The Bid Draft: An End to Tanking




The Bid Draft would end the NBA's reliance on ping pong balls.
The recent NBA trade deadline was most notable for the drama involving Dwight Howard and the Orlando Magic.  Faced with the looming specter of Howard’s potential departure as a free agent, the Magic were presented with the decision of whether to trade Howard or “risk losing him for nothing” as a free agent.  In fact, some argued that simply letting Howard go and becoming a losing team in the short-term was better for the team’s long-term competitiveness.  Howard ultimately waived his option to become a free agent this year, sparing the Magic this unenviable decision.

Nevertheless, the Howard quandary highlighted an issue that has garnered increasing attention in recent months:  If a team isn’t going to be really good, it’s better to be really bad.*  Sam Presti executed the most salient example of this strategy with his tear down of the Rashard Lewis/Ray Allen Sonics into the current Thunder juggernaut.  In response, we have seen what seems to be an increasing number of teams “tanking” for better draft position, either by trading away good players or by benching their best players with questionable “injuries” once it becomes clear they won’t be competing for the playoffs that season.  The belief is that getting a high draft pick is the easiest road to getting good again.**

*When even Michael Jordan has something figured out about team management, you know it’s entered the conventional wisdom.

**This study by David Berri argues otherwise.  While I think the study has some holes (perhaps a better study would be rating how teams with high lottery picks did a few years later) and I’m not a huge fan of Wins Produced as a metric, it is compelling evidence that being bad is not necessarily the quickest way to being good.  Nonetheless, NBA teams think tanking is the way to future success, so it’s still a problem regardless of whether it actually works or not.

The problem was neatly encapsulated by Jeff Van Gundy (2:00 mark of this video) and a subsequent article by Henry Abbott.  Meanwhile, tanking has become fodder for nightly ballosphere Twitter jokes.  Humor aside, the growing consensus is that tanking is a bad thing and serious changes in the system are needed.  The issue, however, is balancing the problem of incentivizing losing with the problem of competitive balance that the draft is meant to alleviate.  To these eyes, a hopeless, uncompetitive team in a particular city is a worse problem than the league incentivizing losing in certain situations.  Therefore, I believe solutions that award draft picks without any regard for team quality would hurt the game more than they would help.  Helping bad teams get good without incentivizing losing is a rather intractable problem.

The best solution I’ve been able to come up is a system I call the Bid Draft.*  It is quite simple: Allow teams with salary cap space to bid on the top draft slots. 





The basic rules: The salary cap space bid would have to exceed the rookie salary slot for the first pick in the draft, which was $4.4 million for 2011-12.  The rookie drafted with the “purchased” pick would have a cap number equal to the total amount bid, although he would only receive the $4.4 million rookie salary for the first pick.  The amount of the bid which exceeded the rookie’s salary slot would be distributed among the other non-rookie players on the team for the duration of the draftee’s rookie contract, although those players’ cap numbers would not change.**

*Feel free to propose alternate names, I’m not wedded to this one.

**There are two reasons to distribute the "extra" money among veterans. Most important is to assuage concerns from the players that veteran salaries would be negatively impacted.  Admittedly, veterans would probably still have issues because there would be less demand for veteran free agents if teams used cap space to buy draft picks instead, but they collectively wouldn’t be making any less money. The second reason is to avoid the problem of overpaying unproven rookies, thus reducing their incentive to improve.

How would this work in relation to the existing draft?  Teams willing and able to use additional salary cap space on rookies would jump in line ahead of teams in the traditional draft, forfeiting their own draft pick in the process.  Those teams would be required to bid above the maximum rookie salary slot for that pick.  So if the first pick in the draft would normally have a salary of $4.4 million, a team would need at least that amount of salary cap space plus whatever additional amount it wanted to bid.  Each team could only purchase one draft pick per year using salary cap space.  If the team had multiple draft picks, it would forfeit the highest of those picks when signing a player with cap space.*

*I spent a ton of time coming up with a system akin to waiver wire bidding in fantasy auction leagues, under which teams would submit bids for individual players.  But then I realized simply bidding on the draft pick itself would be far less complicated.

Here’s how this would work in practice.   Each team with salary cap space exceeding $4.4 million would be invited to bid on the first pick on the draft.  After that, the same process would occur for the second pick in the draft, the caveat being that any winning bid would have to exceed the $4.4 million rookie salary for the first pick in the draft.*  The process would continue with each successive slot in the draft until there were no other teams with at least $4.4 million in cap space, or no teams willing to bid over $4.4 million for that draft slot.

