Nba nerd

Why Most Free Agent Signings are Awful

The market for NBA free agents is not a free market. It has a few important restrictions that make it a little socialist in nature. The most important ones are the salary cap, the luxury tax, and the maximum contract size. Because of these restrictions, there is almost no benefit for an NBA manager in signing free agents to fair market value, unless the contract is small or the marginal benefit of the player's wins produced is large (the proverbial "final piece" for a championship). The salary cap imposes large opportunity costs on every salary that an NBA club pays.

Let's start with the fact that, by definition, a team where 100% of the players were paid on "fair" contracts should be expected to win 41 games, since the salary cap loosely forces each team to spend the same amount. Now, it's true that you can overspend to get into the luxury tax. BUT, if you are overspending on "fair" contracts, then again, by definition, each marginal contract you add can only improve your team logarithmically, not expenonentially. This is because you can only play 5 players at a time. Number 12 on your depth chart won't make a big difference no matter how much money you spend.

The logical consequence of this is that, in order to win, you must have some unfair contracts. In other words, your team has to find a way to spend less money per win than the other teams. This is generally true in most markets, not just the NBA; all companies strive to find the best workers they can, but very few firms employ a strategy that sounds like "well, we will just pay them more than anybody else, and get the best workers that way!"

There are several reasons why teams end up signing too many contracts that are "fair" -- or worse (Amare Stoudemire's contract is horribly unfair -- for the Knicks).

Teams overpay for youth

Consider Gordon Hayward. He's a fine player. In all likelihood, and he'll probably get a little better (he's 24, and players tend to peak around 26). He's versatile, shoots well (for argument's sake, let's consider last season an outlier), and does lots of things off the ball that produce wins. He's a lot like Chandler Parsons, another fine player. Still...

Gordon Hayward has a replacable skill set. There are guys like Mike Miller, Ray Allen, Shane Battier, Matt Barnes, etc, etc, around every year who will do this job about as effectively, and at a fraction of the price. Now, those guys are old. Not really reliable on more than a one or two-year deal. But the league keeps pumping out players like this. Eventually, Kyle Korver, Danny Green, JJ Reddick and Wes Matthews will all get older and come at cheaper prices. These types of players have playing styles with a lot of longevity, because they are predicated on reading the floor, shooting and passing well rather than just athleticism.

You may also say that those old, underpriced guys usually only sign with contenders. That may be true. But if the team isn't a contender, then why is it paying a max salary to a player like this in the first place? I agree that this is probably worth it for a team that already has 50 wins in salary on the books and is trying to move to 58 with a guy like Parsons instead of 55 with a replacement-level SF. But are 2-3 extra wins produced worth the extra $8-10 million a year that a max salary costs for the Utah Jazz?

Consider that a couple of years ago, Houston was happy to recycle Chase Budinger with Chandler Parsons (before Bud's knee injuries, they were pretty similar players). The Rockets were in a different place then; they'll probably pay Parsons now because those extra 2-3 wins matter a lot.

Teams overpay for older players through lengthy contracts

Consider Chris Bosh and Amare Stoudemire. They are entirely different types of players, but in 2009-10, Amare produced about the same number of wins as Chris Bosh did in 2013-14. That is, their impact on the bottom line was similar. Another similarity between 2010 Amare and 2014 Chris Bosh is that both are/were at the end of their prime. Chris Bosh is far from a has-been -- now. At 34, he won't be the same player. It's hard to say how fast a player will decline after 30, but he will decline. Father Time doesn't always land a knockout in the early rounds, but he always wins the bout.

Bosh is not worth a maximum 4-year contract because his maximum is a "legacy" max, and because he is too old. Compare the $20 million that Bosh can earn to the $17m or so that Kevin Love will demand next year, and consider that four years is a long time for a player in his thirties. Even if we all get together and put aside our differences about how Miami's system affected his numbers, that you think WP48 doesn't capture defense, yadda yadda yadda, in the end, Bosh will be 34 years old and making $26 million. That's probably going to be a terrible deal.

