How to Win at NBA Free Agency

Every year during the NBA Free Agency season, some owner’s going to do it.

Some owner’s going to bring home the Rashard Lewis Certificate of Achievement for signing a player to a preposterous sum of money, despite wise economic, financial and statistical advice screaming “no!”

If I can prevent even one owner from overpaying, I’ll feel vindicated.  So, NBA execs, listen to the golden rule this off-season:

For every $1,000,000 you spend, be sure you’re getting back at least 0.7 wins in return.

Let’s break it down:

- Assume a $60M salary cap for all 30 teams. ($60M x 30 = $1.8B)

- There will be 82 games played by all 30 teams next season and exactly half will be won. (82/2 x 30 = 1230 wins will be available.)

- $1.8B / 1230 wins = $1,451,613

1 win = $1.452 million.

Or, alternatively, $1 million = 0.688 wins.

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But how many wins is a player worth?

Glad you asked. John Hollinger gets paid to crunch a metric hella-ton of numbers and does a damn good job of it. He created PER and a bunch of other proprietary advanced metrics used to measure players. One such stat is “Estimated Wins Added,” giving the estimated number of wins a player adds to a team’s season total above what a ‘replacement player’ (12th guy on the Bench) would produce.

Example: LeBron James, last year, had an EWA of 23.5. To project that to a full season (remember last year, there were only 66 games played), just multiply that figure by (82/66), and you’ll get an EWA of 29.2. If you replaced LeBron James with a clone of Juwan Howard, Miami would’ve lost 29 more games.

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So how much money was LeBron James worth last year?

LeBron’s Salary? $17,545,000. For every million spent on LeBron, the Heat received 1.664 wins. That’s tremendous value.

How tremendous? If you take LeBron’s EWA and multiply it by the $1.452 million per win we talked about, The Heat could’ve paid LeBron James over $42 million ($42,382,701 to be exact) and still not overpaid one cent for his production on the court. Not only is LeBron James the best player in the NBA he is also the most undervalued!

Of course you wouldn’t (and couldn’t) pay LeBron $42 million, because you’d have just $18 million left to pay Dwyane Wade, Chris Bosh and nine other players. Or, to give every player their proper value, you’d end up skyrocketing beyond the salary cap (which The Heat did, regardless) and pay the luxury tax. It gives you the idea of what a player’s worth on the court, and gives you an idea of why we have “max contracts” and why the very best players are almost always underpaid.

To illustrate this point, here’s a list of the 10 highest NBA players in Market Value using 2011-12 EWA.

Rk Player Salary EWA Market Value
1 LeBron James, MIA $17,545,000 29.2  $  42,382,701
2 Kevin Durant, OKC $17,548,838 24.8  $  36,070,384
3 Chris Paul, LAC $17,779,457 21.7  $  31,561,586
4 Kevin Love, MIN $13,668,750 18.4  $  26,692,084
5 Blake Griffin, LAC $5,731,080 17.8  $  25,790,324
6 Dwight Howard, ORL $19,261,200 17.5  $  25,429,620
7 Russell Westbrook, OKC $5,082,416 17.3  $  25,068,917
8 Andrew Bynum, LAL $16,473,002 16.2  $  23,445,749
9 Dwyane Wade, MIA $17,024,000 15.9  $  23,085,046
10 Al Jefferson, UTAH $15,000,000 15.8  $  22,904,694

 

Important to note, Blake Griffin and Russell Westbrook were playing under their rookie contracts, so they’ll look unfairly compensated, but even if they had max deals, they’d still be underpaid.

If Miami paid James and Wade what they were worth in added wins, The Heat would’ve been $5M+ over the cap just with those two players alone. Add Bosh, who checks in at a cool $13.3M in Market Value, and all the sudden you have a $76M “Big 3.”

(Also, I think it’s fun to imagine Miami without James, Wade or Bosh, and imagine them as a team that would limp along to a 3-79 record if you replaced all three players with Derek Fisher, DeShawn Stevenson and a zombie clone of Norris Cole – the 3 worst players in EWA.)

