The Bid Draft: An End to Tanking

The Bid Draft would end the NBA's reliance on ping pong balls.

The recent NBA trade deadline was most notable for the drama involving Dwight Howard and the Orlando Magic.  Faced with the looming specter of Howard’s potential departure as a free agent, the Magic were presented with the decision of whether to trade Howard or “risk losing him for nothing” as a free agent.  In fact, some argued that simply letting Howard go and becoming a losing team in the short-term was better for the team’s long-term competitiveness.  Howard ultimately waived his option to become a free agent this year, sparing the Magic this unenviable decision.

Nevertheless, the Howard quandary highlighted an issue that has garnered increasing attention in recent months:  If a team isn’t going to be really good, it’s better to be really bad.*  Sam Presti executed the most salient example of this strategy with his tear down of the Rashard Lewis/Ray Allen Sonics into the current Thunder juggernaut.  In response, we have seen what seems to be an increasing number of teams “tanking” for better draft position, either by trading away good players or by benching their best players with questionable “injuries” once it becomes clear they won’t be competing for the playoffs that season.  The belief is that getting a high draft pick is the easiest road to getting good again.**

*When even Michael Jordan has something figured out about team management, you know it’s entered the conventional wisdom.

**This study by David Berri argues otherwise.  While I think the study has some holes (perhaps a better study would be rating how teams with high lottery picks did a few years later) and I’m not a huge fan of Wins Produced as a metric, it is compelling evidence that being bad is not necessarily the quickest way to being good.  Nonetheless, NBA teams think tanking is the way to future success, so it’s still a problem regardless of whether it actually works or not.

The problem was neatly encapsulated by Jeff Van Gundy (2:00 mark of this video) and a subsequent article by Henry Abbott.  Meanwhile, tanking has become fodder for nightly ballosphere Twitter jokes.  Humor aside, the growing consensus is that tanking is a bad thing and serious changes in the system are needed.  The issue, however, is balancing the problem of incentivizing losing with the problem of competitive balance that the draft is meant to alleviate.  To these eyes, a hopeless, uncompetitive team in a particular city is a worse problem than the league incentivizing losing in certain situations.  Therefore, I believe solutions that award draft picks without any regard for team quality would hurt the game more than they would help.  Helping bad teams get good without incentivizing losing is a rather intractable problem.

The best solution I’ve been able to come up is a system I call the Bid Draft.*  It is quite simple: Allow teams with salary cap space to bid on the top draft slots. 




The basic rules: The salary cap space bid would have to exceed the rookie salary slot for the first pick in the draft, which was $4.4 million for 2011-12.  The rookie drafted with the “purchased” pick would have a cap number equal to the total amount bid, although he would only receive the $4.4 million rookie salary for the first pick.  The amount of the bid which exceeded the rookie’s salary slot would be distributed among the other non-rookie players on the team for the duration of the draftee’s rookie contract, although those players’ cap numbers would not change.**

*Feel free to propose alternate names, I’m not wedded to this one.

**There are two reasons to distribute the "extra" money among veterans. Most important is to assuage concerns from the players that veteran salaries would be negatively impacted.  Admittedly, veterans would probably still have issues because there would be less demand for veteran free agents if teams used cap space to buy draft picks instead, but they collectively wouldn’t be making any less money. The second reason is to avoid the problem of overpaying unproven rookies, thus reducing their incentive to improve.

How would this work in relation to the existing draft?  Teams willing and able to use additional salary cap space on rookies would jump in line ahead of teams in the traditional draft, forfeiting their own draft pick in the process.  Those teams would be required to bid above the maximum rookie salary slot for that pick.  So if the first pick in the draft would normally have a salary of $4.4 million, a team would need at least that amount of salary cap space plus whatever additional amount it wanted to bid.  Each team could only purchase one draft pick per year using salary cap space.  If the team had multiple draft picks, it would forfeit the highest of those picks when signing a player with cap space.*

*I spent a ton of time coming up with a system akin to waiver wire bidding in fantasy auction leagues, under which teams would submit bids for individual players.  But then I realized simply bidding on the draft pick itself would be far less complicated.

Here’s how this would work in practice.   Each team with salary cap space exceeding $4.4 million would be invited to bid on the first pick on the draft.  After that, the same process would occur for the second pick in the draft, the caveat being that any winning bid would have to exceed the $4.4 million rookie salary for the first pick in the draft.*  The process would continue with each successive slot in the draft until there were no other teams with at least $4.4 million in cap space, or no teams willing to bid over $4.4 million for that draft slot.