The league's history is full of guys who got lengthy max-contracts at the end of their primes, and were horrible values at the end of those contracts: Rashard Lewis, Amare Stoudemire, Shaquille O'Neal, Kobe Bryant (inexplicably extended  two further years!!), Carlos Boozer, Joe Johnson, Gerald Wallace, Elton Brand, and on and on. Many of those players may have been worth thier salaries in the first years of their contracts, but they were all overpaid by the end.

Teams Fall Into the Sunk Cost Fallacy

Over and over again, teams are afraid to lose their players "for nothing". Often, this results in them overpaying for decent players who are no longer on rookie contracts. This leads to scenarios where Brook Lopez earns the maximum despite not being anywhere near a top-25 player.

More subtly, it leads to teams exercising the options on their first-round picks, even if those picks were busts. Minnesota paid Wes Johnson for four years, even though they had team options and could have just let him go (later, they ended up bribing Phoenix with an additional pick to take him). New Orleans has a team option for 2015/16 on Austin Rivers. I wonder if they will drop him or exercise that option?

Sometimes, getting nothing in return for a player is....just fine.

Teams Worry Too Much About Having a Full Roster

NBA Teams have a salary floor. Furthermore, they have 15 roster spots. But there is no need to spend the money unless you have to.  Philadelphia spent the vast majority of the 2013/14 season under the salary floor. Much was made of the fact that they opened the season with quite a few roster spots opened.

Unsurprisingly, Sam Hinkie had plenty of opportunity to take on salary late in the season by absorbing contracts like that of Danny Granger. In another shocker, the 76ers managed to field a full team in all 82 games despite starting the season with only 12 players or so. Along the way, I am guessing that Philadelphia's owner made lots of money.

The truth of the matter is that roster spots 12-15 do not have heavy impact on a team's regular season win total (either positively or negatively), and spots 10-15 have no effect at all during the playoffs. Teams should strive to keep the salries of these roster spots as cheap as possible. Furthermore, their best use is on young players who might develop into contributors later, on unfair contracts. Guys like Hollis Thompson, Chandler Parsons, and Lance Stephenson come to mind.

Players like Rashard Lewis, Jason Collins, Shannon Brown, Antoine Jamison, and (insert old player that won't get minutes here)? They are a waste of both money and space on most rosters.

Teams...well, Teams Don't Evaluate Talent Well

There isn't a fix for this, of course. By definition, about half the teams are below the average NBA teams' level when it comes to evaluating NBA talent. Our data leads us to believe that there are about four or five GMs that seem to be significantly and consistently outperforming the others at picking the best win producers, and a couple that look very much like they have figured out a secret that no one else in the league has caught on to. Conversely, there are four or five GMs that consistently fail at picking win producers, and one or two that look like they simply have no business being in the job. This is, again, pretty consistent with a bell curve. If you believe that talent evaluation is a skill, you would expect NBA GMs to fall on a bell curve.

Given the above, it isn't surprising to me at all that Orlando seems to have broken pretty much all of these rules by paying 31-year old Channing Frye $32 million for 4 years.

@ Patrick " all companies strive to find the best workers they can, but very few firms employ a strategy that sounds like "well, we will just pay them more than anybody else, and get the best workers that way!"

Actually that is exactly how CEO's are hired and paid. It's why they make so much more than the typical worker and it's always why it's bullshit.
Talking about Orlando, if Frye's contract is bad, how would you rate Ben Gordon's 9 millions for 2 years ?

I don't how such a deal can be possible. Seems like a joke.
Well I can come down from my soap box now and just reference this post every time. Phew made my job easier. Been saying this for awhile.

