Taking the LeBron Test

On Friday, LeBron announced he is going home.  I think I found out about this story when Kathleen Hays e-mailed and asked if I could come on Bloomberg Radio to discuss the move.

As I think I have noted in the past, a live radio interview is very much like a test.  Except I can’t always guess which questions will be asked.  Plus my answers must begin within a second of the question being asked and a whole bunch of people get to hear these answers.  In sum, this is much harder than any test my students have to take!

So how did I do on my test?  For those who missed my conversation with Kathleen, you can still hear our quick five minute conversation. Unfortunately, I think you will discover that it would have helped if I could have studied for this test the night before!

Part of this I think I got right (sort of).  Last year LeBron produced 17.8 win for the Heat (all numbers in this post are my own calculation).  And since the Heat won 54 games, that means the Heat — without LeBron — were about a 36 win team.  Meanwhile, the Cavs won 33 games last year.  So the Heat without LeBron are close to the Cavs last year (Matthew Yglesias at Vox.com makes essentially the same point).

Of course, to complete this analysis we have to consider who takes LeBron’s minutes in Miami (something I didn’t do on my test).  For example, the Heat are adding Luol Deng.  Last year Deng’s WP48 was 0.082 while LeBron’s mark was 0.294.  Given these numbers, the Heat with Deng would have been 13 wins worse.    And that is better than the Cavs last year.

So the Cavs — as I said — will probably need to make more moves if the teams wish to contend with the best in the West.  The team did add Andrew Wiggins with the first pick in the draft.  Wiggins, though, did not perform well at Kansas last year.  And so far in summer league, Wiggins has not impressed.  He shot just 34.5% in his first two game.

Yes, I think summer league doesn’t really matter much.   But I should note…

  • I keep seeing people get excited about a player based on some summer league highlights only to see that a box score result that suggests the player is really not producing (Dante Exum is a good example of this issue).
  • Although summer league doesn’t matter much, what Wiggins is doing is consistent with what we saw at Kansas.  Wiggins can definitely take shots.  Not sure what else he does well.  Being “athletic” is simply not the same as being “effective” (i.e. producing wins!).

Assuming Wiggins really doesn’t produce wins in large quantities, it would make sense for the Cavs to think about moving him for a player like Kevin Love.  LeBron’s window to win titles is clearly finite.  If the Cavs want to win a title with LeBron, the team needs to do what it can to acquire productive talent now (and not hope that Wiggins or the other young players will become productive talent).

The fact that LeBron’s career is finite leads me to something I clearly got wrong.   In my conversation with Kathleen I said that Cleveland’s franchise value has clearly gone up.   Bleacher Report echoed this sentiment, arguing that LeBron’s return raises the value of this franchise to $1 billion.

Again, I took my Bloomberg test without much time to study.  And after thinking about this, I think this has to be wrong.  As noted, LeBron’s career is finite.  While he is in Cleveland, we can expect revenues to increase substantially.   But at some point LeBron departs (or stops producing like LeBron).  When that happens, this franchise returns to what it was three days ago.

So why would you spend $1 billion to purchase such an asset?  At some point you are just going to be owning a Cavalier franchise that doesn’t have LeBron.

Now it is possible that someone would pay this amount even without LeBron.  There are only 30 NBA franchises, and owning these teams is about more than owning a simple business.  Owners also get a substantial consumption benefit.  That benefit, though, is not typically part of franchise valuations (and I think that is why these franchise values seem to generally miss the actual sale price of the teams).  And I don’t think that valuation –which has to be a function of the long-run value of the team — is really impacted much by the short-run value of LeBron.

So although I said in the interview that Cleveland’s franchise value would go up, I think that must be wrong.   And that means my performance on this test was not all that I hoped (next time I need to study more!).

One final note on LeBron’s impact.  A couple of days ago 538 noted that LeBron will make his teammates much better.  They based this on a very crude study of shooting percentages.  Basically all they did is look at what happened to shooting percentages in Miami and Cleveland with and without LeBron.  And what they show is that playing with LeBron increases shooting efficiencies.

I think there is a simple explanation for this effect.  Relative to an average small forward, LeBron gets more than twice as many assists (which is a very large increase).  And a your teammates’ assists go up — as the calculation of Wins Produced notes — your shooting percentage will go up.  Again, this effect is part of Wins Produced.   There may be an effect beyond just simple assists (better floor spacing, differences in defensive pressure, or something like that).  But I have not seen a systematic study that captures that effect.

And I would note… the Spurs seem to shoot very well without LeBron (as we saw in the NBA Finals).  The Spurs willingness to pass the ball seems to be part of that story (and as State Farm notes, Chris Paul’s ancestors knew about passing the ball decades ago!).

- DJ

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