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Second Round Sellouts: Why selling NBA draft picks is a bad idea

The NBA draft is often described in gambling terms. It’s a crap shoot, the order determined by a lottery. Teams might be better off throwing darts or flipping coins to make their selections. And while these are obviously exaggerations, there is a degree of truth.  Drafting is an inexact science. Especially later in the night, misses far outnumber hits. The potential value of nailing a second round pick more than justifies the effort, though. Unfortunately, more than a few teams every year decide to not even try. These teams fold before the cards are even dealt, costing themselves and their fans the chance to win big.

While the practice of selling late first round picks has thankfully fallen out of favor (though not before the tactic hamstrung the Seven Seconds or Less Suns to a degree by costing them inexpensive sources of quality depth those squads lacked), second rounders are still fair game. On draft night, four teams purchased a total of six second round picks for cash considerations. Ranging from the 44th to 60th and last overall selection, selling NBA draft picks continued to be a long standing NBA tradition.

In the last ten drafts, 49 trades were reported to include cash considerations as primary inducement to one side of a deal (for the purpose of this exercise, deals such as the 2006 trade of Rajon Rondo, Brian Grant’s contract from Phoenix for Boston’s 2007 first rounder where Boston also received cash as a final “balancing” of the trade where not included).

Not all of these trades were simply rich teams out financial-muscling poorer teams; in some cases, such as the Philly’s sale of the 60th pick in the draft this year, the selling team has no roster space for additional picks and could simply invite the player they would have picked to camp in any event.  In others, the cash is used to lessen the hit of a salary dump as the “buying” team needs to offload salary to accommodate a future move.

However, in broad strokes, selling draft picks is bad business. The troubles faced by a franchise as profligate as the Knicks in terms of trading away their draft picks has been well-documented. At least New York received something of perceived basketball value for the right to make those selections, no matter how hare-brained the idea behind the exchange turned out to be. In the case of teams simply releasing their picks or agreeing to trade down for dollars, nothing of basketball value is gained.

While in the past some teams might have justifiably claimed financial hardship, this excuse really shouldn’t fly today. Especially under the current, extremely owner-friendly collective bargaining agreement, and with franchise values escalating on a seemingly daily basis, claims of poverty are more likely rationalizations for pocket-lining. While fans are paying full freight to expect to see a franchise compete to the utmost, it’s only a slight exaggeration to equate being on the selling end of routine deals of this type to point-shaving.

Still, second rounders are unlikely to become stars or even especially useful players. Since the imposition of the rookie salary scale in 1995, around three players selected in the second round per year turn into consistent rotation players for the team which drafted or traded for them. A few more (such as Patrick Beverley or P.J. Tucker) have made it back to the league after failing to stick the first time around. But, while the odds aren’t good, the rewards to hitting are considerable. Generally signed to minimum contracts (around $507,000 for the 2014-15 season), these players don’t have to do much at all to provide value well in excess of that salary.  Nate Silver estimates the “market rate” for a win is around $1.75 million. A player needs to “produce” a measly 0.3 wins per season to justify that contract. Assuming 2 year contracts, 205 of the 372 players drafted in the second round since 1995 who have appeared in at least 1 NBA game have surpassed the threshold of .6 Win Shares for their careers.

Thus, if a second rounder actually makes a team’s roster, he’s already better than 50/50 to have been worth the money. In terms of upside return, consider this list some top second rounders drafted between 1995 and 2012: Manu Ginobili, Paul Millsap, Gilbert Arenas, Kyle Korver, Marc Gasol, Anderson Varejao, Trevor Ariza, Amir Johnson, Monta Ellis, Marcin Gortat, DeAndre Jordan, Mario Chalmers, Goran Dragic, Chandler Parsons, Nikola Pekovic, Isaiah Thomas, Omer Asik and Lance Stephenson. Is there any team in the league that wouldn’t love to add one or more of these players virtually costlessly both in terms of salary or trade assets?

Worst case scenario, a team can always draft an overseas project, and even if that player is unlikely to ever come to the NBA, the rights to the player remain an asset for use in future deals more or less in perpetuity.

Against these benefits, there are the relatively paltry sums these picks fetch. The Wizards reportedly received just under $2 million for the 46th pick, for example. Though that deal was spun as giving the Wizards “more flexibility on the free agent market,” the justification rings hollow. The team doesn’t receive any sort of salary cap or luxury tax rebate for the amount received in the swap. So basically, the money goes straight to the bottom line. Teams which routinely make these moves are either so financially desperate as to be non-competitive (perhaps relatedly, ESPN’s Zach Lowe reported the Wizards lost around $13 million last season), acting in a penny wise/pound foolish manner, or both by sacrificing the tremendous, low cost benefits of these second round selections for a quick cash infusion. For example, the Pacers deciding to shift the 57th picks to Knicks for cash deprives them of a free chance to add badly needed inexpensive talent while doing nothing to aid their goal of re-signing Lance Stephenson and avoid the luxury tax.

So who are the primary culprits? Many teams bought on some occasions and sold on others, the following represents the franchises with the most net sales (on the left) or net purchases (on the right):

Net Draft Sellers

 

The Timberwolves have averaged selling one draft pick per season over the last decade. Is it any wonder they have struggled to put talent around Kevin Love to the point where he appears headed out the door at the earliest possible date? While not making too much of this tiny data point, it is inescapable that all the franchises listed on the left have been noted in recent times for being cheap, poorly run, or both. Of course, purchasing picks is no guarantee of quality teams either, but it seems clear that teams which routinely sell simply aren’t competing on the same playing field as the rest of the league.

Especially for teams in smaller markets who struggle to attract or keep stars capable of outperforming even a max contract, securing players on cost-controlled rookie deals is vital to success. Without players collectively outperforming their salaries, a team spending the full cap amount can only expect to win about 35 to 37 games. Even a team choosing to spend up to the luxury tax line can only expect to win in the low 40s. So, if a team like Minnesota is unlikely to acquire a “supermax” player, and routinely foregoes opportunities to add talent which could easily return 1000% value (as Leon Powe did for the Celtics, for example), how can they expect compete?

The Wolves of all teams should know how damaging the lack of draft picks can be to a team. After reaching an illegal agreement with free agent Joe Smith, the league fined the team five future first rounders (the penalty was later reduced to four.) The inability to refresh the talent base was a major reason for the team’s struggles in the mid-2000s and Kevin Garnett’s subsequent departure. Instead of learning from that unpleasant outcome, they now seem poised to repeat it.

Seth Partnow

Seth Partnow lives in Anchorage, Alaska. He writes about basketball at places like Washington Post's #FancyStats Blog, TrueHoop Network's ClipperBlog. Follow him @SethPartnow and sethpartnow.tumblr.com