Another note,
Why does it seem like everybody is a walking ESPN analyst? From this recent Lebron thing to the Draft(both NFL and NBA). I can't take a guy seriously quoting Bilas saying that Wiggins has upside or Parker is NBA ready. Whatever that means. No more sport center or shows with talking heads for me. Just the event and thats all.
Did teams not seeing Arturo's work on the different levels of pro leagues? There are tons of cheap talent available. Not only does the NBA playing musical chairs with coaches, it does so with players. I guess it is a fraternity.
The "fraternity" thing has legs. Guys like Juwan Howard stuck around a long time because everyone liked them.
So field a team for 10 Lebrons on 5 mil a year contracts with 2 Giannis on the bench developing?
DG22,

2 LeBrons at the max is also "unfair".
I only hate James going to Cleveland for one reason: It fools people into think Irving is this great guard who just needed help. He sucks but could get better. I don't know about a star but at least slightly above average. If i'm Cleveland, I trade Irving,Waiters, Bennett, and picks for Love, Dieng, and Rubio. Hell I would throw in Wiggins too. Wiggins is a SF anyway. Man, they fucked up not getting Noel last year.
Flip side of that gripe though, hearing "with no regard for human life" makes me smile evilly.
Saying you'd trade Irving, Waiters, and Bennett for Love is kind of overkill. With the monstrous extension handed to Irving, in a proposed trade of Irving, Waiters, and Bennett for a juice box I'd seriously consider the juice box.
@BPS,

I believe @AndrewSutton was implying that the Cavs trade Bennet, Irving, Waiters, and Wiggins, for Dieng, Love, and Rubio. That said, I doubt the Cavs would be able to fleece the Timberwolves that badly (Saunders isn't that inept is he)? If that's the case, if I'm the Cavs management I wouldn't even mind taking on Kevin Martin's loaded contract. Technically, if you exclude this season as an outlier year, Martin's been a borderline star much of his career. He would actually be a definite upgrade on the wing, along w/ Allen & Miller, over Waiters (IF Martin can return to form).
BPS...To the general public though? Irving, in the mind of the public, is a top 5 or 10 guard. Even with Golden State, I would trade Curry but thats me.
DreSmoove,
Agreed
And Miami just made the Bosh contract worse by giving him a 5th year...
Selfishly I was trying to see if Clippers could get James, him with Griffin and Jordan...man lob city on steroids...For entertainment value I wanted to see Bosh in Houston or Dallas, Wade in Chicago, and Melo in LA
If we are talking about the damage these moves do, then you have to evaluate bad moves in several dimensions:

1 - Is it a bad move that is still a consensus opinion that you could undo? To that end, I'm less worried about overpaying young "promising" guys because it's going to be much easier to trade a Hayward or Parsons to someone than a terrible player that was overpaid. These are mistakes that are fixable. Making bad moves other teams would avoid locks you into them.

2 - Is it needless stupidity with no value added? One could make an argument that the Mavericks and Hornets had to overpay a bit in order to even have a shot at those players; doing things like giving Ben Gordon a contract for millions when nobody would have paid him more than the minimum is an unforced error, rather than a forced one.

3 - What is the opportunity cost? As stated, the last few spots on the roster don't really matter, so people should be taking fliers on them (it's why, for instance, I really liked the Odom signing by NYC. It didn't work out, but what do they really have to lose compared to the potential of gaining LA Lakers Odom if he gets his head right with Jackson again?). Clogging that with someone who has no upside but also no real value is doubly harmful compared to overpaying for a productive player in a starting spot (who is still contributing and adding value, even if overcompensated for it).

4 - What was the marginal value? As was stated in the original article, a "mistake" in terms of overpaying that still adds marginal value matters. In the same way, overpaying for valuable starters on legitimate playoff teams worries me less, as the bench is less important in the playoffs and the value of the starters is magnified. If you take efficiency too far, you will end up with a great regular season team that always loses in the playoffs (Houston so far?); at some point the five to seven best guys vs. the five to seven other best guys is all that matters if you go far enough. At that point a bunch of great values in the eight through twelve spot are unlikely to do anything for you.