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So what about our current crop of Free Agents? Let’s evaluate a few making headlines:

Tim Duncan, San Antonio Spurs, F/C (12.2 EWA): The numbers (and dollars) say Duncan’s still a max guy who could command over $17 million per year. But no matter how refreshed he looked this past season, he’s 36.

Deron Williams, Brooklyn Nets, PG (11.6 EWA): Deron Williams will get a max deal. Expect a haul of $16-$18 million annually. Worth every penny, but not a penny more. Good thing a penny more isn’t possible.

Steve Nash, Phoenix Suns, PG (11.3 EWA): You know how we scoffed at Toronto offering 3 years, $36M yesterday? Thinking it was foolish? That’s a surprisingly reasonable offer. Nash’s production last year was worth $16 million. Expect some drop-off, but $12 million seems completely legit.

Roy Hibbert (restricted), Indiana Pacers, C (10.4 EWA): 4 years, $58 million was offered by the Blazers. It’s as if the Blazers were working off my cheat-sheet. $60 million over four years for the young center is a perfect contract by EWA standards. The Pacers can match the $58 million and feel good about it. He’s young and should improve.

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Now, maybe you’re noticing a pattern here. That somehow, although we’re using a $60 million salary cap to account for all the wins a team may purchase, it feels like nearly every player I named above is worth max (or close to max) money. Why?

Because 77 qualifying NBA players who last actually cost their teams 61 wins in a 66 game season. That’s almost one win per team. Those wins are being made up by the top level players, because those lost wins have to go somewhere.

If you include the number of players who don’t justify the veteran minimum salary of $788,872 by accounting for 0.6 wins, over 110 players on NBA payrolls actually would’ve cost their teams money, even if they all played for a minimum salary. We’re talking about free money vanishing into the ether. Money your team can take!

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If your goal is to succeed in free agency and buy as many wins for as little cost as possible, you have two options:

1. If you’re going to sign a max contract, woo the max-est of max players to your team: (See: Heat, Miami – 2010)

The most incredible values in free agency are right there at the top! Not just LeBron James and Dwayne Wade! Take a look at this gigantic list of underpaid players! (See column on far right for just how underpaid they are.)

Rk Player Salary EWA Market Value Diff
1 LeBron James, MIA $17,545,000 29.2  $              42,382,701  $ (24,837,701)
2 Blake Griffin, LAC $5,731,080 17.8  $              25,790,324  $ (20,059,244)
3 Russell Westbrook, OKC $5,082,416 17.3  $              25,068,917  $ (19,986,501)
4 Kevin Durant, OKC $17,548,838 24.8  $              36,070,384  $ (18,521,546)
5 Greg Monroe, DET $3,007,920 14.8  $              21,461,878  $ (18,453,958)
6 Ryan Anderson, ORL $2,244,601 11.8  $              17,133,432  $ (14,888,831)
7 Ty Lawson, DEN $1,654,440 11.1  $              16,051,321  $ (14,396,881)
8 DeMarcus Cousins, SAC $3,627,720 12.3  $              17,854,840  $ (14,227,120)
9 Chris Paul, LAC $17,779,457 21.7  $              31,561,586  $ (13,782,129)
10 James Harden, OKC $4,604,760 12.4  $              18,035,192  $ (13,430,432)
11 Marcin Gortat, PHX $6,790,640 13.9  $              20,199,415  $ (13,408,775)
12 Kevin Love, MIN $13,668,750 18.4  $              26,692,084  $ (13,023,334)
13 Brandon Jennings, MIL $2,493,720 10.7  $              15,510,265  $ (13,016,545)
14 Roy Hibbert, IND $2,588,590 10.4  $              15,149,561  $ (12,560,971)
15 Paul Millsap, UTAH $8,103,435 13.4  $              19,478,007  $ (11,374,572)
16 Ersan Ilyasova, MIL $2,541,000 9.3  $              13,526,394  $ (10,985,394)
17 JaVale McGee, DEN/WSH $2,462,400 8.8  $              12,804,986  $ (10,342,586)
18 Kyrie Irving, CLE $5,144,280 10.1  $              14,608,505  $    (9,464,225)
19 John Wall, WSH $5,530,080 9.9  $              14,428,153  $    (8,898,073)
20 Lou Williams, PHI $5,176,000 9.6  $              13,887,098  $    (8,711,098)
21 Derrick Rose, CHI $6,993,708 10.3  $              14,969,209  $    (7,975,501)
22 Al Jefferson, UTAH $15,000,000 15.8  $              22,904,694  $    (7,904,694)
23 Josh Smith, ATL $12,400,000 13.9  $              20,199,415  $    (7,799,415)
24 LaMarcus Aldridge, POR $12,372,000 13.8  $              20,019,063  $    (7,647,063)
25 Andrew Bynum, LAL $16,473,002 16.2  $              23,445,749  $    (6,972,747)
26 Tony Parker, SA $12,500,000 13.2  $              19,117,303  $    (6,617,303)
27 Dwight Howard, ORL $19,261,200 17.5  $              25,429,620  $    (6,168,420)
28 Dwyane Wade, MIA $17,024,000 15.9  $              23,085,046  $    (6,061,046)
29 Thaddeus Young, PHI $7,478,261 8.8  $              12,804,986  $    (5,326,725)
30 Steve Nash, PHX $11,689,062 11.3  $              16,412,025  $    (4,722,963)

