Maynor, the 20th pick in last year's draft, is a legit backup point guard prospect who I think will be pretty good (he was drafted ahead of UCLA's Darren Collison, for instance). So to paraphrase Hollinger, the Jazz basically gave Maynor to the Thunder as payment for taking on Harpring's large, otherwise useless dead-weight contract. The total savings to the Jazz is $10.46 million, and the Thunder will pay nowhere near that amount (a total of not quite $2 million) to take on the injured Harpring because - get this - injury insurance is paying most of his salary. This is a classic win-WIN for the Thunder, who have patiently stayed under the cap waiting to take advantage of a deal like this. The details Hollinger enumerates about this trade will blow your mind.
Aaron has written before about salary structures in the various leagues, and this is a clear example of how guaranteed salaries ruin the NBA in terms of fair trading. In a terrible economy, these contracts become even more onerous for NBA teams.
Simmons' article yesterday covers this very same issue - how the contracting economy is going to pressure NBA teams into these kinds of salary-cutting trades. (Loved his take on the Utah trade - "How dare you jump the gun on column, Utah!")
The ability to not fire underperforming employees, or give them pay decreases, or mitigate the damage those contracts do to your team's flexibility, somehow relates to The World is Flat by Thomas Friedman, but Aaron can explain that to you.
Thomas Friedman discusses a few characteristics for businesses and economies to succeed in a globalizing world. These include the ability to start a business and close down a failing business quickly and efficiently. Who wants to take on the risk of a new business, if you are forced to keep paying employees, taxes, and fees for two year, even if the idea turns out poorly and the business is losing money. Additionally, being able to fire ineffective employees cripples a business trying to compete. When a business is unable to fire an poor employee; 1) what incentive is there for the employee to work hard and 2) how is a business being forced to pay money and get nothing in return supposed to be good for the business?
ReplyDeleteHow is a long term guaranteed contract good for any NBA team? In every other business in America, employees work hard for an financial incentive...usually salary and/or bonus and trying to earn a higher salary. Once a player gets a guaranteed salary what incentive is there to try any harder or at all? There is always the goal of a championship, but how many players on the Warriors or Grizzlies honestly feel like they have a chance at winning a championship?
When teams adopt a strategy of we'll give you a good player as long as you'll take this bad player making lots of money as well...how is this a good system? I think baseball is a little better of trading established effective players for multiple prospects. I also acknowledge that football doesn't have it perfect, given that the average career is only three years and players can be dropped at any time.
I have proposed before that there is a middle ground. Something like guaranteeing a contract for the first two years, then alternating between a team option and player option.
Well that was a nice post. I liked it.
ReplyDeleteBathmate
Thank you Bathmate!
ReplyDeleteAaron, I completely see your point about "how is this good for the business" but I think we addressed previously the flip side of that question - how do you protect the employee? For instance if you get hurt and therefore a team drops you, that really isn't right. And if you simply get dropped for poor performance, that also harms the livelihood of the employee. (Unrelated to salaries but related to the NFL caring about players - the fact that it has so atrociously dropped the ball on concussions. So I do not give the NFL the benefit of the doubt for player issues, including salaries.)
The bigger issue, though, is that in the NBA these franchise-hamstringing salaries occur because that's what the market will bear. While it sucks for teams like the Jazz to have to give away a good PG just to save money, they did this to themselves when they signed that Harpring contract. And when they overpaid Boozer. And when they decided to match Portland's offer to Paul Millsap this summer.
Yes, it's atrocious for a team to give huge money to a Zach Randolph or an Eddy Curry. But other dumb teams start overbidding, and poof - bad contracts appear. So I don't think the guaranteed salaries themselves are to blame.
To provide one counterpoint to my own argument, this year the economic contraction has created unforseen problems for NBA teams. Typically the salary cap and subsequent luxury tax move in step with the league's revenues, which until this year has meant yearly increases. But with the recession, they predict the cap/tax will shrink maybe $3-5 million next year. So teams that were under the cap/tax could suddenly be over it, with exactly the same contracts as the previous year. Obviously that is a problem with the way the NBA's salary structure is laid out, but I imagine it will be corrected in the next Collective Bargaining Agreement.