5 - I do think one thing that is under-evaluated is also fit. Dallas, for instance, is a strong proponent of things like adjusted plus/minus (heresy!). I don't think those are the be-all and end-all anymore than any other particular statistic for player measurement, but there is something to be said for developing some roster-based synergy. Just look at the difference in performance for Monta Ellis on the Bucks vs. the Mavs. To that end, if a team overpays for a player who is likely to fit very well with their team concept (Diaw with SA) versus a team overpaying for a player who won't fit well, I feel the former is more forgivable (again, especially on playoff teams where that value is magnified).

So to that end, I would argue the worst signing so far is Ben Gordon (basically fails on every criteria), that things like Hayward are not perfect but hardly major errors, that there will be some underrated moves by teams signing long-shots to lower roster levels in order to unearth gems (this is pretty much the Spurs' calling card), and that the teams which are going out of the way to add reasonably priced players that add synergy may yield better than expected results (I really like the Grizzlies adding Carter, despite his age, for this reason).

TL;DR - we come down too hard on the fixable mistakes but not hard enough on the un-fixable ones that don't add marginal value for teams.
Houston offering a max contract to Bosh made some sense - their cap room is about to vanish, they need bigs, and have a strong enough roster that a few more wins could very well push them deep into the playoffs. It's not a great contract and would probably be an albatross by its end, but I could understand it.

I don't understand the 5 year max in Miami at all. In the absence of some real magic in the next couple years, a 'good' outcome for them looks like being a 40, 45 win team with no cap room. Why lock yourself into that?

If overpaying for free agents can move you from being a 50ish win team to being a 60 win team, go for it; that's the range where extra wins turn into legitimate changes in title chances. Otherwise you're just setting money on fire.
Had Lebron stated earlier that he want on the good LA team then this could have happened...
http://www.swerskis.com/#9P116P222P228P123P560P210P193-20P341P1127
this is why superfriends teams that get three guys that are max and a bunch of scrubs work so well. generally superstars are underpaid and the cap forces teams not throw money in the bin. or if you can get say someone like scottie pippen locked in a long term relatively low dollar contract...
The other thing about the Houston-Bosh offer is that he's still probably tradable the next year.

I'm still real iffy on the Hayward move, because Lance'll Make'm Dance is still around.

Dang, how is he still unsigned? He's probably the second best 2-guard in the league, he's young, and he doesn't have a Harden's Defense-style flaw in his game. He's the real Manu 2.0; a guy who has the size and athleticism to play minutes at the 1, 2, or 3, who has the ball-handling and passing to be your backup ballhandler, and who plays really solid defense. If he's willing to come off the bench and lead a second unit, he fits on literally any team with cap room.
I'd say the HEAT should have looked into going after young guys like (Trevor) Booker, Jordan Hill, and Ed Davis to fill out their front line (honestly, why aging forwards like Chris Bosh & Luol Deng? Smh). None of those guys made over the MLE last season (nor had they ever at this stage in their careers). Sefolosha and PJ Tucker were off the market (which sucks) cuz they were two really good 3-and-D guys (who were affordable), and the Nets opted to keep Kirilenko, but there were still some very decent (young) cheap wings that were worth taking a look at, e.g., Jae Crowder and Troy Daniels. Obviously guys like Trevor Ariza, Eric Bledsoe, Lance Stephenson, and Isaiah Thomas were interesting, but would have been SIGNIFICANTLY more expensive (plus seems like Phoenix was willing to match any Bledsoe offer sheet anyway). Could have seen the HEAT paying Stephenson a 4 yr/$48 Mil USD contract, and him accepting it (Ariza could have probably been had for less). Even if you'd gotten Wade for 10 mil per year (or 6 yrs/$60 mil USD), it would have been money well spent overall imo.

