Saturday, February 21, 2009

Casualties of War

In previous posts, we’ve flagged basketball names that are just spoken flat-out wrong, from “Vitale” to “Kobe”. One of the oddest cases of bad pronunciations in basketball is a problem that pervades all major sports in the United States and Canada: the odd first-syllable stress when we speak of “offense” or “defense”. Have you noticed that these words always receive second-syllable stress in other contexts? Try saying the phrases “Department of Defense” or “The defense rests, Your Honor.” Stress on the second syllable, right? So why, then, would we switch the emphasis in an athletic context? Other sporty permutations of the word still place emphasis on the second syllable: Try muttering “Defensive Player of the Year” (a clear case of iambic tetrameter if there ever was one, making Ben Wallace nearly Shakespearean) or “He’s a subpar defender.” Yet, the iconic chant to spur your team to guard their own goal better is “DE-fense!” (which is probably unique to basketball) and the knock on Amar’e Stoudemire is that he “can’t get back on D” (omitting the unstressed syllable entirely).

These problems recur with that word’s opposite. If I make a rude comment, I might worriedly inquire: “I hope you didn’t take offENSE” (iambic tetrameter yet again); a hagiographer might dreamily write that a politician or a military leader is “on the offENSIVE” — again, the stress is with the second syllable. But consider: For the past five seasons, the Phoenix Suns have boasted the best OFFense in the league and have led the league in OFF-ensive efficiency.

Stress shifts in spoken language are hardly unheard of, but they are usually regionally based. Consider “CON-tro-ver-sy” in the United States vs. “”con-TRO-ver-sy” in England or India. Or “FI-nance” over here vs. “fi-NANCE” across the Atlantic. Are there any other cases where these discrepancies are found only in one industry or walk of life?

Perhaps one motivation for the first-syllable stress in ‘offense’ and ‘defense’ is to distinguish: when commentators are likely to be talking simultaneously about a player’s or team’s performance at both ends of the court, it helps to stress what is different in the two concepts, and to elide what is common (the –fense part!). Also, loading all the oomph upfront in those words emphasizes the aggressive, go-get-it spirit required to succeed. Finally, it could be that these mutations just happened by chance one day and caught on, without anyone thinking much of why. The sports world has venerated John Madden and Yogi Berra as commentators, although their elocution hardly made them Laurence Olivier or Alan Keyes. Finally, some linguistic analysts argue that stress shifts are more likely at faster speaking rates. This is likely to be the case in the rough-and-tumble toil of sports announcing. If only George Blaha could just chill out.

Thursday, February 19, 2009

One For You, Nineteen For Me

Well, the trade deadline is gone, and there’s a lot of odd analysis going down in hoopsland these days. This Rocky Mountain News article frets that “The Nuggets already have eight players next season committed to make about $66 million. That gives them $4 million for five additional roster spots if they want to stay under the tax line.” Well, our journalist friend sure is begging the question there. Is it reasonable to say that an NBA team sees the aggregate salary threshold triggering luxury tax as a bad thing in itself, rather than simply a wrinkle that must be considered in the marginal cost of players? The typical analysis fails to consider how profit-maximizers (whether idealized or rough-and-ready) make decisions. Similarly, this article from February 16th suggests that the likeliest reason why the Detroit Pistons traded away backup PG Alex Acker, he of the $711,517 salary, was so they could get under the luxury tax line, rather than as a business decision like any other: is the cost of the investment justified?

It makes little sense to say that the Pistons dumped Alex Acker so they could get under (or close to) the luxury-tax line per se. Rather, one could say that given the Pistons’ aggregate salary position above the tax line, Joe Dumars noticed that, among other available roster shuffling options, by cashiering Acker they could save twice his annual salary of $711,517, or $1,423,034. Presumably if the Pistons were only $1 above the luxury tax line, they would have been less keen to jettison Acker to save $711,517 (his total salary, plus $1 in tax). And if, say, Acker’s annual salary were $20 and the Pistons were $5 above the luxury tax line, it is hard to imagine their dumping Acker just to save $25. There is some value to carrying a third point guard. And there is a nonzero probability that basketball value translates into economic value: if Acker is able to fill in during a couple games when Rodney Stuckey is injured, say, and he helps the team win a couple games and improve playoff position, his presence could be responsible for millions of dollars of extra revenue from playoff home games.

Perhaps we could say that owners are chary of paying luxury tax because they do not want to help competitor teams. But the orders of magnitude here are tiny: by dumping Acker, the Pistons avoided paying out $711,517 / 23 , or about $30,936, of luxury tax to each team (the dollar-for-dollar tax penalty is divided equally among all non-tax-paying teams). It is hard to imagine this making much of a difference to any individual owner’s P&L statement. Besides, a lump-sum cash transfer should not affect the recipient teams’ marginal decision-making regarding rosters: presumably, the acquisition or dumping of players should hinge on whether their contract value is justified by the attendant extra revenues, regardless of the team’s existing profit-or-loss level. Perhaps tax considerations (and here we mean real government tax, not NBA ‘tax’) might influence an owner’s decision-making if his distributions from the team corporate entity suddenly increase. Additionally, risk-averse owners might be slightly more willing to take on the gamble of a new player contract when they perceive they are pulling in more cash flow from the team. But again, thirty thousand dollars should hardly make much difference, so it is hard to see why Joe Dumars would think in such a way.

