The Nuggets defy psychology

Initially, the Denver Nuggets trade of Nene felt wrong for me. In the past three seasons Nene has been the Nuggets best player, producing between 8 and 10 wins a season. It’s no coincidence that the Nuggets have had three consecutive 50 win seasons with Nene playing like he has. In the offseason the Nuggets rewarded Nene with lucrative five year $65 million deal. That’s what makes this trade so remarkable. We often talk about many of the mistakes front offices in the NBA make. So many of these have to do with fundamental flaws in human psychology. Somehow — at least this season — the Nuggets have bucked some trends that traditionally hurt franchises.

The Sunk Cost Fallacy

The sunk cost fallacy is one of the hardest things humans struggle with. When we invest time or effort into something we want to see it pay off. People keep old cars because they’ve poured money into repairs. NBA owners hold onto players because they’ve invested high draft picks and lots of money into them. Here’s the facts for Nene:

  • Nene is 30 years old. That means he is not likely to improve and is exiting his prime.
  • To reiterate: players over 30 tend to decline, sometimes sharply.
  • Nene has not been playing at his normal levels.
  • Nene has been dealing with injury.
  • Nene’s contract means that he would have been hard to trade had his play remained poor.

The Nuggets had two options. On the one hand they could hope Nene got healthy, reverted to his old form and played well. On the other, they could have waited and if he didn’t get healthy they would be stuck with a broken down, over 30 player with a virtually untradable contract (an issue New York will be dealing with shortly)

Trading Nene means admitting a deal didn’t work. That’s fine. Sometimes bad luck happens in the NBA. What is rare is for NBA management to admit it. Joe Dumars still has Tayshaun Prince on his roster. Players like Darko Milicic and Kwame Brown are still getting played because once upon a time every front office thought they were a top prospect. The Denver Nuggets broke the mold here and I’m actually quite proud of them (even if I am saddened to see Nene go)

The Eye Test and the Availability Heuristic

Twitter blew up after the trade was announced. JaVale McGee‘s intelligence was questioned. Some very memorable plays were pointed out. We have another built in problem. Things that stand out in our memory seem more important. We don’t like to admit it but more memorable events seem more important and more likely than they really are. JaVale McGee missing an easy dunk is an example of this. When we look over the aggregate stats though we see McGee has been a very good player the last few seasons. Here are the facts on JaVale McGee:

  • He’s very affordable
  • Despite his claims he’s worth $14 million, his scoring totals mean his re-sign price is likely lower
  • He’s young and entering his prime
  • His numbers have been good.

So in going for McGee the Nuggets bypassed the eye test, avoided focusing on memorable events and went with a player with good stats. Again, for sports management this is remarkable!

Not all happy

Part of the reason the Nuggets made this deal was to afford Wilson Chandler. Wilson Chandler has never been that great of a player. While it’s possible after his first four years in the league (and a stint in China) that he may greatly improve, it’s unlikely. The Nuggets aren’t breaking the bank, or overpaying him that much (at roughly $6 million a year he needs to produce around 4 wins to be worth it, which he did his last complete season) but it isn’t a strong move. A long term deal to an iffy player is never a great move. Unlike McGee though, Chandler does pass the eye test. That means he may be worth trade value to other teams. Given the front offices recent string of success I’m content to wait a little bit to see how this turns out.

One other problem is the Nuggets still employ George Karl. A problem George Karl has had is playing the wrong players. With Wilson Chandler reupping and Al Harrington still on the roster it’s possible that the current crop of good players on the Nuggets will still be underutilized. This is not a new problem though, so there is nothing specific about this trade that should make me worry.

All in all the Nuggets did a very good Warren Buffet style trade. The sold high and bought low. It’s possible they learned their lesson from the Kenyon Martin fiasco a few years back. While I’m not certain the Nuggets will be able to contend with the Thunder (at least not while Faried’s minutes are being limited) I am still fairly optimistic about the Nuggets going forward and hopeful that the front office will continue to make good moves.


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