NBA Lockout and Inception of Conventional Wisdom

An idea is like a virus...

“What is the most resilient parasite? Bacteria? A virus? An intestinal worm? An idea. Resilient… highly contagious. Once an idea has taken hold of the brain it’s almost impossible to eradicate.” 

-Cobb from Christopher Nolan’s “Inception”

The NBA lockout entered its fourth week on Friday, but a lot of the commentary presented by NBA writers and analysts has not moved beyond the typical conventional wisdom, including these popular gems:
  1. The teams that pay the most, win the most.
  2. The league can and should control competitive balance.
  3. Bad contracts are hurting the NBA.
  4. A lockout will kill the popularity of the sport.
Dave Berri, Martin Schmidt and Stacey Brook actually looked over these issues more than five years ago in The Wages of Wins. But Scientific American explains that misinformation - even when we are aware it is incorrect – can still influence us because it’s  “like a virus, resilient, highly contagious“. Luckily enough, being informed about misinformation can diminish its effects. Consider this article an attempt at attacking the virus of misinformation.

The Team that Pays the Most Wins the Most

Conventional wisdom says that teams with higher payrolls win more titles.  Furthermore, if the high payroll teams are all in big markets, then competitive balance is severely harmed and the league suffers.

David Aldridge from Turner Sports published that conventional wisdom on NBA.com two weeks before the lockout.  Here are some key points:

  • The Lakers with luxury tax cost $110 Million.
  • The Kings below luxury tax cost $45 Million.
  • The Lakers by spending money make money.
  • The Kings by trying to save money are losing money.
  • A new system is needed to make the teams more competitive.
Thus we see the common, parasitic, and incorrect idea linger.  And here is yet another example.
Kevin Arnovitz from espn.com suggested the NBA consider Bob Costas’ revenue sharing plan for Major League Baseball to address the disparity between big market and small market teams. The MLB revenue sharing plan was based on baseball’s Blue Ribbon Panel, that did indeed show a spending to win disparity (although the panel only considered five years of data). The Wages of Wins addressed this issue though (Chapter Three):
When we look at the Blue Ribbon years, (1995-99) we see that payroll explains about 33% of wins… So although payroll and wins have a stronger relationship during the Blue Ribbon years, it is still the case that for these years about two-thirds of wins cannot be explained by payroll.

A flawed parasitic idea about the MLB is being applied to the NBA. Does it make any more sense in basketball?  From 2000-01 to 2009-10 (using data from USA Today), team payroll in the NBA only explains 6% of the variation in team wins.  To put that in perspective, if we look at baseball since the 1980s (i.e. look at more than the five years considered by MLB’s Blue Ribbon panel) we see that about 18% of wins are explained by team wins.  All of this says that teams can’t simply buy a title in the NBA or MLB.

The League Can and Should Control Competitive Balance

Berri and his colleagues also reported findings on NBA competitive balance in the Wages of Wins (Chapter 5): “The NBA, relative to any other league we have examined, is not competitively balanced. Yet fans keep coming to the games.” Their analysis showed the standard deviation of winning percentage in the NBA was about three times higher than a league with perfect competitive balance.

Sport Years Noll-Scully Competitive Balance
NBA 1986-2005 2.86
MLB American League 1986-2005 1.78
MLB National League 1986-2005 1.76
NHL 1985-2004 1.70
NFL 1985-2004 1.45

Table 5.1 from the Wages of Wins. Twenty Years of Competitive Balance in North America

In the article  “Competitive Imbalance Continues in the NBA.” Dave and crew explain very simply that the league is limited in their control over competitive balance thanks to the short supply of tall people. No matter how much money teams have to throw around, there are a limited number of players like LeBron James and Dwight Howard. Unless a great many more tall people talented in the sport of basketball suddenly appear, it is unlikely we’ll see the league more balanced no matter what rules David Stern puts in place.

A bigger issue also raised in the article is that in spite of the lack of competitive balance – which has persisted through much of NBA history – league revenue, fan attendance and television ratings continue to increase (at least, have so through much of league history). It’s a very nice tale to believe that a fair and balanced league would be both possible and also more popular. But thus far the data hasn’t supported either claim.

Bad contracts hurt the NBA

Guess who makes more money?

Another piece of conventional wisdom of the NBA lockout is that bad contracts are a problem for the owners. Former espn.com columnist Bill Simmons repeated this argument two weeks ago.

The problem with the “bad contracts” argument is that players’ collective share of revenue is the same regardless of what each individual player gets paid in salary. As a group, the players’ cannot earn more than 57% of basketball-related income, so while bad contracts may impact owners individually, they do not negatively impact the owners as a group. Other players are affected by bad contracts because they reduce the slice of the pie that is available to the rest of the players.  So owners shouldn’t be upset when Joe Johnson, Rudy Gay, Andrea Bargnani, etc… are overpaid.  Other players, though, should be very unhappy with Johnson, Gay, Bargnani, etc…

See Taking a Look at the Numbers Behind the NBA Labor Dispute and Better Angels by Arturo Galletti for an in-depth explanation of why bad contracts did not cause the NBA lockout.

A Lockout Will Kill the Popularity of the Sport

Did something else cause popularity to drop?

Another piece of conventional wisdom tossed around during the NBA lockout is the notion that an extended lockout will drive away fans.

The lockout won’t kill NBA popularity. Why? Because NBA fans like the NBA! The Wages of Wins reported an analysis of how lockouts and strikes – ones that cost games – impact attendance. The analysis revealed that there really wasn’t a statistically significant impact from these events in baseball, football, hockey, or basketball. Fans may say they won’t come back. But the data says they do.

It turns out that when a sport is taken away, fans have very little they can do other than threaten the league to “come back or else!” Unfortunately the “or else” amounts to very little, and fans are happy to return once the stadiums and arenas reopen.

Getting Rid of the Bad Ideas

We know Aldridge and Arnovitz read the Wages of Wins Journal. Aldridge said as much in the past and Arnovitz linked to this blog last week. Despite familiarity with ideas from the Wages of Wins Journal, their thoughts were still infected with strains of conventional wisdom exposed as myths five years ago.

Nothing in this article is new, but hopefully these old ideas will help a new generation of NBA fans see the lockout clearly without being infected by the virus of misinformation (parading about as the conventional wisdom). By addressing the problems of the conventional wisdom surrounding the lockout, it’s my hope that these resilient and bad ideas will wither away before they can infect the subconscious of anyone else.

-Mosi

If you’re interested in a discussion of why there is a lockout and what the potential solution could be, then check out the Weekend Podcast: Replaying Thoughts on the NBA Lockout.

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