I have been assuming here that general managers act as pure profit-maximizers on behalf of their owners. But in some cases, owners place (the perceived chance of) winning above profits, such as when Knicks owner James Dolan signed off on Isiah Thomas’s rash acquisitions of Steve Francis, Jalen Rose, Jamal Crawford, and the like. Other rich or overzealous owners like Mark Cuban or Paul Allen may act similarly. If this is the case, then all bets are off: tax-paying teams would be less likely to worry about the tax, and also less likely to worry about transferring cash to other teams.

To be sure, irrational economic behavior is not rare: both corporate and individual decision-makers often fixate on avoiding thresholds that are better seen as arbitrary points on a continuum of financial positioning. For example, grandmothers from the Great Depression are likely to caution, “Don’t take on debt. Pay off your loans.” Well, if you can borrow at interest rates lower than the rates of return you are likely to earn from investing that money, then you certainly should keep your loans, or borrow more. Heck, Merrill Lynch carried a leverage ratio of 28:1 at the end of 2007. A leverage ratio of 1:1, or less, is one (extreme) point along a continuum of possible outcomes, but hardly the only logical one. Similarly, there’s little use in fixating on one rule, “Don’t go above the luxury tax line”, if that constrains you from making prudent investments. Other economic actors use crude heuristics, rather than careful analysis, to make decisions. It may be that, given how the luxury tax line has been constructed under the Collective Bargaining Agreement [i.e. the tax line is set at (i) 61% of average team revenues, minus (ii) average team benefits for players, including pension, 401(k), medical, and life insurance], breaching that line is a useful signal that a team is probably paying too much, given the typical magnitude of other team costs such as leases, administration, marketing, and other overhead.

So okay, it’s possible that team owners and management, crippled by bounded rationality, are anchoring on the luxury tax line as a fulcrum of decision-making. But still, most team owners have acquired their wealth through outsized success in other businesses, so they know how to run a business; it is unlikely that they would be distracted so. There is little evidence that they are in fact making decisions as NBA reporters suppose they are. (Sadly, team revenues and profits are not publicly reported, and so we cannot correlate profitability against player salary outlays.)

What about the scribes who write about the NBA: why do they so blithely accept the salary tax number as some kind of Demilitarized Zone, not to be breached? One writer said that “owners treat the luxury tax threshold the way Dracula treats sunrise” . Well, to put it nicely, most NBA reporters probably got started as college sports reporters and worked their way up; though constant learning is ostensibly part of their job, they are not necessarily policy wonks. It is they who are more likely the boundedly rational ones, stuck in a conceptual scheme that makes no sense.

Tuesday, February 3, 2009

Just The Way You Look Tonight

The occasion of Michael Redd’s latest injury got me thinking about his career: a lot of hype with little payoff. In 2005 he was billed as the deadly shooter who could lift LeBron James to championship contention, but in the alternative, as Milwaukee’s sole star he has barely lifted them above .500. And the tale of Redd hurriedly rushing to Jerry Colangelo’s hotel suite for his Olympic interview has been told in a number of fora. Apparently Colangelo showed up at Colangelo’s door in a sweat suit, asked for the bathroom, and emerged a few minutes later in a suit and tie. This story denotes Redd’s respect for the game? I’d say it shows his lack of common sense and good judgment. He couldn’t have changed at his gym prior to the trip to Chicago? Or in a public bathroom somewhere else in the Chicago hotel? If Redd did that in a real job interview, they would literally shut the door in his face.

In general, it seems that NBA players have a strained relationship with looking good. When the league-wide player dress code was introduced in 2005, Allen Iverson whined that “You can put a murderer in a suit and he’s still a murderer.” Raja Bell quite idiotically griped: “I understand they're making it out to make us look better to corporate and big business. But we don't really sell to big business. We sell to kids and people who are into the NBA hip-hop world.” Has Bell never gazed at the fat butts in the courtside seats, the faces up in the luxury boxes, or the logo outside his arena? Last I checked, kids and hip-hop-heads didn’t earn million-dollar bonuses.

But some players know that, perhaps paradoxically, no man looks more bad-ass than he who rocks a fine suit. Individuality through uniformity is probably achievable only if you have the body for it, as most NBA players do. Jalen Rose greeted the dress code blithely, noting that “I’m a dresser, so it’s not going to be that much of a change for me.” Shawn Marion observed that “I think it is appropriate … you should be in a nice shirt and slacks.” And appropriately, Marion’s official NBA headshot has him looking Bond-esque. Most college players wear a shirt and tie in their official team photo, but somehow these guys lose their internal mother’s voice after they sign a first contract.

Finally, let us admire the Celtics, who looked bad-ass times seventy-three when they met President Bush last year. These guys should star in the next sequel of “Ocean's Eleven”.