*Another way to do this would be to only require the team buying the pick to exceed the rookie salary slot for that particular pick.  For example, a team attempting to purchase the 6th pick would only have to bid in excess of the $2.6 million rookie slot for that pick. I prefer making a team use at least $4.4 million in cap space to purchase a pick because it allows only teams who are willing to invest significant resources to do so.

The key advantage to this system is that it would eliminate the incentive for intentionally losing games on a nightly basis.  While there would remain some incentive to tank because the “regular” draft order would still go from worst record to best, the import of those picks would be reduced because most years teams with salary cap room would jump ahead of the teams with the highest picks.  Teams with salary cap room would be free to compete as hard as they could the preceding year without having to worry that winning would hurt their draft position, while teams without cap room would be less likely to tank for, say, the 5th pick in the draft.

This reduction in tanking would not be without a downside.  The draft’s original goal of helping bad teams improve would be somewhat compromised, as there would no longer be so direct a relationship between losing and a team’s ability to acquire the best rookies.  However, bad teams would still generally benefit because it is much easier to have salary cap room as a bad team.*  As these excellent articles by Larry Coon show, the league’s best teams are all well over the salary cap--no surprise given the fact that good players usually make more money and successful teams are willing to pay to keep those groups together.  Meanwhile, the teams with the most cap room next summer include the Suns, Cavaliers, Blazers, Celtics, Pacers, Hornets, and Nets.  Only exceptionally well-managed teams could compete for a championship and amass enough salary cap room to afford to jump ahead in the draft and nab a top rookie. Plus, if they had the cap room these teams would likely focus on signing veteran free agents who could immediately put them over the top. Nevertheless, the league could implement a safeguard to prevent the ultrarich from getting richer by prohibiting teams which made the conference finals from using salary cap room on rookies.
*This would also help eliminate the problem in recent years of bad teams such as Washington, Sacramento, and Charlotte having salary cap room but being unable to use it without drastically overpaying veteran free agents.  It will also help teams well below the cap more easily reach the league’s new salary floor without having to overpay for veterans.

But most years, the highest quality teams able to create cap room would be those in the second tier of contenders, such as the Rockets, Pacers, or Sixers this year.  This would eliminate the time-tested maxim that the middle is the worst place to be if you hope to eventually win a championship.  

This post is intended to be a broad outline of this proposal.  Since this is a very rough starting point, I would love to hear your comments on how this system could be improved. A few issues that have occurred to me:

  • Deadlines with respect to free agency and exercising contract options would need to be adjusted so that teams could know how much cap room they would have before the draft.
  • The league would need to have the bid process occur at some point well before the draft, perhaps around the time the lottery occurs now.

  • Teams that bid high amounts for rookies could be stuck with albatross cap numbers for those rookies if they did not pan out.  Current rookie contracts are only guaranteed for two years so this should not be an enormous issue.  To the extent one exists, one fix would be to allow teams who bid drafted a player to wait until the end of the rookie’s second year to decide whether to pick up his third year option, so they could have more information on the player’s performance level.

  • What would happen to the lottery?  Its purpose was to eliminate tanking, so I think it could be safely eliminated on the assumption that at least a few teams would use cap room on rookies each year.  Plus, keeping the traditional lottery could really burn the team with the worst record in the league that didn’t have any cap space, pushing that team even further back.*

*Then again, if a team has the worst record in the league and no cap space it probably deserves such a fate.

Sadly, the elephant in the room is that neither the league or the players seem likely to agree to this system. Plus it is unlikely to be changed until the expiration of the current CBA at least 6 years from now.  Since any changes to the draft would need to be collectively bargained to avoid running afoul of antitrust laws, the players’ association would be required to assent.  It’s hard to imagine veterans agreeing to a system that would chill bidding on veteran free agents as teams preserved their cap space for the draft, even if that money were eventually distributed to them anyway.*

*We saw during the lockout that for many players, system issues and freedom of movement were more important than the raw amount of money coming into their pockets from the division of BRI.

Nonetheless, the current system skews too far towards encouraging losing. This results in fans paying good money for scores of terrible games at the end of a season. Allowing teams with salary cap room (and the willingness to invest it in rookies) to “pick” higher in the draft would eliminate the direct incentive for losing games while still furthering the goal of helping bad teams improve.

7 comments:

  1. Joel CharalambakisMarch 27, 2012 at 1:04 PM

    Pretty cool idea. I don't think I could have ever thought of something like this.

    Something I've been thinking of is that I'd wish the FA market were a bit more open to every team. The NFL awards draft picks to the worst teams but due to it's hard cap and salary structure more player movement is common, even with big names. Teams have to think long and hard about best value when evaluating their personnel and we frequently see rookies get drafted to replace a player, even someone young, due to the latter's impending FA status.

