• Matt Morizio

Pando Pooling: Is it worth it?

Updated: Mar 15

Imagine working in a winner takes all, high risk career, where the odds of making significant money are stacked wayyyy against you, and it’s much more likely you walk away with nothing.


Now imagine being able to hedge against those odds. You’ll pledge to contribute a percentage of your future salary to a pool with your peers who have also pledged their future earnings. Eventually you will all draw from the pool evenly, whether you make $0 or millions.


That’s the mission of an exciting startup out of California called Pando.



They are targeting professional baseball players as their first significant test case, and if I’m being honest, I’d probably decline the opportunity to join a pool if I were still playing.


Why?


I’d feel like I’m betting against myself, and elite success is never achieved when doubt lives inside you.


Here’s how it works in baseball: a group of players agree to contribute a percentage of their post-arbitration salary to a pool. The money is then distributed evenly among all participants (after Pando takes its 10% fee).


Let me give a little background:

  • Minor leaguers earn between $5k-$10k per year on average.

  • The average major league salary is $4.3M. If the average career is 5 years, that’s roughly $21.5M career earnings.

  • Taking that same $21.5M number, if the pledge is 10% of future salary and the pool has 10 total players, only 2 of which make the big leagues, the total contributions to the pool equal $4.3M. Divide that among 10 participants after Pando’s 10% fee, and each player receives $387,000, even though eight of those players contributed $0.


It’s a great situation if your career doesn’t pan out, but if it does, you pay.


I get it, the odds of making the big leagues are slim (check out the chart from Baseball America below), and $21.5M is a lot of money, so maybe giving up a couple million dollars isn’t such a big deal.



But is it worth it? I don’t think so.


In Pando Pooling, it seems like the winners lose, and the losers win.


Pando is similar to a relationship between a venture capitalist and an entrepreneur, but in the case of Pando Pooling, the VC is the entrepreneur.


The entrepreneur (baseball player) is simultaneously working on his own business (making the big leagues) while investing in other businesses (joining a pool with other players trying to make the big leagues).


Call me crazy, but I don’t think there’s a single VC on planet Earth that would invest in an entrepreneur who is simultaneously investing in competing startups in his industry in case his own fails.


Joining a pool to hedge against my potential failure feels like I’d be betting against myself. “I totally expect to make the big leagues….but in case I don’t, this is a nice safety net.”


I don’t believe elite-level success happens if there is a plan B. I’m not comfortable expecting to win while simultaneously insuring against failure.


That doesn’t sit well with the competitor in me.


And if you tell me that a player’s mindset should be, “I’m going to make the big leagues and gladly pay my buddies in the pool. We grinded together,” I’ll tell you that in that case you should pay them anyway. You don’t need Pando for that.


Straight from Pando’s site, "We offer a tool to reward those who take risks. Pando empowers you to feel confident in your choice to pursue your dreams.”


But having played in the minor leagues, I know first hand that confidence doesn’t come from having an insurance policy against your career. Confidence isn’t derived from money.


Confidence comes from internal makeup and work ethic, and anyone seeking confidence from an external source will always be disappointed.



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Investment advice offered through Beck Bode, LLC, a fee-only Registered Investment Advisor in the Greater Boston area.