Taylor and Kahn Get it Wrong (again)

If you are on Twitter, and follow any NBA people at all, you heard lots of opinions yesterday about Kevin Love's near-max contract extension, for 4 years, with the fourth year having a player option. So, let's be frank: barring injury or huge dropoffs in production, there is nearly zero chance that Love exercises that option (regardless of whether he wants to remain a Timberwolf, since he'd make more money by opting out and signing a new contract), so this was a three-year extension. It's truly hard to imagine how a management team could screw up while signing the team's best player, but somehow, Taylor and/or Kahn managed to do it.

It's not often I agree with John Hollinger (insider), but on this issue, he has nailed it:

As I noted above, one of the two reasons to do an extension is to lock in a superstar for as long as possible. Max contracts for superstars are the best contracts in basketball; as Henry Abbott has already noted, LeBron's value is probably about $50 million a year, so getting away with paying him $15 million puts his team at a massive advantage. With players of this caliber, the biggest threat isn't overpaying them; it's that they'll leave as unrestricted free agents, when everybody in the league is trying to pay them and the rules limit the amount.


Because of that, I had figured no sane team would ever offer a superstar player an early opt-out, especially one in a smallish market renowned for frigid winters.

And for what? So they can keep a "designated player" option around for Ricky Rubio? We don't even know whether Rubio is a max-caliber player, let alone one worthy of signing to a five-year deal three years from now. And if Love is already gone by then, what's the point?

It's truly staggering to me that a man who has made billions has such a clear lack of understanding of the basic economics of one of his businesses. One of the most basic facts of the NBA is that the midlevel veteran talent is overpaid, good rookie players are underpaid, and MVP-caliber players are way underpaid. Basically, Taylor tried to play hardball with Kevin Love and got swindled in a huge way. And all for "future flexibility". Wait, so you didn't want to lock up a franchise player so that you could later, maybe...lock up...a...different...franchise player? Yeah, Mr. Kahn (Taylor), there's a reason I keep this GIF handy for my Timberwolves posts, because this is your management philosophy in a ****ing nutshell:

Bird. In. The. ****ing. Hand. This is not rocket science.

Let's review some interesting details. Kevin Love is currently 23, so when he opts out (and he will), he'll be 26. Huh. Here's an interesting fact about players, which you might have come across if you read David Berri's posts on the Wages of Wins Journal: players tend to improve when they are young, and their performance peaks around their mid-twenties, where it more or less plateaus until they are 30, and then starts degrading; at some point in their 30s, it usually falls off a cliff (but it's hard to predict when). Berri covered this in lots of articles (and his books), but perhaps the most relevant is a piece he wrote in response to a study about how Derrick Rose is probably going to get even better:

The David Biderman article he references appeared in the Wall Street Journal in December of 2009.   At that time, I added a few thoughts (see A Quick Note on Aging in the NBA) in this forum.  For those who don’t wish to click on the link, here is what I said back in 2009 (with a few more notes added in response to what Telander said):

  • Via a study of NBA players from 1977-78 to 2007-78 (a study discussed in more detail in Stumbling on Wins), we found that an NBA player generally improves until he is in his mid-20s.  Performance after this point is not much different until a player reaches about 27 or 28 years of age.  After that point – and especially when a player passes the age of 30 – performance starts to decline more noticeably.

Now, let's review the economics of the situation. Currently, the Timberwolves have Kevin Love over a barrel (financially speaking). $60million over 4 years is not the $80 million over 5 that he wanted, but it was way more than what he could get; if Love refused an extension, some other team might have offered him the same amount, but there is a real possibly no one would, since, knowing that Minnesota would match, all it would accomplish is a 24-hour salary cap lock. Or, he could play for $6.1 million next year and become a restricted agent. But then he'd be sacrificing $10 million next year just to make $16 million 5 years after that. And this contract gives him $16 million already, and he'll likely make $16 million for the forseeable future, so playing out the one-year qualifying offer is just delaying his payday by a year. See the hamster wheel analogy above.

So. The Timberwolves had Kevin Love in a bad negotiating spot. They knew this. By some accounts, they lorded it over him, handing him a contract in the training room, etc.  They were definitely playing hardball. And playing hardball is fine. But you should know what the hell your homerun scenario is when you are playing hardball. And your homerun scenario is most definitely not "Our franchise player will be an unrestricted free agent just as he enters his prime years." The Timberwolves were presented a choice. Behind door #1, they can have some financial flexibility in three years to use on who the hell knows what. Behind door number two, they can lock up an NBA-MVP-caliber player for two years of his prime at a fraction of his economic worth. They chose door number one.

Seriously, you have got to be kidding me. If we estimate Love's economic worth at about $30 million, they basically gambled on losing a projected 2-year, $28 million profit in three years time for...wait for it...."flexibility". Even in a best-case scenario where he opts out and re-signs, the Timberwolves will end up paying more for the two years they could have locked up, so they lose around $5-$10 million in profit. Oh, and they acted like such arrogant jerks during the process that I am sure notable free agents over the next few years are not going to be thrilled about working for David Kahn or Glen Taylor. And, Mr. Kahn, let me clue you in on something: you need players to see you as a great guy and to want to work for you, because they sure as hell are not signing in Minnesota for the weather.

Furthermore, if Love were to walk after 5 years, this would be bad, but less devestating; as we note above, he'd be 28, and beginning to decline (gradually, sure, but still). If he walks at 26, you lose a player entirely in his prime.

Sheer Idiocy. This is how negotiations should have gone:

Love: I want 3 years, $45 million.

Minny: No, we know your options are limited as an RFA and we've got the leverage here, so it's 5 years, $80 million or we'll talk again in the summer.

Instead, they went like this:

Well done, messieurs Taylor and Kahn, well done.