The Seattle Scientists — an alternative to the New Orleans Mess

You all know by now — the New Orleans Mess tried to trade Chris Paul to the Lakers (involving the Rockets as well), but the other owners, who jointly own the Mess, stepped in and blocked the trade. The trade has quickly become an argument about the small market/big market dichotomy in the NBA. My brother Conor sent me a standard response from Matthew Yglesias at Slate. Yglesias argues that artificially preserving the talent on small market teams is misguided:

It’s not clear to me why they don’t just eliminate this New Orleans franchise. Everyone knows there are too many NBA teams. Nobody wants to own this team, nobody wants to play for it, and there’s no a priori reason to believe an NBA franchise in New Orleans could ever be financially viable.

Yglesias and many others feel that the Mess and maybe a few more teams should be “liquidated” and “replaced” in some way. Ideally, they could be moved to a big market, where the financial returns to winning seem higher. However, eliminating and moving teams is bad press. I also think that keeping teams in the flyover zone is important, even if they are not financially viable on their own. In economics-speak, the league is a general equilibrium system, where the finances of each team depend on the other teams’ performance and the overall league structure. Prima facie “partial equilibrium” returns to moving talent to the big markets may be misleading, if doing so effectively kills small market teams and their fans.

The NFL — the most profitable professional sports league in the U.S. — suggests a different approach. A league executive told me that the NFL likes its generous revenue-sharing system because it maintains stability while messy teams (for example, the Jaguars) try to figure things out. The Jags may be awful to watch right now, but at least their ownership is under control. Revenue sharing combined with cap rules also evens out salaries, enhancing competitive balance. I think that competitive balance (through the flyover zone) and stability are far more important than trying to maximize the market return of each team individually. The NFL is the proof.

None of this is new thinking, though, and it’s not a realistic short-run strategy for the NBA (they just ratified a new CBA — doh!). My finance PhD friend Felipe sent me a nice Moneyball update by Tyler Cowen (of Marginal Revolution fame) and Kevin Grier that got me thinking about how to help small market NBA teams. Cowen and Grier note that the hunt for undervalued assets in baseball is getting harder and harder. The rich teams found the undervalued assets too and bid up the price. Salaries explained only 2.2% of MLB winning percentages from 1986 to 1993 but explained 27.1% from 2004 to 2006. Understanding how teams win actually helped the rich teams once they figured it out, since rich teams can pay the most for the good stuff.

I don’t think that this has happened in the NBA yet. More and more teams have advanced stat departments (Daryl Morey and the Rockets have paved the way), but there’s a lot more room for strategy variation in the NBA, so it might be easier to stay a step ahead. My possibly naive view is that defense, intelligence, and effort are underrated, and a team could run a system that rewards those skills even more than traditional NBA systems would.

Instead of the New Orleans Mess, we could have the Seattle Scientists. The Seattle Scientists are the brainchild of discussions with my buddy Tony over the last couple years. The city isn’t so important, but Seattle is a highly educated city with a strong basketball culture (before the SuperSonics were spirited away) that we think would identify with the Scientists.

The idea has two parts. First, run a system that will reward different skills. Our thought is to go with the most evolved version of Paul Westhead’s breakneck offense that was featured on ESPN’s 30 for 30. Westhead had some success with this offense at Loyola Marymount and even more success in the WNBA, but didn’t do that well in the NBA. What really interested us, though, is the version that David Arsenault runs at tiny Grinnell College in Iowa. It’s even faster, has full line changes like in hockey, and presses hard on defense.

The second part is searching for players who will work as hard as possible in a system that rewards effort. The system should create easy shots, so offense skill won’t be as important. We would also target good press defenders, which probably isn’t on many NBA team’s radar. By using a different system, we would create our own personal undervalued assets.