I'm hoping Wade smells the shit about to hit the fan, and works out a beneficial deal w/ Riley that sees the team try to trade him to CLE in exchange for getting back the partially protected 2015/2016 (& unprotected in 2017) first round pick they traded CLE, and some filler players (e.g., Anthony Bennett) for Wade @ the MLE over 5-years. (This trade should happen after CLE fleeces Minny of Love ofc). This way, Wade doesn't have to look like the bad guy for leaving, and can do it under the guise of "making the HEAT" better.
DreSmoove,

I'd put the chance that Wade makes less than $60m over 4 years very low. In a world where Parsons and Hayward make that much, Wade will still get the max or close to it, knees and all.
I definitely agree w/ you @PatrickM (Wade taking the MLE for 5 yrs in CLE is even more of a long shot lol). It was more of a "what the HEAT should have done w/ their cap space" scenario. And since that's not what's going to happen (what w/ Bosh being given the max), "what Wade should do to get his butt out of there, before shit gets real."
Wait, Houston avoids paying Bosh the max and gets Ariza 4 years/32 million? Huge win for the Rockets. Miami gives Bosh 118 Million? No. Just no.
I'd like the Ariza signing if he ever had a good season on a non-contract year. And he's 29. I doubt he can replace Asik's and Parson's production.
Both are good players DG, but, IMO, 4 years of Ariza at 32 Mil returns better value that 3 years of Parsons for $46M. Of course, I'd take either deal before I'd give Carmelo 122 mil over 5 years. Hope Knicks fans enjoy losing in the 1st round of the playoffs...
Players don't get paid for the playoffs. They should but they don't.
Hey now Tommy. 45 wins or so looks good enough for a legit shot at the eastern conference finals at the moment.
I don't get the first round exit joke in the context of just talking about the Rockets.
If were throwing out early candidates for Eastern Conference teams te exceed 44 wins, Chicago looks to be one serviceable guard away - and we know decent guards are gettable. Healthy LeBron + four average teamates = what 49 wins? If Cleveland can get Love for Wiggin, I'll take Cavs over 46.
Keep in mind the Parsons contract is 2yrs and then a player option for the third. Given that Parsons will be in his prime and NBA players love opting out, I think one has to assume that unless he has a dramatic decline in quality (injury?), it's a 2 year deal.
@Tommy_Grand

I think the teams in the east that could exceed 45 wins (barring injury), are ATL, CHI, CLE, and TOR. IF, and this is a really BIG "if," New York get another productive big (e.g., Blair, Booker, Davis) to go along w/ Aldrich and Dalembert, and excommunicate Bargnani (at least until they can trade him), they should see some improvement. Especially w/ the upgrade @ the PG position in Calderon (Bargnani not getting any playing time will be the key though). Charlotte got one of the better draft prospects in Noah Vonleh, so if he pans out, they'd have a solid front line w/ Biyambo, Gilchrist, Jefferson, and Vonleh. Plus they have pretty solid wing depth too w/ Adrien (who I hear they're interested in bringing back), Stephenson (if they can get him), and Williams. Getting Stephenson will be paramount to cracking 45 wins though. I predict a precipitous drop in wins for Indiana.
As a loyal son of Cleveland, I express great satisfaction at Griffin's reported offer of Dion Waiters and Anthony Bennett for Kevin Love. It wouldn't surprise me if that total basket case of a franchise in Minnesota bit on the offer.

That trade offer is like saying to a guy with a Ferrari, "Hey, if you give me your Ferrari, I'll give you herpes." Only in the NBA are such propositions given serious consideration.
JohnFloyd,

That would be a sweet deal for the Cavs.
But there has been reports of the Wolves saying "No wiggins, no deal."
I mean, Flip isn't the brightest GM, and he does a lot of chicanery around his country-club buddies, but he frankly isn't outright stupid.

Bennett is worth NOTHING right now. And pretty much 29 teams agree on this. Cleveland can keep deluding itself about potential, but you cannot erase that he had essentially the worst rookie season of all time, and is the first #1 overall to go to the D-League. He's a negative asset and only a decent sophomore campaign is going to erase that.

So let's start there. If CLE does not want to include Wiggins in a deal, that's totally up to them, but including Bennett in a deal is literally making it WORSE.
Bennett didn't play in the D-league but he did suck. Now last he was not in shape and was injured most of last year so optimism can be sold just looking at the people gushing over summer league clips.
*last year
I read something about a proposed Klay Thompson and Tristan Thompson to Minny scenario, for Love to CLE, and picks to the GSW. Where are these alleged "insiders" getting their sources from? LOL! Also, if I'm CLE, while Thompson's not a great big, he's still productive. No way I give him up in favor of Wiggins.

