PS: It’s Crazier Than You Think!

关注的人都知道,NBA是阿布t to experience a frenzied summer of free agency. The new TV contract will give each NBA team a 33% boost in their salary cap for next year, moving from $70 million to $94 million. Teams, players and fans alike are trying to figure out just exactly what this will mean. In a recent fan post the writer described the impact of the new money as requiring teams to pay 1/3 more next year to retain or acquire free agents. It was correct in pointing out the dilemma, but it WAY understated the impact. The NBA is adding enough money to give EVERY single player in the league a 33% raise, but it can only spend that additional money on free agents this year! The result will be chaos and carnage! Day will be Night! Up will be Down! Left will be….You get the point. By the end of NBA Free Agent Apocalypse 2016, we could see a tear-stained fan standing outside the ruins of the Staples Center wearing a T-Shirt that reads "We had $20 million and all we got was this T-Shirt and Festus Ezeli!" There will be enough new money poured in to pay the top50 free agents a $14 million ayear RAISE(RAISE, NOT Total Salary!).

The goal of this article will be to point out some rational options in a world gone mad. There will be some math. There will be some economics. I will point out the need for a possible DeAndre Jordan rule that has nothing to do with free throws. How will teams and fans evaluate the summer that looks like South American hyperinflation from the 70’s? It may be that front offices need a new nerd to guide them through this process who has nothing to do with advanced NBA stats. Let’s get started:

The Math

The NBA has implemented a system that basically turns over its workforce (at least those eligible for free agency) every 4 years. There are a ton of variables (rookie contracts, teams exceeding the cap, shorter contracts) but the overall impact is that an average of 25% of NBA teams’ salary will be invested in each four year "class". It has to be noted that teams cannot spend this year’s windfall on anyone except for the 2016 free agent class. Everyone else is locked into contracts extending from 1 – 3 more years. The following table assumes that teams will spend all of their available money into 4 year contracts. They won’t all do this, but this is what would happen if they did:

Salary Cap Assumptions: 2016-17 - $94 million/2017-18 - $112 million/2018-19 - $106 million

Team Salary Allocation By Four Year "Class"

(In Millions of Dollars)

	Group One	Group Two	Group Three	Group Four	Total
2015-16	$17.5	$17.5	$17.5	$17.5	$70
	25%	25%	25%	25%
16 - 17	$41.5	$17.5	$17.5	$17.5	$94
	44.1%	18.6%	18.6%	18.6%
17-18	$41.5	$35.5	$17.5	$17.5	$112
	37%	31%	15.6%	15.6%
18-19	$41.5	$35.5	$11.5!!!	$17.5	$106
	39%	33.5%	10.8%	16.5%

Reminder: The extra $720 million added to cap space is in ADDITION to the amounts that this year’s free agent players already were paid.

Why Does the Cap Go Back Down?Simple Answer: Owner’s greed. To understand this, fans and observers can NEVER forget that a commissioner is the agent of the owners. For the good of the game, the massive new TV contract should have been phased in with 4 straight years of big increases. However no business is going to turn down money in its pocket today. The commissioner’s job is to serve the business interests of the owners even if it damages the game (Thus Roger Goodell). This is why the contract is front-loaded and actually goes down. Remember that ownership briefly floated the notion of "smoothing" the salary cap impact. This meant that owners would get their money up front and players would have to wait. It failed, even though there is obvious impact on 2018 free agents. Imagine watching your teammates getting massive contracts for 2 years and then being told that your class has to take a pay cut! It could happen.

Why would the owners spend all their money now?Why did the NBA need a salary cap in the first place? Owners couldn’t stop spending on players even if they lost money. There will be pressure on teams to spend on players since owners are now making more. Remember every team owner gets a $24 million raise of their own. Fans, coaches and even owners themselves expect to pay up to the cap to make the team better. In the case of teams with their own free agents, they will have to spend much more to remain the same. In order to understand owners’ actions, just try the following:

Stand outside a toy store and hand an 11 year old kid $100. Tell him he can spend it now or next week when everything goes on sale. He will spend the $100 before you finish the sentence and ask you to pay the sales tax (where applicable). NBA owners ARE that 11 year old kid.

Do any of you remember 2009 free agency? Detroit was going to make a splash in free agency and they had money to spend. Their prize: Ben Gordon for $50 million Charlie Villenueava for another $43 million. Having money to spend and a willingness to spend does not mean that there will always be great players to spend the money on.

Why not just wait for 2 years to spend money?Should teams try the 76ers strategy and just tank for 2 years? Here is the difference: Rookies are (well-paid) indentured servants. They have no choice in the pick. Witness Ben Simmons lack of enthusiasm for Philadelphia. Free agents have a choice in the matter. The salary cap limits how much you can offer anyone, so you can’t throw outrageous amounts at attract quality free agents when your franchise is a dumpster fire.In order to keep or acquire free agents teams need to be competitive.

