Wednesday, August 17, 2005

A Mea Culpa by Mark Cuban

By Dan T. Rosenbaum

Mark Cuban in his blog presents a fascinating discussion of how the financial realities of the NBA, along with his misunderstandings of these realities, eventually resulted in him waiving one of his best friends - Michael Finley. This blog entry should be required reading for every NBA front office executive. It is a textbook example of why teams need more than a "capologist" who understands the ins and outs of the collective bargaining agreement. Teams need to understand how the details of collective bargaining agreement, trends in revenue across the league, and the structure of team salaries and player contracts will come together to form a market for trades and free agency. Seeing how that market will develop and how it can be exploited is worth millions (if not tens of millions) to teams.

I have had the good fortune of having dozens (and maybe hundreds) of e-mail exchanges with Mark over the years, as well as meeting him for lunch last Spring. He is a very impressive person - friendly, smart, insatiably curious, and always thinking.

(As an aside, my wife who is better at judging this than me was impressed by how down-to-earth he was. As an example, he remembered details about my wife that I had briefly mentioned to him in an e-mail several weeks before. This despite the fact that he handles hundreds of e-mails a day. Also, he generously offered to assist on a personal matter that we never in a million years would have thought about asking his assistance with.)

Mark also has as good or better an understanding of the collective bargaining agreement as anyone that I have run across in the league or the player's association, for that matter. This is especially true when thinking about the implications of the rules as Mark is a damn good economist. (He is also a very good stats person.)

That said, Mark has so many irons in the fire that sometimes he just does not have the time to think carefully through the implications of every last detail. Combined with his aggressive decision-making justified by his remarkable life story, this can lead to mistakes - especially as new realities start to unfold. He alludes to this in his blog.

"The model for success in the NBA has changed over the past 6 years I have been in the league. When I first got to the Mavs, there was no luxury tax, revenues from TV and the league went up every year, as did the salary cap. That changed dramatically with the leagues new TV deal and it changed even further with this years new collective bargaining agreement. Rather than an environment where salaries could go up because the cap and revenues were going up, we entered an environment where trades were made almost exclusively for financial reasons and rarely for basketball skill reasons.

The Mavs tried to take advantage of the situation. When the annual league revenue increases stopped and a luxury tax loomed, teams adjusted their financial profiles. To get under the tax threshold, they offered good players packaged with horrible contracts. We took them. We hoped the talent would get us a championship before the number of bad contracts we took on in trades caught up with us.

It didn't happen."

In the end trying to buy a championship is too expensive in the NBA. It may occasionally work for the Yankees in baseball, but in the NBA the salary cap and luxury tax make it prohibitively expensive to go that route. Trying to buy a championship also tends to lead to teams with too many scorers and too few role players, another point Mark now realizes.

"More importantly we have gone from just trying to acquire talent to have assets that in turn might be traded for better talent, to making sure we have players that fill a role for Coach Johnson’s vision of the team. Today, and for the future with young players that we can develop to fill those roles on future Mavs teams."

The problem with the idea of "acquiring talent to have assets" is that too often these "assets" have large contracts. But if a player produces less than his contract is worth, he is not an asset to the Mavs or any other team that he might be traded to. This reality becomes more important in a league with a luxury tax that doubles (or more than doubles) the costs of adding a player. In essence, we get back to the principle that a player is an "asset" only if his marginal productivity exceeds the marginal cost he adds to the team.

And players who don't fit into a role on a team, i.e. don't have high match quality, to use an economics term, run the risk of seeing their asset value fall over time. Players who are poor matches often are not going to be happy in their roles. This leads to reduced productivity for the team and the perceived value of that "asset" starts to fall. Putting players into roles where they can succeed probably is THE most important task of coaches and front offices. It leads to more wins and increased asset values for player contracts.

To that end, I have one final suggestion for Mark Cuban. Last year Seattle exceeded all expectations not because they got better players (very little change from the previous year) or got a new coach (the coaching staff stayed about the same), but because they did a better job putting players into roles where they would succeed. Part (but not all) of the reason for that is because they added Dean Oliver. Dean is a great stats expert and good basketball person and his specialty is helping coaches and front offices put teams together that best utilize their players' talents.

I know that Mark is not a big fan of Dean's book, but that is somewhat beside the point. Look at the evidence. Seattle improved by 15 games without significant changes in personnel or in the coaching staff. Historically, spending more on players has on average cost about $3 or $4 million for every extra win. Even if Dean had only a one tenth probability of being responsible for a third of those extra 15 wins, he would be worth $1.5 million a year. Wouldn't it make sense to take a tiny chance and spend one tenth of that and have Dean helping you?

Last updated: 3:00 PM, August 17, 2005

30 Comments:

Anonymous Anonymous said...

i never realized he was that type of person... all the times he was on tv, the broadcasters made his image seem negative... i guess the media can portray a persons image like that... good article

8/18/2005 12:12 AM  
Anonymous Anonymous said...

most cities would be happy to have an owner like mark, although he comes off as arrogant and abbrasive he's still passionate about his clubs and is not afraid to take that extra step to win a championship

8/18/2005 11:49 AM  
Anonymous Kevin Broom said...

