How we got free agents in baseball

escorting ships through the Strait of Hormuz, then just as quickly, not.

Reminds me of the movie "Jaws".

“Remember the mayor said, "Hey, everything's great.”

Go back in the water." What it all means for the wider war and for gas prices. This week, on Sources and Methods, the National Security Podcast from NPR. At 4am on October 8, 1969, Kurt Flood got woken up by a phone call. Flood was 31 years old at the time, and it spent the last 12 years,

almost his entire adult life, playing centerfield for the St. Louis Cardinals.

He was an all-star. He'd led the Cardinals to the World Series three times,

sports illustrated, called him the best centerfielder in baseball, and he planned to finish that as career in St. Louis. But when he rolled over and picked up the phone at 4am, a middle manager from the Cardinals for an office told Kurt Flood he had just been traded to the Philadelphia

“Phillies. Kurt Flood didn't want to go to Philadelphia. They just finished second the last in”

their division, and on top of that, Kurt Flood was black, and Phillies fans had a history of treating the team's black players badly. One black Phillies player in the 60s actually were a helmet in the outfield, because Phillies fans threw batteries at his head. But Kurt Flood did not really have a choice. The way baseball worked at the time, when you got drafted by a major league baseball team, you played for that team. They wanted to trade you, you went where they

traded you. You didn't like it, you could quit baseball. This was explicit in every player's contract. It was called the Reserve Clause, because teams reserved the rights to each player. Kurt Flood thought this was ridiculous. In fact, they didn't just think it was ridiculous, he thought it was illegal. So we decided to sue Major League Baseball for a right that most of us take for granted. The right to work for whatever employer might want to hire him.

His case went all the way to the Supreme Court, kind of ruined Kurt Flood's life, and it helped change professional sports forever. Hello and welcome to Planet Money, I'm Keith Romer. Can I say hello to Planet Money? It's been a long time. I'm Jacob Goldstein. Are we getting the band back together? I'm Robert Smith. It's a alumni day at Planet Money. Jacob and Robert, you both used to host Planet Money. Welcome back. Thank you. Truly happy to be back.

And you have returned today to share a version of an episode from your excellent new podcast business history. To show about the history of business. It's all there in the name, including in this case the history of the business of Major League Baseball. So we are going to

“turn over the rest of the episode to the two of you. You guys remember how to do the next part?”

I got this. Today on the show, the story of Kurt Flood and the reserve clause is a story about capital versus labor. It's a story about anti-trust law and competition. And really, it's a story about the moment when people stop thinking of professional sports as just a game and started to think of it as a business. So it's 1969. And Kurt Flood is one of the highest paid players in baseball. He made $90,000. Robert Smith, do you want to guess how much that is in inflation adjusted $20,26?

I mean, highest paid players in baseball. It must be like $2 billion. Close. It's $800,000.

I mean, it's a lot. Well, so is it a lot or a little? It's a lot of money relative to somebody with a normal job today. But it's like, I don't know, 30 times less than a star baseball player would make today. And so let's think about why. Why were top players in baseball making so much less in 1969? Well, part of it is, baseball was just a smaller game than it's a more lucrative game today. There is more money overall. The pie is bigger. Broadcasting, merchandising,

everything advertising. But there's another reason. A reason that's, you know, the center of today's show. And that is, the players didn't have very much leverage because of the reserve clause because they couldn't go play for other teams. So as a result, they were getting a smaller share of the money that was coming into the game, a smaller share of the pie. And were used to thinking of sports as different. But think about it for a moment how wild this is.

Imagine if every year Google and Apple drafted the computer science graduates coming out of Stanford and Carnegie Mellon and MIT. And when you got drafted, you had to go work for that company. Even if you didn't like Apple, like you had a contract and you had to work for them forever until they fired you or traded you to another tech company, in which case you had to work for that company or not be a computer engineer. The employees would have no bargaining power.