Resetting the Market – A Changing Economy

A Salary Cap is a limitation on Free Market forces. Kevin Durant or LeBron James could demand $40 million of more and they would find a team willing to pay. Top free agents are limited under the cap. Free agents currently with a max contract will get a raise this summer, but it will only be in proportion to the rise of the over-all cap. The rise of the cap does not create additional players (Remember European players come over subject to rookie contracts). It just means more money (TONS more $$$) for free agents this summer. A massive increase in demand with no change in supply results in hyper-inflation. That is the NBA this summer.

From the chart above, 30 NBA teams have approximately $40 each to spend this summer. That is $1.2 billion they can spend, but only certainly players to spend it on. Find a list on the internet of potential free agents. Are there 5-10 players that would be worth $20 million under last year’s contract? 15? With the influx of $720 million in new money and the money that teams already spend on this year’s free agents, teams could spend $20 million/year for 50 free agents and still have $200 million left to spend on the left overs.

Markets need information to function properly. Usually that information comes from patterns of previous transactions. In the summer of 2016 the knowledge of how much a free agent should get flies out the window. How do you get new information? Owners and GMs can’t talk to each other. That’s collusion. Can GMs and agents start early discussions? No that’s tampering. At this point you can get more information from sports writers, bloggers and fan posts than any other source. Everything is a blank slate until July 1 hits. Then all hell breaks loose.

Player’s Worst Nightmare: It is finally your chance to hit free agency. Until this past season, it looked like you would possibly be looking for a new team, heading to the D league or to China. You were hoping to hang in the league. You finally established that you could be a rotation player, maybe even a starter. You would kill for $4 million a year. Your agent comes to you with an offer for $32 million over four years with the team you want. It is beyond your wildest dreams. You agree to the offer and pop the champagne. Life is great. You promise to name your first-born after your agent. Mama’s gonna get a new home. Then 2 days later you see your picture on an article: "Biggest Bargains of Free Agency". Players of less stature are getting WAY more money. Can you get out? You never signed the contract.

Team’s Worst Nightmare: You desperately want a big man in free agency. It doesn’t have to be the best, but you are willing to spend on an anchor for your defense. You identify 3 targets you would like. On July 1 you offer your top choice $72 million over four years. He agrees and you are glad. Then the days drag on and the money starts to dry up. Your choices B and C remain unsigned and you could obviously get them for much less. Buy you are committed to plan A for $72 million. Maybe you doctor can flunk him on his physical.

The Moratorium:有两次在一个运动员的职业生涯they make an informal agreement prior to finalizing the actual commitment. The first time is when they make a commitment to a college and before they sign their letter of intent. For an NBA free agent, the 2nd time is during the moratorium. Ten years ago, very few high schoolers backed out of their "commitment". Now with commitments being pushed earlier and earlier, virtually every recruiting class includes a few drop outs or drop ins once letters of intent are actually signed. In the NBA, commitments made during the moratorium are almost universally finalized. Prior to last year, Hedo Turkoglu’s backing out of his commitment to Portland was one of the few examples, and the contention on the player’s side was that he hadn’t completely committed. Last year, DeAndre Jordan’s about face spurning the Maverick’s may have opened the door to a new way of operating (Think of the change in fortunes of the Mavs and Clippers if he had just signed with Dallas. Mark Cuban had every right to be furious). At the least, it sparked a shortening of the moratorium to 5 days. At worst, it may mean that a deal may not be a deal until the contract is done. From a legal point of view, there is no agreement until things are finalized. If a player agreed during the moratorium and then died before signing, the deal would not be legally enforceable. If a hidden physical problem is disclosed the deal will not be finalized. But last year’s buyer’s remorse u-turn by Jordan (even though fans may sympathize with his reaction to being hot-boxed by his Clipper teammates) may have opened Pandora’s Box. In the case of a major, major miscalculation involving tens of millions of dollars, could a player or team just back out of a deal this summer. If that happens, then DeAndre Jordan may havesparked for a need to eliminate the moratorium completely. If only he could eliminate intentionally fouling for free throws.

What Will Happen on July 1?Despite this being a relatively weak free agent class, there are likely to be a record number of max contracts. But beyond that, players who are not considered part of a team’s "big three" may demand and receive contracts in the $15-18 million range. There will be a number of middling free agents that receive penthouse deals. While there may not be a consensus on which players deserve such money, remember that it only takes one team to make a player a multi-millionaire.

What Should a Team Do?

Preliminaries: Clearly every team needs to hand on to any cheap assets they can control over the next few years. Exercise any team options. Hold on to draft picks and players on rookie contracts.

Know Your Window: When is your team going to peak? In the next 2 years? In years 3 and 4? After that? There are only 3-4 teams that really have a good chance to prevent "Cavs-Warriors III – The Trilogy Concludes!" in 2017. Anybody else should not commit to older talent at inflated prices for the next 2 years.