Did you just tell Cuban to pay Dean $1.5 million? Nice! :)

8/19/2005 1:43 PM  
Anonymous paulpressey25 said...

Dan, I own Olivers Book and think he adds value...I know you aren't attributing all 15 wins to Oliver, but that said, the reason the Sonics won 15 games more was Ray Allen played as the Superstar he is capable of playing....not Dean Oliver.

...Ray played that way in 2000-2001 for Milwaukee....then he hurt his ankle and let up for a couple years...he wouldn't take the ball to the hole among other things....and George Karl has talked about this at length........finally, last season, in a contract year, Allen threw his health fears to the wind and put out big time...and proved it was enough to help carry a decent team to a 50-win season....

8/19/2005 7:52 PM  
Anonymous Anonymous said...

not only that i think the improvement of luke the return of collison and the improvement in evans etc... helped a lot as well

8/19/2005 8:09 PM  
Blogger Dan Rosenbaum said...

On Dean Oliver, no coach or front office person ever scores a point, so their contributions have to manifest themselves through the players, i.e. by putting them into roles where they can succeed, i.e get better.

And interestingly, Allen's adjusted plus/minus has been almost identical the last three seasons. But of the three years, last year was (by a tiny margin) the lowest. Not much evidence of contract year improvement.

8/20/2005 10:19 AM  
Anonymous PaulPressey25 said...

Dan, I thinks that's where the statistical analysis of players has its weak point....IMHO you can use statistics to great effect, but you can't view them in a vacuum. ......when I watched the Sonics last year, I saw a much more aggressive, motivated and interested Allen on the court...and that guy inspired his team-mates as well.

8/20/2005 1:01 PM  
Anonymous Anonymous said...

That opinion is totally unfair to Ray. He has played hard throughout his career in Seattle. (I can't speak to his day-in, day-out effort in Milwaukee.)

8/20/2005 6:54 PM  
Blogger Dan Rosenbaum said...

PP: But I guess if the stats don't really apply in this situation, then why do they apply in any other situation when someone's personal observation contradicts what the stats say? Anonymous claims that in his (her) opinion Ray Allen had played hard during his entire time with Seattle and that your characterization of him is unfair. That squares with the data.

Also, if Ray Allen drove to the hole more, could that be because other players were used better than they had been in the past. Perhaps by players being better utilized, more driving opportunities opened up for Allen. So maybe what you see as increased effort on Allen's part is really just better utilization of players' skills - something that may have been partially made possible by Dean Oliver.

8/21/2005 4:16 PM  
Anonymous Paulpressey25 said...

Dan, I've watched Allen his whole career...you can put me, most Bucks fans and George Karl on one side and all the stats guys on the other side as far as opinions on his play and on-court attitude these last few years.

I'm not knocking statistical analysis, its why I bought Oliver's book and greatly enjoy your weblog and writings, but I am noting that there are instances when you have to toss the statistics out the window and look to other factors. It doesn't mean you toss aside statistical analysis, but you simply acknowledge that at certain times, there are things that may be happening on the court that plus/minus or PER ratings or whatever are not able to wholly explain.

This season will be a good test for Oliver, the Sonics and Ray Allen to see how they all respond.

8/21/2005 9:58 PM  
Anonymous Anonymous said...

"It doesn't mean you toss aside statistical analysis, but you simply acknowledge that at certain times, there are things that may be happening on the court that plus/minus or PER ratings or whatever are not able to wholly explain."

You mean when you've got an axe to grind?

I'm not bothered by your comments from a statistical perspective. Of course your general point is correct. But you're obviously biased when it comes to Ray Allen, and virtually no one who's watched him day in, day out in Seattle would agree with you.

8/22/2005 12:23 AM  
Anonymous Anonymous said...

in some cases if someone actually watches every game they do know more than what statistical evidence would show, i would know more about my home team than someone who intereprets statistical evidence, as a fan i do take the word of a person who actually watched every game over someone who quotes statistics,

8/22/2005 2:26 PM  
Anonymous Kevin Broom said...

How many fans watch every game?

How many fans understand the difference between "watching" and "scouting"?

When it comes to the opinions of most FANS -- even ones who watch every minute of every game -- I'd prefer statistical analysis. I elevate opinions that can be supported by specific comments and logical thinking.

"That's just what I see." Isn't worth much with me.

Statistical analysis from someone like Dan is worth a great deal because the stats SEE every game. They're not made up in some fantasy world, but are the record of what actually happened on the court. An imperfect record to be sure, but still of value.

8/22/2005 4:35 PM  
Anonymous Anonymous said...

a lot of fans watch every game of their home team, they know more about the team than anybody else, there are a lot of things statitistical data does not show,

8/22/2005 7:24 PM  
Anonymous Kevin Pelton said...

"as a fan i do take the word of a person who actually watched every game over someone who quotes statistics."

What about when these eyewitness accounts contradict each other, as they usually do?

8/22/2005 10:46 PM  
Anonymous Anonymous said...

i disagree, usually they do not contradict each other on major points , if you visit of fan forum dedicated to a team they tend to agree on the impact of a particular player on their team, while outside fans tend to overate or underate a players importance, people who actually watch ever single game know a players true worth

8/23/2005 12:04 AM  
Anonymous Kevin Broom said...