They would absolutely be underpaid not with their paid now, right? It would be flagrantly wildly illegal.

scandal where Google and Apple and a few other companies had these secret deals not to recruit

“each other's employees. It wasn't quite as stringent as the reserve clause, but it was definitely”

illegal and they had to pay hundreds of millions of dollars because you can't do that. You can't have a no-poaching agreement. There's a term that we love here at Planet Money and at Business History. It's called Manapsony. It's Manopolis lesser known cousin. In a monopoly, of course, there is one seller, so they can charge a lot of money for their Manopolis product. In the case of Manapsony, there is only one buyer. It's often applied to job markets, like in a company town where there's

only one employer. That's Manapsony, which means that they can actually pay people much less. And the reserve clause is a classic case of Manapsony. The only buyer at this point, for Kurt Flood's labor, is the St. Louis Cardinals. He has to take whatever they give him, or if they want to trade him, he gets traded. So this is why Kurt Flood wanted to sue baseball. And when he was thinking about doing this, trying to make his decision, he talked to the head

of the baseball players union, which had only recently become a full-fledged official union. And the head of the union tells Flood that there have been a couple of similar court cases in past

decades, and that the players always lost. And to be fair, there is something to the owner's

stance here, because professional sports do require at least a little bit of collection,

“something light collusion. Well, you have to show up in the same place at the same time, right?”

Obviously, but also because you want the teams to be competitive, you want to have exciting games. The fans want that. The owners want this. This is how you make money. So if you had a truly free market, or anyone could just start a new team, any amount for the best talent, one really rich guy, and you know this would happen, would just start a team, buy up all the best players, and then win every game, and nobody would watch. It would ruin the

entire league. And baseball fans right now are probably thinking of the Dodgers who have the highest paid team in baseball. We've won the last two world series, and we will talk more about that at the end of the show. They're from to watch. Okay, so back to Kurt Flood trying to think about whether to sue baseball. There's one other thing that is stacked against him, and that is this. When you look back at the cases that came before Kurt Flood, you really get the sense that the

judges just kind of didn't want to mess with baseball. Like baseball. It's like apple pies, this special game. It's not a normal business. And you you see this in their decisions.

So remember Kurt Flood had gone to the head of the union for advice. And the bottom line,

the head of the union tells Flood is your case is like a million to one shot. And even if you happen to win, you're not going to get damages because you're already making this huge, you know, huge for the time salary. Oh, and also, by the way, if you bring this case, your career as a player is over, because nobody's going to want to hire the guy who sued baseball, even as a manager as whatever. You're done with baseball if you bring this case. So it's scary. I mean, he's being told,

like, you could throw your whole career away if you make this move. And importantly,

“I think Kurt Flood has already been through a lot in his life up to this point. When he was coming”

up in in professional baseball in the 1950s, he played on minor league teams in North Carolina and Georgia where there was just constant racist heckling from the fans. One time, he even got yelled at by his team's own trainer because he put his dirty uniform in the laundry with his white teammates uniforms. And in fact, a trainer pulled Flood's uniform out with a stick and sent it to a black laundry 10 miles away. And as Flood is thinking about swing baseball, race is clearly part of

the dynamic in his mind. All of the owners are white, more and more of the players are black. And after the union had tells Flood how he'll probably lose his case and be ostracized from baseball, Flood says, okay, but if I do win, will it help other players in the future? And the union had says, yeah, well, and Flood says, that's good enough for me. Let's do it. He decides to sue

Major League Baseball. So how do you do this? At this point, he knows what was a million to one odds of

winning? Yeah, how do you how do you find a lawyer for that? You find a guy who's kind of half politician, half lawyer, you know, yeah, that'll do it. So the union finds this lawyer named Arthur Goldberg. He had been a former Supreme Court justice who stepped down to be the ambassador to the UN, which truly seems like a step down, I guess you know, maybe it was different those days. Goldberg says he'll take the case if the union just pays his expenses. And Goldberg and Flood

come up with a strategy. That is this. They're not just going to fight the case in court. They're going to fight the case in what journalists love to call the court of public opinion. They're going to try and convince America that the reserve clause is wrong. You're out of

the commissioner of baseball, guy named Bui Tune. It's 1969 when they send this letter. And the language in the letter is pretty clearly invoking something bigger than Kurt Flood's case.

“It's invoking the civil rights movement. Robert, you want to read a little bit from the letter?”