Laser-Like Focus on Your Targets:There are a lot of free agents out there. What matters to your team? Shooting? Defense? Size? Every team will have to spend big to acquire or retain FA’s. Make sure you know who your team wants and when to offer. Because this market is so short and so fluid, hit your targets, get an answer and move on when necessary. You will find many teams putting take-it-or move-on offers to free agents.

Develop Alternate Strategies:The Internet will be buzzing with teams that are calling Kevin Durant or Hassam Whiteside at 12:01. The best pick-ups of the summer may come from teams that park on the doors of 2nd/3rd tier FA’s. Other tactics may involve front-loaded contracts (if it is still allowed) pouring extra money into the first 2 years, while saving money and creating trade assets in years 3 and 4.

Overpay for 2 Year Deals:团队想要竞争在未来2年and also want money to spend in 2018 when the cap shrinks. The solution: 2 year deals. However, players will push for 4 year deals. In order to get them to sign a shorter deal, offer a premium on a premium. Take a player who the new market indicates is going to get $13/year or $52 million over 4 years. Instead your team offers $36 or even $40 million over 2 years. The player will then be negotiating his next contract in a down market, but he has received extra money up front. Minnesota is a team that should employ such a strategy. If they keep and make a good pick with the 5th selection in Thursday’s draft, they could have 3 important pieces on rookie contracts. They will have the same advantage that the NFL Seahawks had with Russell Wilson on a cheap rookie contract. The Wolves are not ready to contend, they are not a destination place for free agents, and they could use some veteran help as they try and shed a losing culture. Paying near max money for mid-level talent may be the only way to get anyone to help this promising young roster. ( Even I don’t know HOW in the World Sacramento gets free agents this summer Is there any amount of money that can attract a player to that mess? When Rondo says that he never seen anything like it you KNOW it is bad).

Find Gaps in the Market: This will be a very fluid market in a very short amount of time. While most free agents will be "winners", some will win less than others. When will be bargains be found? On July 1? Near the end of the moratorium? 5 days later? The teams that strike during market lulls will be the big winners this summer.

Use of "Game Theory"and Economic Principles: 5 Years ago teams started adding Stat Geeks to their front offices. While some teams rely on advanced statistics and strategies more than others, they have now become main stream. Teams obviously do their own mock drafts to develop strategies for the annual talent selection. In this crazy new World, the teams that debate and develop ways of influencing, monitoring and conquering a changing NBA economic landscape may have an advantage in the summer of 2016 and beyond. Talent evaluation will only go so far when there is an earthquake shaking the NBA landscape.

What Should 2016 Free Agents Do?

Preliminaries:Opt out of any contract if you can. This is the summer to strike it rich. While the salary cap goes up again next year there is a deep class of 2017 free agents. Now is the time to strike.

Superstar Exception:For Kevin Durant and LeBron James and anyone else in the top stratosphere, taking a max contract for 2 years, with the 2nd year being a player option makes the most sense both in terms of dollars and cents as well maintaining control over their future options. Durant should not commit to OKC for one second past the time that Russell Westbrook does or doesn’t resign with the Thunder.

Get a 4 Year Deal for as much as you can:There is nothing wrong with wanting as much money as possible. It is the American way. For most 2016 free agents who are in demand this means getting the highest possible yearly salary for a full four years. Remember that when the cap shrinks in a couple years, other free agents will want more money. Sometimes timing is everything, and the 2016 free agent class hit the jackpot.

知道你之前ities: How much money does a player need? The easy answer is "as much as possible". We tend to think that all free agents with options should only sign with teams that could provide a chance for a championship. Once a player has options that meet his dollar threshold, "fit" is certainly an issue. Do you want to return to your team from last season? Will you get the chance to play enough? Are you the 1st, 2nd, or 3rd scoring option (remember that DeAndre Jordan originally signed with Dallas for the opportunity to be more heavily featured in the offense)? Will you have good teammates? How will your future and the team’s future mesh? There will be free agents this summer who get all the money they want and then end up in bad situations.

Don’t become known solely by your contract!乔约翰逊一直是一个很好的NBA球员吗?确定。But he has been more infamous for signing the last of the super-max contracts before the new labor agreement. Remember Raef LaFrentz EC? That wasn’t his official name, but for several years you would assume that his first name was "Raef LaFrentz" and his last name was "Expiring Contract". There are a number of players who are going to create poisonous situations with fans and teammates alike when their over-sized contract is not matched by their talents. It is great to be paid, but spending 4 years riding the pines and being despised is not a great way to live.

CONCLUSION

Certainly we cannot rate free agent signings this summer based on the actual dollar amounts because they will all seem ridiculous. The key is whether the signings fit into a thoughtful plan for the future. For the next four years being an NBA fan is going to be wild and crazy. Enjoy the Ride!