicago Cubs fan).  The Cubs basically traded him (and a few other players, who haven't made as big of an impact) to the Yankees for All-Star closer Aroldis Chapman.  Chapman played an instrumental role in the Cubs' World Series victory and then became a free agent at the end of the season.  He signed again with the New York Yankees.  Theo Epstein, President of Baseball Operations for the Chicago Cubs organization realized the importance (and the consequence) of this move.  He also understood the risks.  If the Cubs hadn't won the World Series, especially if Torres turned into a superstar for the Yankees, Epstein would have become the laughing stock of professional baseball.  It ended up turning out just fine - the Cubs ended up winning the 2016 World Series after 108 years!


What Theo Epstein recognized was simply the "price of money."  He decided that the short-term win was worth the potential of the long-term loss (we still don't know if Gleyber Torres will turn out to be a superstar or a bust).  In other words, he understood that he had to give up a potential superstar to win the World Series now.  Do you agree with his choice?


How many times are we, as leaders, faced with a similar choice.  I would bet that all the experts would tell us to make the investment for the long-term instead of the short-term win, and in probably 999 times out of one thousand, I would say that they were absolutely, positively correct.  I would also say that Theo Epstein built another World Series winning franchise (the Boston Red Sox) exactly by focusing on the long-term as opposed to the short-term.  Moreover, he built the Cubs from a perennial bottom-dweller to one of the most successful teams in the last few years by exactly focusing on the long-term (building up the minor league system, avoiding signing large, expensive free agent contracts, etc).  I think (and many casual baseball fans, sportswriters, and pundits would agree) that the decision to trade a potential superstar to win a team's first World Series in over 100 years was exactly worth it. 


Again, in almost every case, and as a general rule, when faced with a decision about winning now versus winning later, the best decision is to win later.  However, there are always exceptions to the rule.  You just have to be sure that what you have to give up for the short-term is worth it.  Fly the W.