*Another way to do this would be to only require the team buying the pick to exceed the rookie salary slot for that particular pick.  For example, a team attempting to purchase the 6th pick would only have to bid in excess of the $2.6 million rookie slot for that pick. I prefer making a team use at least $4.4 million in cap space to purchase a pick because it allows only teams who are willing to invest significant resources to do so.

The key advantage to this system is that it would eliminate the incentive for intentionally losing games on a nightly basis.  While there would remain some incentive to tank because the “regular” draft order would still go from worst record to best, the import of those picks would be reduced because most years teams with salary cap room would jump ahead of the teams with the highest picks.  Teams with salary cap room would be free to compete as hard as they could the preceding year without having to worry that winning would hurt their draft position, while teams without cap room would be less likely to tank for, say, the 5th pick in the draft.

This reduction in tanking would not be without a downside.  The draft’s original goal of helping bad teams improve would be somewhat compromised, as there would no longer be so direct a relationship between losing and a team’s ability to acquire the best rookies.  However, bad teams would still generally benefit because it is much easier to have salary cap room as a bad team.*  As these excellent articles by Larry Coon show, the league’s best teams are all well over the salary cap--no surprise given the fact that good players usually make more money and successful teams are willing to pay to keep those groups together.  Meanwhile, the teams with the most cap room next summer include the Suns, Cavaliers, Blazers, Celtics, Pacers, Hornets, and Nets.  Only exceptionally well-managed teams could compete for a championship and amass enough salary cap room to afford to jump ahead in the draft and nab a top rookie. Plus, if they had the cap room these teams would likely focus on signing veteran free agents who could immediately put them over the top. Nevertheless, the league could implement a safeguard to prevent the ultrarich from getting richer by prohibiting teams which made the conference finals from using salary cap room on rookies.
*This would also help eliminate the problem in recent years of bad teams such as Washington, Sacramento, and Charlotte having salary cap room but being unable to use it without drastically overpaying veteran free agents.  It will also help teams well below the cap more easily reach the league’s new salary floor without having to overpay for veterans.

But most years, the highest quality teams able to create cap room would be those in the second tier of contenders, such as the Rockets, Pacers, or Sixers this year.  This would eliminate the time-tested maxim that the middle is the worst place to be if you hope to eventually win a championship.  

This post is intended to be a broad outline of this proposal.  Since this is a very rough starting point, I would love to hear your comments on how this system could be improved. A few issues that have occurred to me:

• Deadlines with respect to free agency and exercising contract options would need to be adjusted so that teams could know how much cap room they would have before the draft.
• The league would need to have the bid process occur at some point well before the draft, perhaps around the time the lottery occurs now.

• Teams that bid high amounts for rookies could be stuck with albatross cap numbers for those rookies if they did not pan out.  Current rookie contracts are only guaranteed for two years so this should not be an enormous issue.  To the extent one exists, one fix would be to allow teams who bid drafted a player to wait until the end of the rookie’s second year to decide whether to pick up his third year option, so they could have more information on the player’s performance level.

• What would happen to the lottery?  Its purpose was to eliminate tanking, so I think it could be safely eliminated on the assumption that at least a few teams would use cap room on rookies each year.  Plus, keeping the traditional lottery could really burn the team with the worst record in the league that didn’t have any cap space, pushing that team even further back.*

*Then again, if a team has the worst record in the league and no cap space it probably deserves such a fate.

Sadly, the elephant in the room is that neither the league or the players seem likely to agree to this system. Plus it is unlikely to be changed until the expiration of the current CBA at least 6 years from now.  Since any changes to the draft would need to be collectively bargained to avoid running afoul of antitrust laws, the players’ association would be required to assent.  It’s hard to imagine veterans agreeing to a system that would chill bidding on veteran free agents as teams preserved their cap space for the draft, even if that money were eventually distributed to them anyway.*

*We saw during the lockout that for many players, system issues and freedom of movement were more important than the raw amount of money coming into their pockets from the division of BRI.

Nonetheless, the current system skews too far towards encouraging losing. This results in fans paying good money for scores of terrible games at the end of a season. Allowing teams with salary cap room (and the willingness to invest it in rookies) to “pick” higher in the draft would eliminate the direct incentive for losing games while still furthering the goal of helping bad teams improve.