The Old Familiar Sting

There are certain NBA teams that are currently not very good, and don't show much possibility of becoming good anytime soon. Specifically, their core has an average age over 25, without much room for significant improvement. They don't have significant trade assets that are not integral to the team, and they probably will not receive a very high draft pick in the next couple years.

Specifically, I am thinking of:
Indiana (9-20)
Charlotte (12-17)
Toronto (15-17)
New Orleans (13-15)
Philadelphia (7-22)
Washington (10-19)

What should these teams do? If their owners wish to someday put a championship-contending team on the floor, then they need a new strategy. Trading the team's second-best or best player (see Miami in 2008, Minnesota in 2007, Portland in 2004, or Atlanta in 2001) is probably the smart course of action. Hence, most of Bill Simmons's rather creative trade proposals in his recent column dated December 23rd involved, say, Toronto trading Chris Bosh, Washington trading Antawn Jamison, Philly trading Andre Iguodala, New Orleans trading David West, Charlotte trading Gerald Wallace, and the like. This would probably be devastating to fans of those teams, but they don't have much hope for glory right now, and it's time to invest in the future.

Of course, "rebuilding" is a risky strategy. You could score big in the draft and pick Kevin Durant and Russell Westbrook in consecutive years, say. On the other hand, you might pick up Emeka Okafor and Sean May as your lottery haul, and then you will be consigned to mediocrity for awhile. So much of a franchise's value hinges on ticket and merchandise sales, which in turn is driven by star power. There is a good case that scouting budgets should follow a cycle: high in mediocre years just before rebuilding begins and correct draft picks are crucial; low once the franchise has assembled a young core and you want to let that melange stew and simmer; and moderate during championship-contending years (where the addition of role players like James Posey and PJ Brown to Boston can help reel in a title).

What's more, the objective function of owners probably varies. Although on-court success probably drives team revenue, the correlation is not perfect. Some owners, like Mark Cuban, want to win, profits be damned. (It helps if you are highly liquid thanks to a sweet business deal you made in 1999.) Other owners, like Jerry Reinsdorf in Chicago, are able to bring home big profits every year while purveying consistent mediocrity, the Jordan era notwithstanding. In the older, pre-television days of the NBA, team owners were entrepeneurial promoters who just wanted to make a dollar of profit off of their teams (a milieu discussed by David Halberstam in Breaks of the Game, but today there are some owners who delight in owning a team just to be a player in popular sports culture -- to own a locus of identity for millions of people. But most owners, such as Jerry Buss, still want to wring profit from their team.

There is something of a principal-agent problem here (albeit one with multiple principals): Every fan on the planet thinks the team should maximize wins, but to their frequent frustration, the owner, likely a shrewd businessman all his life, thinks about P&L first, second, and last. Why did Phoenix owner Robert Sarver insist on selling draft picks (which could have become Luol Deng, Rajon Rondo, Marcin Gortat, Rudy Fernandez, etc.) during the team's recent peak? If we dispense with normal corporate law and consider fans the true stakeholders, then the owner is in some sense the "agent" tasked with delivering happiness to the team's fan base, but he is self-dealing by considering his personal financial needs first. The Toronto Raptors, for example, are quite profitable despite never putting a championship-level team on the floor in their 15 years of existence. (On the other hand, the Green Bay Packers, who are actually owned by their fans, have not necessarily out-performed the rest of the league since Bart Starr left the team. The Pack only managed one Super Bowl in 16 years with Brett Favre; top QBs like Montana, Aikman, Brady, Elway, and even Roethlisberger have each brought home several more.)

The Raptors are a special case, actually, as they are owned by the Ontario Teachers Pension Plan. Should we begrudge elderly Canadian classroom veterans their right to a happy retirement and a steady return on assets? Refusing to satisfy Vince Carter or Chris Bosh with top-quality talent may be self-dealing, but it is the warmest and fuzziest case of self-dealing I've ever known.