 

When they become free agents, go get ‘em! Barring catastrophic injury, you can’t possibly pay what they are worth! And the bigger the star, the better the deal!

That’s why superstar players have all the leverage and can dictate exactly where they want to play … because contracts are capped. That’s why superstars can team up. That’s why “Destination Cities” are going to have their pick as free agents become available.

(Also: That’s why the Knicks totally blew it with their “Big 3″ of Melo, Amare and Tyson Chandler, because while Melo and Chandler essentially earned what they were worth, Amare’s EWA left the Knicks $11M – about 5 wins short. You think they couldn’t have used those 5 extra wins? To become the No. 4-seed in the East and avoid Miami until the Conference Finals?)

The other way to succeed in Free Agency is to find the other place where players are undervalued:

2. Scout the Bargain Bin:

What if I told you I could build you the foundation of a competitive NBA team for $18 million? Interested?

How about this team?

Player Salary EWA(82) Market Value ($M) Diff
Paul Millsap, UTAH $8,103,435 13.4  $              19,478,007  $ (11,374,572)
Brandon Jennings, MIL $2,493,720 10.7  $              15,510,265  $ (13,016,545)
Ty Lawson, DEN $1,654,440 11.1  $              16,051,321  $ (14,396,881)
Ryan Anderson, ORL $2,244,601 11.8  $              17,133,432  $ (14,888,831)
Greg Monroe, DET $3,007,920 14.8  $              21,461,878  $ (18,453,958)

 

Ok … they aren’t all free agents. They’d all expect raises. But the five are currently paid $72 million combined below their market value.  You can double the salaries of these five players with enough money left over to make a spirited run at a max contract player (preferably a swingman with a lineup like this), and round out a stellar roster with some savvy veteran minimum contracts. You could do this … or something like this … over a three-year period, certainly, plus you’d have trade pieces to move if you wanted to make a run at a second max player.

Another secret? Big men are undervalued … as long as they’re less than 7′ tall.

It’s true. Greg Monroe, Ryan Anderson and Paul Millsap are all big men who can play power forward. But there’s more! JaVale McGee, DeMarcus Cousins (a couple headcases, sure), Ersan İlyasova, Marcin Gortat, Al Jefferson and LaMarcus Aldridge are all playing at more than $7M more than what they’re being paid. They’re all between 6’8″ and 6’11″ and they’re all undervalued. If you’re going to find a bargain, Power Forward is the position at which to shop.

Remember the four free agents I called out above? Nash, Duncan, Williams and Hibbert? They’d work in a pinch, but I’d seek out better values first. Be aggressive at the very top. Be aggressive in the trenches. But don’t just make splashy free agent signings just to stockpile good players.

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This year, the going rate for a win is $1.452 million.

Owners … GMs … listen to me. Don’t pay more.

 

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