Two thoughts come to mind. First, is Simmons correct that NBA GMs really are that stupid to be offering so many contracts and evaluating players so poorly? Do they actually think Boozer is a top five center and attempt to pay him as such? Or are they paying him that just to keep him because there's another stupid GM out there who would pay him like a top 5 center?
ReplyDeleteSecond, this brings me back to the many times I have argued that a hard cap is necessary. When you have any way for teams to spend whatever they want, then you get a few 'haves' who will spend that extra million or two to get an inferior player, meaning the home team has to continue to overspend to keep their fan favorites, even if they putting themselves in financial position that they can't get the complementary players needed to win. The luxury tax needs to be replaced by a hard cap.
The further question...do I have a problem because I am a sports purist with no particular attachment to the NBA? Are NBA fans happy with the current economic structure? (Are Jazz fans happy they gave away Maynor and Harpring? Do they think that they can win a championship with Deron Williams, Boozer, Millsap, AK-47, Okur, etc.?) I'm sure the owners are ok with the structure that earns them money most times and sometimes loses money in bad times (just like every other business owner). And I am certain that NBA players LOVE their guaranteed contracts.
ReplyDeleteSo if the fans are happy even with the limitations and owners and players are happy? Should I really have that big of a problem? Are salaries mostly appropriate (better players earn more) and only a few Zach Randolph-type contracts make the news (how is it possible that Zach Randolph is the 18th highest paid player in the NBA? [also, Royce, your fail for not providing the Hoops Hype link earlier, which is possible the best salary information on the internet for any sport])?
You're right, Hoops Hype would've been a good link for me to drop in the main article, my bad.
ReplyDeleteHere's the thing - you are right to criticize a situation in which teams are no longer increasing competition via trading but rather decreasing it. In the Maynor trade, the Jazz actively made a division rival better over the long term by giving them Maynor, in return for saving money. So even if Utah fans are okay with the trade and the overall cap status in the NBA (the one Jazz fan I know isn't sweating this trade), over the long term these flaws will wear down a league. As an impartial third party observer I think you are accurate in your criticisms.
Simmons is correct that at least half the GMs in the NBA are not very good and give bad contracts. For instance, paying Boozer as a top 5 PF (he's not a Center) is not that smart considering he's fairly one dimensional in my opinion. But like you say, another team would've paid that so the Jazz had to pay to keep him.
I would argue that despite these flaws the NBA's luxury tax is pretty close to a "hard" cap because of two reasons:
1) You cannot sign players (other than using exceptions, which are mostly mid-level deals) once you are over the cap... that is a "hard" cap in theory. What makes it a semi-hard cap rather than fully hard (nobody make any flaccid jokes) is those exceptions I just mentioned - you can sign your own players to put you well over the cap, or you can complete trades while over the cap, if the salaries in the trade match... which of course leads to trades where expiring, dumb deals are thrown in just to make salaries work.
2) The luxury tax threshold forces teams to pay $1 in tax for every $1 they are over the tax line... which is really, really expensive. Theoretically some "haves" can overpay for talent, but since they can only acquire that talent using the exceptions listed above and because that tax money is distributed evenly to the other owners, it's actually not terrible for the league economy overall because in practice no teams exceed the tax by a large amount indefinitely. It's just too costly and teams won't be profitable.
Fact I learned today: You can't sign big name free agents when you're over the luxury tax. I think that one fact alone almost makes me like the NBA's economic structure. You can go over to get role players and keep your own players, but not to sign the most talented free agents.
ReplyDeleteSo maybe the problem really isn't the structure, rather the incapacity of the GMs. This almost feels like how Communism could work in theory, except that every time a dictator emerges and everyone else ends up in poverty.
Well I am against legislating to protect people from stupidity...so I will allow the NBA to continue.
Until I am able to merge this fact with my overall sports economy theories.