Dear Mr. Cured, after 12 years in the major leagues, I do not feel that I am a piece of property to be bought and sold irrespective of my wishes. I believe that any system which produces that result violates my basic rights as a citizen and is inconsistent with the laws

of the United States and of the several states. Yeah. And then in the second paragraph,

Flood says he wants to talk to other teams about playing for them. Last line of the letter, I, therefore, request that you make known to all the major league clubs my feelings in this matter and advise them of my availability for the 1970 season, sincerely yours, Kurt Flood. A week later, Bui Tune calls Flood at home and reads his response, the league's response to Kurt Flood's letter. The response says in part, "Dear Kurt, I certainly agree with you

that you as a human being are not a piece of property to be bought and sold. This is fundamental

“in our society and I think obvious. However, I cannot see its applicability to the situation”

at hand. You've entered into a current playing contract. Under the circumstances, and pending any further information from you, I do not see what action I can take and cannot comply with the request contained in the second paragraph of your letter, sincerely yours, Bui Tune." So now this is a big deal. The Court of Public Opinion is in session. And around this time, Flood does this interview with Howard Cousel, the famous sportscaster,

and Cousel says some version of what a lot of commentators are saying about Flood's case, which is essentially, in this letter, you say you're not a piece of property to be bought and sold, but you're getting rich playing baseball. How can you compare yourself to somebody who's enslaved? And Flood says a well-paid slave is nonetheless a slave. That is probably Kurt Flood's most famous quote. There's a biography of Flood by Brad Snyder that was a key source for the show

that is actually called a well-paid slave. There was also that subtler argument against Flood's case as well. If the reserve clause went away, the richest teams would just buy the best players and win all the time. Baseball wouldn't be competitive anymore. The league would destroy itself, so the owner said. And most people agreed with the owners. A poll around this time found that 69% of people thought the reserve clause was necessary for baseball. So Flood is losing the case

in the court of public opinion when his case goes to the court of law, the court court in Manhattan in 1970. And Flood's lawyers know they need a good witness to change public opinion, but nobody who's playing baseball at the time wants to testify because they're too scared, right,

why would they? But you know who agrees to testify? Jackie Robinson. Amazing. Kurt Flood's hero,

first black man to play in the major leagues. At this point he's 51, he's retired, he's going blind. But he agrees to testify. He takes the stand and Flood's lawyer asks Jackie Robinson about the reserve clause. And Robinson says, "Anything that is one sided in this country is wrong, and I think the reserve clause is a one sided thing in favor of the owners, and I think it's certainly should be at least modified to give a player an opportunity to have some control over his

destiny." So fundamentally, Jackie Robinson is saying something quite similar to what Kurt Flood has been saying, "But in a little bit of a subtler way, and he is a national hero at this point." Yes, in fact, the judge in the case asked Jackie Robinson for an autograph for his grandson. And it is the case that when Jackie Robinson says this, people listen. The coverage in the news is warmer than when Kurt Flood says it. So now the public is starting to consider Flood's argument

a little more seriously. The vibes are changing, but the judge in the case doesn't care about vibes. He cares about legal precedent, and the legal precedent is clear. The Supreme Court

“has repeatedly upheld the reserve clause, and so that's what the judge does. He finds against”

Flood and in favor of Major League Baseball. Flood's lawyer says, "This is only the end of the first inning." See, that's what you want out of a lawyer. Someone who can make that check.

Good baseball metaphor. Yeah. I feel like lawyers always talk about inning. So he wants to be

so psyched if it's a baseball kid. It's like, "Findlet." Flood's lawyers appeal the case. They lose on appeal. They appeal again. And the Supreme Court of the United States agrees to take the case. The Super Bowl. Oh, trials. In a minute, what I programmed could did this.

Oh, yeah. Oh, yeah. Oh, yeah. The Supreme Court hears oral arguments in the case of Curtis C. Flood versus Buickay Cune. Commissioner of Baseball at all, on March 20th, 1972. It's the big day. The court rooms packed. The press box is overflowing. People are spilling out onto the courthouse steps or whatever. But you know, one person who is not there, Kurt Flood. Kurt Flood at this point is apparently living in Mallorca, Spanish island in the Mediterranean,

working part-time as a sports announcer for an English language radio station, also working part-time at a bar. Kurt Flood is generally having a tough time at this point in his life. I mean, think of it a few years before he's an all star. And now it seems like everyone in America is mad at him for shaking up major league baseball. Yes. Yes, exactly. But, you know, his lawyer is there at the Supreme Court to represent him and and his lawyer steps up at oral arguments to make

the case before the Supreme Court against the reserve clause. Against this rule that Kurt Flood is fighting. Flood's lawyer says the reserve clause is a group boycott and a blacklist. All owners under the rules are obligated not to deal with a player if he is on a reserve list. He is blacklisted. In other words, Flood's lawyer is saying the reserve clause is literally a bunch of businesses getting together and saying, "This guy, nobody higher him. We're not going to hire this guy."

And then Flood's lawyer says, "And this is the most obvious restraint of trade known to man."

