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Why Paying LeBron James His Worth is the Best Thing for Competitive Balance

Bob Donnan/USA TODAY Sports

There’s a salary revolution going on in the NBA. The new TV deal is set to go through next year, and the already escalating pay checks are going to climb even more.

Based on the current CBA and the projected 2017 cap of $108 million, a 10-year veteran with full Bird rights could sign a deal starting at 37.8 million (35 percent of the max). The five-year contract with an annual raise of $2,835,000 would be $217,350,000 with $49,140,000 coming in the fifth year. And believe it or not, for some players, that’s not even their full worth.

The reason for that is the “max contract” may be artificially deflating the actual value of some players. If LeBron James could test a truly open market where there was no individual max, what would he generate? $50 million or more?

However, as Ken Berger of CBS Sports observes, there’s something that players gain by having their salary restricted:

If James had been making $50 million with a $58 million salary cap in 2010-11, he would’ve been playing with Falk and some other old cranks from the senior home in Bethesda. Of course, when Jordan hit the $30 million mark for the first time in NBA history in 1996-97, the Bulls’ next highest-paid player was Dennis Rodman ($9 million). Scottie Pippen made $2.25 million.

Instead, James took a little less than the player max, teamed up with Chris Bosh and Dwyane Wade, won two NBA championships and made it to four consecutive NBA Finals. Then, he took another slight pay cut and went to back to the Cleveland Cavaliers, where he teamed up with a pair of emerging stars in Kevin Love and Kyrie Irving.

As Berger observes, there’s a return players get for taking lower pay and that’s greater power. They can influence who wins or loses in the league by banding together. Berger’s piece is arguing against the individual cap from the player’s point of view, but there’s also a perspective of this which helps from the owner’s point of view.

Essentially, Berger’s piece is arguing that because there’s an artificial construct called “max value,” players negotiate for that. And that’s how you end up with someone like Wesley Matthews making nearly as much as LeBron. And no one is going to argue that those two players are in the same relative “value” to a team.

Yes, there are a number of factors that go into a “max contract” but the essence is, the player says, “Give me all the money you legally can.” And the owner says, “OK, here’s all the money I can legally give you.”

The owner does so without worrying about it because he can give two or three players the same deal. Super teams are all the rage and they’re possible because of the artificial maximum individual contract.

You can fit two — or even three — max contracts under current rules. But what happens if those players are paid according to their full value? How many $50 million deals can you fit below $71 million? (For the mathematically challenged, the answer is one.)

Furthermore, there’s the question of how much is a player actually worth? That’s a difficult question to answer. In part, that’s because owners have two goals: profit and witting. What exacerbates things is that those goals aren’t always in harmony.

For the Los Angeles Lakers, they chose money over winning when they extended Kobe Bryant, giving him two years for $48 million in spite of the fact that on the court there was no way he could ever vindicate that pay. But the revenue he generates just by existing in a Lakers uniform exceeds his check.

For the Brooklyn Nets, they threw caution to the win and tried to buy a championship outright. (Sure it didn’t work, but they still spent the money.)

That said, the ultimate goal of an owner would be to win games while making money. So what happens when you look at those two things together? Which players give the most bang for the buck?

I looked at all the players in the league last year, comparing their Win Shares (from Basketball-Reference.com) and their salaries (from Draft Express.com). I then determined how many Win Shares per million each player generated for his team. These are the results:

Sheet 1 (3)

The further up the player is, the more he made. The further to the right he is, the more Win Shares he had. A player in red was below the median of .60 Win Shares per million dollars; players in green were over that threshold.

The upward slope is the trendline. That’s more or less “fair value.” Players above it are theoretically “overpaid” and below it are “underpaid.”

Note that this is very abstract. There are a host of things that play into value and this is just looking at Win Shares. For instance, you can’t evaluate James just based on his actual production because how much he impacts players around him and how he breaks down defenses aren’t represented by his Win Shares. I’m in no way suggesting that he’s “overpaid.” The same goes for guys like Chris Paul and Russell Westbrook.

Kevin Durant looks severely overpaid last year because his Win Shares were curtailed because of his injuries.

Good contracts aren’t always immediately obvious, either. Derrick Rose’s seemed great when he signed it. He was coming off the youngest MVP season in history and had no injury history. No owner in the league would’ve hesitated to give him the exact same deal. But we all know how that turned out. Stephen Curry’s was diminished because of his injury history, but he’s been healthy since.  Now he’s the reigning MVP and arguably the best non-rookie contract in the NBA.

Speaking of which, rookie deals have a big impact. You’ll notice that a lot of those names splayed along the bottom right are still on their first deals.

Furthermore, even rookies aren’t all the same. If we were to have paid everyone $600,000 per Win Share, Jimmy Butler would’ve made $4,820,641 last year — making him the most underpaid player in the league (in theory). That’s in large part because of the rookie scale and being drafted No. 30 instead of No. 1 like Anthony Davis, who while a better player was not as “underpaid.”

So yes, there are mitigating factors, but the basic premise doesn’t change. Owners are investing in players whom they’re hoping will provide wins.

In all, there were 48 ballers who had at least 6.0 Win Shares and generated them at more than the median value. Of those, 29 (60 percent) were on teams that won at least 50 games and/or made it to the conference semifinals. Those 11 teams constitute 36.7 percent of the league.

It’s an unavoidable and inarguable conclusion that there’s a correlation between efficient spending and winning. The more “cheap wins” you have the more likely you are to win. And while having a superstar like James helps a lot, so can just stacking a team with high-value role players and/or second-tier stars.

Look at what happens when you take a group of players near the trendline. Take for example this group of five players:

hawks

Would you rather have the Atlanta Hawks’ starting five and $12 million to spend on someone else or LeBron James for the same $50 million?

Or, how about this group?

warriors

There’s a pretty solid starting five and a sixth man and Finals MVP to go with it.

However, now second-tier players like Draymond Green and Klay Thompson are getting max money or close to it. And this brings us back to Berger’s argument, which is that players who aren’t max value get the money because that artificial construct exists.

If James gets his $50 million, Love goes somewhere else and gets $40 million and so on and so forth. Accordingly, each team has less money to spend and so there’s less money to spend on the next tier of players.

Ergo, by James making less than he’s worth, some other players get more than they’re “worth” simply because that money is available to spend. The same amount of funding is spent; it’s just distributed differently. And this works to the favor of the owners who have the elite players.

Cavaliers’ owner Dan Gilbert is cutting some serious checks and might end up paying $240 million in salaries and taxes this year alone, just by extending his own players. That said, how much would he be willing to pay if he was already giving Irving his true value while Love and James were both trying to get theirs?

Bear in mind that the tax goes up exponentially. If Gilbert is paying everyone their full worth, those checks could quickly escalate to north of a $500 million. Flexibility should be something restricting him. Instead it’s restricting the team who has players like Green and Thompson, who are very good players but not elite.

The bottom line is that the artificial caps benefit the owners who have the tiny handful of the league’s best players the most. They get the benefit of having the player without having to pay their full value, whether that’s in whole dollars or the flexibility that comes with it.

Owners should do away with the max contract, not because it helps the elite players (though that is the fallout) but because it’s the best thing for competitive balance.

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