There are a few fans who watch every game. And some of them certainly know a great deal about their team. Very, very few will know the difference between "watching" and "scouting." And there is a HUGE difference between "watching" a game as a fan (even a knowledgeable fan) and dissecting a game the way a pro scout does it.

Will the uber fan pick up on something the stats don't show? Maybe. But, most of the time those observations can be supported by statistical analysis.

By the way -- if you think there's agreement by fans on a message board about individual player impacts, you haven't spent much time on the RealGM Wizards board. There's an array of opinions on these players -- last season, some viewed Larry Hughes as a selfish shot-jacker, others saw him as an aggressive scorer; some think Jared Jeffries is one of the worst players in the league, others think he's a contributing role player; some think Haywood is a wussy and a stiff, others think he's a very good defender. Heck, we can't even get agreement on whether or not Eddie Jordan is a good coach -- even though he coached the team to their first playoff series win since the 80s.

8/23/2005 11:25 AM  
Anonymous Anonymous said...

Even if Ray Allen's per minute play did not improve, the increase in minutes alone was probably worth a few wins.

(For the record, I probably watched about an hour of Seattle basketball last year.)

8/23/2005 3:47 PM  
Anonymous paulpressey25 said...

Dan, do you have an ability to get some type of shot charting statistics on a guy like Ray Allen for the past five seasons?

I guess the statistic I would want to know is how many shots Ray took per game (and also made per game) within layup or dunk range (included in there times he went to the line for being fouled at layup/dunk attempts) Then compare those numbers as a percentage of the total shots he took.

That still would be an imperfect analysis, but might lend some clues as to whether Ray was going to the hoop more for layup or dunk attempts last season(and not settling for the jumper or driving and kicking out, which used to drive us crazy in Milwaukee)

I'm not sure what type of statistics you have access to, but those type of stats could more clearly demonstrate that my general hypothesis about Allen is in error (or support it)

8/23/2005 8:04 PM  
Anonymous Anonymous said...

kevin , i do spend a lot of time by the realgm boards the toronto one, you do bring up a valid point, but i still beleive that statistical data does not and cannot tell you certain aspects of the game that can only be gained from watching the player, (btw dan, i actually clicked on those supposed blog links, you mightnow actually have to make people post their emails and validate it like cubans blog, although it is a hassle)

8/23/2005 10:11 PM  
Anonymous Anonymous said...

Paul,

According to 82games.com, 81% of Ray Allen's shots were jumpers in 04 and 05. In 03, it was 83% for both Seattle and Milwaukee.

8/24/2005 12:12 PM  
Blogger Pete Nussbaum said...

Dan,

I greatly enjoy reading your articles, specifically as they relate to the salary cap as this is an area I would like to understand better.

Re Allen and the Sonics, I think there is some truth on both sides of this argument. As someone who watches far too many Seattle games, it did seem that Allen played phenomenally last season - but then he has been a true star his entire career.

To me, the Sonic season was divided into halves. The first half of the season, Danny Fortson (a man recruited in no small part because of the opinions of Dean Oliver) was arguably the Sonics' MVP as Seattle cruised to one of the best records in the league. Further, Seattle suffered virtually no injuries until early spring, an edge most other teams did not enjoy.

In the second half, Seattle struggled as Fortson argued with everyone around him and the Sonics finally lost to the laws of probability and suffered injuries.

So, while Dean Oliver deserves a large bit of credit for recruiting Fortson, he can't take credit for the injury situation. The Sonics started out 27-9, but their record after that was only 25-21, more in line with their performance of the previous season. As I'm sure you would be the first to say, there is no black and white cause and effect in a team's performance. There are dozens of mitigating factors that go into a team's success.

8/26/2005 3:43 PM  
Blogger Brian said...

whether Dean helped or not is not important to me. I would be more interested in what he did that made the Sonics better? how did his work lead to the sonics putting players in better positions? that, to me, is a far more interesting argument.

9/05/2005 5:12 PM  
Anonymous Dean Oliver said...

I do thank Dan for giving me credit here. And I wish that I could give more details on what I did with the team this past season, but I am under contract through the end of this month to keep my secrets to myself.

I will say that there is significant statistical information showing that the team did use my work a lot this past season. I tracked all my advice and the subsequent team response and it was all very coincident. I have to use this in order to get a contract I can live on this season.

As to Ray, I cannot speak to his past. I can say that he was a good player and a good person to have around this season. I should point out that any change to a player's performance is not necessarily due to themselves -- coaches and other people can influence such things. That being said, there was very little statistical difference in how Ray played, as Dan points out and as is consistent with what great players do. As with team leaders, though, people typically view the team record as a reflection on him more than on the others.

Ultimately, it does take a team of people working together to improve. From players to coaches to management and me (wherever you want to put me since I did things on both the coaching and management side), the Sonics were a great group of people working together this past season. If I'm not with them this coming season, I'm confident that I can help another team. Dallas, with its array of coaches (esp Del Harris) who use stats, is a reasonable option.

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