To an antitrust lawyer, the sentence would be amazing because there was much murmuring in the

“courtroom because restraint of trade is maybe the key phrase in American and itrust law.”

That's his old baseball. Almost as old as baseball. And by the way, this meaning of trade has nothing to do with like trading a player to another team. It's trade as in commerce. It means it is illegal for businesses to conspire to restrained commerce. And then Flood's lawyer delivers a line that is more appealing to the masses. He says, "And I love this, free American workers determine their own destiny." This fundamentally is what Kurt Flood wants to be a free American

worker determining his own destiny. Put it on a t-shirt. USA with an airbrush eagle fly and over it. I'm going to say it again. Free American workers determine their own destiny. Flood's lawyer sits down and the lawyers for bui-tune and the league and the owners make their case next. Particularly, they point out what they've pointed out in previous cases. For one, a truly free market in players' labor could lead to one team buying up all the best players

and winning all the games. And that this in turn would make baseball boring to watch. And so could destroy the league as a business. They point out that the courts have previously ruled that

baseball is basically exempt from antitrust laws. And then in addition to those arguments,

“they make this new, really interesting argument that's going to prove to be quite important.”

And that's this. They point out that the players' union just a few years earlier had negotiated its first ever collective bargaining agreement with the league, the union contract. And the union has agreed to the reserve clause in that contract. And so the lawyer for the league says, "No suit can appropriately be brought by a member of the collective bargaining organization in a matter which is essentially a matter for collective bargaining." In other words,

if you don't like the reserve clause, don't file a lawsuit. Don't take us to court. Just have your union negotiate a different deal in the next union contract. A few months later, the Supreme Court issues its ruling. The justice is point out that Congress has frequently considered passing

legislation to apply and I trust law at the baseball, but that Congress has never passed that

legislation. And according to the court, according to the opinion, this is proof that Congress does not want antitrust law to apply to professional baseball. In the opinion, the justice is right if there is any inconsistency or illogic in all of this, it is an inconsistency and illogic of longstanding that is to be remedied by the Congress and not by this court. Don't play us. If it's crazy, Congress wants it to be crazy. Baseball is weird. This whole reserve clause thing

is not our problem. And it stays in place. And it stays in place. Kurt Flood loses the reserve clause persists, but the story is not over yet. Kurt Flood has lost in the court of law, but

“remember we were talking about the court of public opinion. And in the court of public opinion,”

Kurt Flood did pretty well. I mean, I can't imagine America is watching the proceedings at the Supreme Court. Well, remember there was Jackie Robinson testifying there was Flood doing all those

broad ways in America. The case starts in the late '60s. It proceeds now into the early '70s.

And it's pretty clear that over this period of time, people around the country have started to

“think differently about the reserve clause and about baseball. And I mean, I think the core of it is”

a lot of people started to see really the foolishness of treating baseball as something other than a business. People stop thinking of baseball players as players, as grown-in playing a boy's game, and they started thinking of them as workers. And when you start thinking of baseball players as workers, the reserve clause kind of becomes ridiculous because you think of your own job and you want free determination to work in a job that you want. After the verdict comes out, papers around the

country write editorials condemning the decision, taking the side of Kurt Flood. For example,

the New York Times writes, "The highest court in the land is still a verdict its gaze from a system in American business that gives the employer outright ownership of his employees. Echoing Kurt Flood's work." Yeah, that word ownership is clearly echoing that Kurt Flood

“letter that kind of started the whole thing. A poll taken around this time finds that popular”

opinion has in fact shifted dramatically. At this point, by an overwhelming margin, people support Kurt Flood and the players. And of course, the players see this shift, they feel this shift, and they take action. A few players decide to test what the reserve clause really means. Specifically, the clause says if a player refuses to sign his new contract, these are the exact words. Pay close attention. The club shall have the right to renew the contract for the period

of one year. And so the way people had read that language up to this point is the teams have the

right to renew the contract for one year and then another year and another year. There's always another

year. But there is another reading of the language. Maybe the club shall have the right to renew the contract for the period of one year means that the club's right to renew only lasts for one