    Currently, I don't know of any other way for NBA teams to improve besides tanking and hoping they guess right in the draft. FA is often closed to them to really good players due to Bird Rights, the soft cap and because players can conjure enough leverage to push for a destination regardless of a franchise's cap situation.

    Opening up the FA market gives another avenue for teams to get better and provides more competition for resigning their own players to avoid overpaying mid-level guys.

    No way something like what I'm thinking gets adopted...guaranteed money and the insistence on avoiding a hard cap I think is too much to overcome. I'm new to all this but would love to get feedback.

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    1. The big difference between the NBA and football is the fact football contracts aren't guaranteed. The other is that one player (with the exception of a QB) doesn't make nearly the difference in football as the NBA. In football you can have simply good players at every position and expect to win big. In basketball, winning a championship without at least one top 10 player in the NBA is well nigh impossible.

      That said, I completely disagree with your idea that stars move more easily through free agency in football. With the franchise tag, star players in the prime of their career almost never move. Drew Brees would be a free agent right now if not for the franchise tag. Same with Matt Forte.

      Also, a lot of your concerns with the "hard cap" are assuaged with this new more punitive luxury tax and additional revenue sharing, which are essentially going to create a hard cap at the luxury tax line for all but a few teams in a few years.

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  2. Yup...fully agree about the guaranteed money being the biggest difference. That's why I mentioned it at the end though I didn't give it it's due amount of space.

    On players moving in the NFL we obviously disagree. I look at guys like Mario Williams, Curtis Lofton, Vincent Jackson, Carl Nicks changing teams and I think of the big boost they provide their new teams. Maybe they're not the 1A star like a Brees or Forte but they're studs, in terms of talent, at they're respective positions. They are dynamic difference makers to the overall complexion of the team and that's what I'd like to see. I don't think it's possible to create a system where each team has a superstar because we don't have 30 superstars and never will. Regardless, does anyone believe that guys like Eric Gordon, Brook Lopez or Roy Hibbert are going to walk this summer for nothing? Franchise level guys? Hardly. But talented, young players? I'd say so.

    Plus the franchise tag has a limited number of times it can be used and on a limited number of people.

    Personally I'd also rather see a true hard cap with a removal of max salaries. Maybe with a higher cap number. I think it would create a more transparent player market, appropriately evaluate players, and give incentive to management who can discover value.

    It seems like we both agree that as long the draft is the only avenue towards cost-efficient talent then tanking as a franchise strategy will continue to be present.

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  3. I'd also say that we see numerous players get portions of their contracts not guaranteed...Odom, Vince Carter, and if I remember correctly Ronnie Brewer, Korver and Rip aren't fully guaranteed in their final years. So maybe what I'm thinking of would require that players and teams negotiate guarantees far more frequently but I think the groundwork is there.

    Really do enjoy your posts and your tweets man. Keep it up. I'm new to this and eager to learn.

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    1. Thanks, appreciate the kind words.

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  4. Maybe making a mountain out of a molehill here, but has any top 20 player in the NFL ever been signed as a free agent? Only one I can think of was Reggie White in 1993. Top 20 NFL players never even get traded, the most recent I can think of is Eric Dickerson in 1987.

    The guys you mentioned are not close to top 20 players. Williams probably wouldn't be available if he weren't coming off a torn pec. Nicks was only available because the Saints had to franchise Drew Brees; if not they'd probably have franchised him.

    In contrast, NBA has had LeBron, Bosh, Shaq, McGrady (first time not yet top 20 but immediately became so), Grant Hill (was awesome at the time), Stoudemire, etc etc etc. And that's just free agents; there have been a million more via trade. NBA player movement is way more exciting than football.

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  5. haha, I guess it depends on your opinion of Peyton nowadays but I wouldn't put him that high. Scouts Inc of ESPN did have Nnamdi as 16th overall before he went to Philly and while I'm not a football guru I hear his problems in Philly are more schematic than talent.

    That's definitely a good list of guys but over the course of 15 years I think there's plenty of cases where guys don't change teams.

    I know you didn't mean to go into a whole NFL v NBA system comparison because even I'll admit it doesn't have the best merits. But I look at the NFL where teams can make drastic jumps year to year. SF this past season for example. Or the Rams with Warner...even though they missed out on the playoffs in between Super Bowl appearances they built a team pretty quickly that had long term viability in terms of its core.

    Perhaps my premise is flawed but it's good to flush these out sometimes...living in KY people here can't stand the NBA. Drives me nuts.

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Keep it clean.