Of course, Westhead’s run and gun didn’t work very well with the Nuggets. Maybe his team didn’t have the right skills, but it’s also possible that the talent level is so distilled in the NBA that it’s hard to win games with a system alone. With LeBron James running around the court, basketball starts to look more and more like an individual game. What shocks me is that small market teams don’t experiment more. The Seattle Scientists would surely generate excitement. Every team would have to answer questions about how they prepare for the Scientists and how they recover for the next game in the middle of a back-to-back-to-back. It would be fun, which is what every league wants.


12 responses to “The Seattle Scientists — an alternative to the New Orleans Mess

  1. There’s a huge problem with the optics of the New Orleans deal. The league should run the team like a bankrupt company in chapter eleven – Dell Demps (or whoever) should be given a budget by the owners to manage the organization independently as a going concern while the league figures out what to do with it. So, managerial decisions are traced back to the independent trustee and not to ownership who, as we’ve seen, has perverse incentives.

    I’m skeptical of the “Seattle Scientists”. While I’m sure that such a team could sneak in to the playoffs – it’s clear that teams tank large portions of the NBA season and consistent effort, even with middling performance, can win games during the mid-season – come playoff time, however, superior talent will win out. The team will be a perennial eight seed. So what good is that? It’s become clear that, due to the ability of a single player to change and organization’s fate through winning games and attracting talent, that the two ways to win in the NBA are either to 1) buy the talent once it becomes a free agent or 2) draft them. Since rookies are looked down for a low price for a set period, the second option is by far the most important for small market teams. There’s little incentive to try and build a team when the draft option is cheaper and easier. In fact, there’s a strong incentive to do something a bit less sportsmanlike…

    • I pretty much agree with your first point – that’s the simplest way for the team to be managed in its best interest (assuming you can trust Dell Demps). It’s not clear whether this will also be best for the league, but it’s also not fair for the league to use the Mess as a tool for their own gain, which is what’s happening right now.

      Regarding your second point, I’m not sure I view a perennial 8 seed as a failure. They would get out of the first round every once in awhile, and definitely make those mid-season games more exciting to watch. There are some NBA teams with very patchy playoff records that would love to be in the mix every year.

      I agree that the draft is an important source of talent for small market teams. However, it’s pretty uncertain as well. A few teams (like the Spurs) have had great success with the draft. Others (like my Pistons) flail around in the draft and come up with nothing but role players and flops. With the Scientists approach, players know why you are bringing them in. You are “overpaying” them relative to other teams, and in return you expect them to work really hard. I think that would bring more certainty (though probably a lower ceiling).

      • Not convinced. What’s the value in six extra games each year? Darko notwithstanding, top NBA draft picks offer greater certainty than top picks in any other sport – the real uncertainty is that there’s tremendous year-to-year variation.Talk to the Raptors about that one. I don’t know what the long term viability is of a team that will never go deep into the playoffs, will never sign a big star, and will never get its hands on the most under-priced asset in basketball: a max player in the first four years of his contract. It’s an interesting hypothesis that says much about the current state of the NBA, not, I think, a viable business plan.

      • Well, there are some questions worth taking to the data from this discussion. I agree that a max player on his rookie contract is tremendously undervalued, but with a few exceptions you need two or three of those guys to get over the hump, and that, I think, is hard to do with the draft alone.

  2. Also, I have some compelling research on late season tanking that I’ll share later in the season. The short story – bad teams tank, and they tank hard.

    • I can’t reply in the thread above. What you say is right. The question is whether or not drafting the max player makes it easier to sign complimentary talent (ie. they will take a pay cut relative to elsewhere to win) or whether it makes management more likely to open the the purse. My guess is that it’s easier to make a run with the max guy and one or two complimentary pieces than with a Scientists type team with those same complimentary guys.

      • You have to find the reply button under the first comment and trust it will put it below the other replies – I’ll try to fix that (kidding). Maybe the solution is to go with the Scientists model but still try to fit a strong draft pick into the system. He might hate you for drafting him into that, but if you did your due diligence you could probably find a guy that would appreciate it.

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