“exact year. And if the player refuses to sign a new contract and waits for one exact year,”

can the player then go work for any team that will hire them? I don't know. The players didn't know either. But in 1975, a couple of them decided to test it out. They refused to sign the new one-year contract offered by the team, the kind of contract that everybody had been signing. They play for one year with no contract. And at the end of the year, the players in the teams go before an arbitrator to decide what is the correct reading of the reserve clause. And the arbitrator

finds in favor of the players. After one year, the players are free to sign with any team that will hire them. And in fact, these players go sign with other teams and get paid a lot more money, surprise they were being underpaid before. Around the same time this is happening, the players union was negotiating their big overarching contract with the owners, with the league, the contract that covered all of the players. And the players are walking into this union contract

negotiation, with a pretty strong hand at this point. They have that arbitration ruling, but also public opinion is on their side. And in fact, the players are able to use all this leverage to kind of win to get the owners to capitulate. The owners agree to get rid of the reserve clause. Although in the contract, players were only allowed to become free agents after their sixth year in the major leagues. So not purely a free market, which is interesting. It sounds like

this was negotiated. Teams get several years of exclusivity from the players. They drafted and presumably trained and brought up to the miners. But then players get to look forward to being a free agent after they'd put in their time. And similar kinds of things are happening outside of baseball around this time, partly inspired by Kurt Flood. Players in the NBA and the NFL are challenging restrictive rules. In 1976, two separate cases made it easier for players in those leagues,

for basketball and football players to become free agents. Though actually free agency was rather limited in the NFL until the 90s. Now, we can step back here and ask kind of a fundamental economic question. What has this shift in sports meant for the way that the pie is split between capital and labor between the owners and the players? And there's a pretty clear answer. In the early 70s, when Kurt Flood brought his case, less than a quarter of the revenue going to the

teams went to the players. Today, it's around half, half the revenue. So the share of the pie going to

in the last couple of years, the potential downsides of free agencies. In fact, the same ones that the owners had warned about at the very beginning have kind of come to pass. The Los Angeles Dodgers, maybe for everyone, have far away the highest payroll in baseball. Famously, they are

paying showhate Otani $70 million a year. Esther is most of that is deferred. Yes, still a lot of money.

And they've won the World Series two years in a row, dynasty. You know, there's an argument to be made

“that they are just buying their way to chip chips. That is a reasonable argument, but I think it's”

clear that it doesn't have to be that way. I mean, just look at the NFL and the NBA. In those leagues, about half of all the revenues go to player salaries, similar to, you know, the way the pie is divided in baseball. But the NFL and NBA players unions have agreed to a salary cap.

Basically, a total amount that each team can pay all of its players. There are some wrinkles,

but that's basically the way it works. Which means it's possible for players to get a bigger piece of the pie without letting one team buy its way to victory. And by the way, the current contract for the baseball players union is coming up for a new role at the end of this year. And you know what the

“owners want? They want a salary cap. They want a salary cap. Yes, sure. Captain Mike,”

I guess, but it doesn't necessarily mean more of the pie goes to the owners. But anyways, the

players don't want the salary cap. And so we'll see what happens with that. So that's basically

the end of the story for now and the news, but we need to finish Kurt Flood's personal story. Yes. When we last heard from him, it was 1972, and he was working at a bar in my Yorker and drinking a lot. He did eventually get sober, moved back to the U.S., and eventually he came recognize for what he'd done for baseball. And for that matter for all of professional sports. And he did have this last kind of big moment in 1994. At the time, the baseball players

were on strike. Among other things going on, there were accusations that teams were colluding to suppress pay for free agents. And the strike was dragging on and on. They had canceled the world series. And some of the players started wondering if they should just haul off the strike and go back to work. Yeah, public opinion was shifting against them. So they called the influx to give the players a pep talk. And Kurt Flood stood up in a room full of major league baseball players.

And he told them, you know, stand your ground. I thought so you could be where you are today. He said, and this part's a direct quote, "Don't let the owners put the genie back into the bottle." And when he finished, the players stood up and applauded. Robert Jacob, thank you so much for coming in and sharing that episode with us today.

“Romer, it was truly a great time. Where can people find the excellent podcast business history?”

Literally wherever they're listening to Plata Money right now. And also on YouTube, just recorded one on Lloyd's of London, about insurance, great plan of money subject. Got Southwest Airlines, Warren Buffett, Sears, Thomas Edison, a lot. Business history is the name of the show. Also, if you like Jacob's reporting, you can find it in our book, find the planet money book in stores now, or you can order it online at

planetmoneybook.com. This episode of Planet Money was produced and fact checked by Emma Peasley. Alex Goldmark is our executive producer. Also, special thanks to Gabriel Hunter Chang and Ryan Dilly at Business History. I'm Jake Bullstein, and I'm Keith Romer. This is NPR. Thanks for listening.