Imo, a package deal consisting of Wiggins, Dion Waiters, and MIA's partially protected 2015 pick for Love and the 3 yrs left on Martin's deal would probably close the deal. I agree, Bennett's most likely not going anywhere. The only attractive thing about him at this stage, is that his contract is partially guaranteed. CLE own a team option they can decline after this season.
Honestly, I would give up Irving if Minnesota threw in Rubio. Thompson is a decent young player but they also have Zeller.
No, CLE traded Zeller to clear cap space so that they could give Bron the max (for 2 yrs). Obviously Love and Varejao will still be a formidable front line, but Thompson, Varejao, and Love will be even better (not to mention both Love and Varejao are injury-prone). Unless CLE intends on signing Ed Davis and another productive big to off-set a potential Love/Varejao injury, I say hold onto Thompson.
Well my point is that no player besides James should stop Cleveland from making a deal.
Oh, I agree. If we're talking that Minny will only do the deal if Thompson or Varejao is included. Then I understand the rationale behind trading one of them. But if you can get the deal done w/o having to dangle either Thompson or Varejao, then I say you should exercise all other options, excepted LeBron James ofc.
Agree w/ DreSmoove
"Bennett is worth NOTHING right now."

I'd be surprised if this is true. Regardless of having a terrible first year, he was the #1 overall pick. That type of pedigree, coupled with the ability to decline future team options on his contract, is likely worth something.
I don't know why GSW didn't want to trade Klay Thompson for Kevin Love. Love is a much better player.
@xitongzou

Nobody knows. They even have an easy lineup shift (both Livingston for 15 minutes at SG, and Iggy for 25 at SG, while giving Barnes more minutes at SF) so it's not like they're opening up a gaping whole. And, on top of that, they'd probably be taking back a solid 3pt shooting SG in Martin. Makes absolutely no sense, except that Klay seems to be Jerry West's guy, and he seem to have a lot of influence in the Warriors' FO.
They could have Barnes too if they were willing to part with Dieng.
@xitongzou

Because only like 4 out of the 30 teams seem to know what they're actually doing (ATL, MEM, SA, & TOR).

Also, Jerry West is a moron (I don't give an expletive that this guy is the logo of the NBA). This is the same idiot who said that the current NBA was watered down by players who only know how to dunk/lay up (e.g., take high percentage shots) and shoot 3's (which are converted at about the same rate as mid-range/long-range 2's). Basically he laments the death of the mid-range game (which is an exaggerated statement in of itself), and cites it as a cause for why the league is (allegedly) inferior today. Yes Jerry, please tell us how much better the league was in 1961, when there were 8 teams, and they were collectively shooting ~41% from the field lol.
Some dumb eastern conference team is going to offer Klay Thompson something like 60 over 4 next summer in RFA. At that point the Warriors either let him walk or make him the highest paid player on their team.

This, right now, is his absolute high peak as an asset. Not moving Thompson now, while people are drooling to get him, is real ultimate 'I have no idea what I'm doing' territory. I'm trying to be a fan of this team and they've made some smart moves lately but I really, really feel like Klay Thompson is the grenade they're drooling to dive onto here.
Chandler Parsons is the best example of a team passing up on a possible steal hoping for the right to overpay him. Paying Chandler Parsons $960,000 would have been a great steal. Paying him 3/46, as Morey realized, was average or below average value.

Also, as far as the choice between veterans and rookies or international guys goes, the minimum salary for someone who has 0 years experience is $507,336. The minimum salary for someone with 10 or more years experience is $1,448,490. Even if you're over the cap and all minimum salary players don't affect your cap situation (because of the minimum salary exception), that is $941,154 of the owner's money!
LAL sign Jeremy Lin and waive Kendall Marshall?

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