Chapter 3

The NBA Salary Cap Myth




Pop Quiz: In the past 10 years, 47 NBA all-stars were drafted and 43 all-stars were obtained via trade.

How many all-stars were acquired via free-agency as a result of clearing salary cap space? [1]

A)    49
B)    45
C)    41
D)        9

Bonus Question: Why did the Boston Red Sox pay $51 million just for the rights just to TALK to Japanese Pitcher Daisuke Matsuzaka, and why did the Yankees pay Roger Clemens about 1 million PER START? 

The answer is D. (Bonus Answer: “Because they can.”). Yes, on average, less than ONE great player changes teams each year because another team got under the cap. A team is 10 times more likely to obtain an all-star through the draft and trades and 5 times more likely to land a prize via a trade alone. Unless there exists an exception-to-the-rule situation like Lebron James and friends in 2010, Isiah should continue to ignore his media critics who contend that the best long-term plan for the Knicks is to “get under the salary cap”.  The truth is that Isiah took the correct, and proper approach to rebuilding the Knicks disaster of an inherited roster. Here’s why:

  1. Hey Media – It’s Not Your Money!: Whether the Knicks are $1 or $100 million over the cap makes little difference. On behalf of Cablevision, James Dolan signs those checks. It’s his problem, not Mike Lupica’s. Most teams try to stay under the cap because their owners either can’t afford to, or choose not to go over the cap. However, Forbes magazine rates the Knicks as the NBA’s most valuable franchise. If the Knicks have one single privilege over most NBA teams, it is the luxury to afford the luxury tax. When he took over as GM, Isiah immediately and wisely seized upon this advantage and absorbed more expensive contracts to help acquire young players and draft picks who would never have been available by dangling the names “Howard Eisley” or “Shandon Anderson” as trade bait.
  1. Fool’s Gold: Why Free Agents Ain’t Always Free:  This off-season’s big free agent prize was Rashard Lewis going from Seattle to Orlando while Kevin Garnett, Ray Allen, and Allen Iverson (earlier in year) all moved via trades. Last year the one-per-year lotto prize was the Bulls signing of Ben Wallace. The Bulls then traded Tyson Chandler to the Hornets for the primary purpose of freeing up future salary space to help absorb Wallace’s contract. Last year Chandler outperformed Wallace, is improving as Wallace is declining, and will be a top defensive big man long after Wallace has retired. In retrospect, Wallace was no prize at all, but, most likely, a long-term mistake. Bottom line: Clearing salary space to land or keep a free-agent often operates more like a trade. And sometimes a very bad trade at that. This is one reason why only about 5 of 30 teams are significantly under the cap in any given year.
  1. Putting a Cap on the “Lotto Strategy”!:   Many media critics love to point to past free agent lotto prizes like the acquisitions of Shaquille O’Neal (Lakers) or Steve Nash (Suns) as shining examples of the get-under-the-cap strategy. Yes, and smoking cigars is healthy because George Burns lived to be 100.  And consider this: both Shaq and Nash were ALSO acquired through trades by the Heat and Mavericks. Other all-star free agent signings like Tracy McGrady (Magic), Dikembe Mutombo (Hawks), and Vlade Divac (Kings) were also acquired via trades by The Rockets, 76ers, and Hornets. In 10 years prior to this summer, only FOUR all-stars (Allan Houston, Gilbert Arenas, Carlos Boozer, & Mehmet Okur[2]) were acquired through available cap space, but unavailable through a trade. That’s it [3]. No, seriously, that’s it. During, that same span 38 all-stars were obtained by trade.


  2. Great Players Resign with Their Own Teams!  Basketball ain’t baseball. This summer Dwight Howard signed a contract extension. Last off-season Lebron, Carmelo Anthony, Dwayne Wade and Chris Bosh all did the same instead of testing the free agent market. The year before that Kobe resigned with the Lakers leaving the Clippers, Bulls and all their salary cap room out in the cold. Amare Stoudemire? Dirk Nowitzki? Tim Duncan? Kevin Garnett before the big trade? All resigned with their teams. Why? Because resigning with your own team will almost always pay the most. In contrast, the Atlanta Hawks have been 10-14 million under the cap for the last 5 years. Last summer they signed Speedy Claxton. 


E. CAP RECAP! (Data from last 10 years [4])

Odds of obtaining an All-Star through Draft & Trades:         90% 
Odds of obtaining an All-Star Through Free Agency:             9% 
Odds of taking a blackjack hit on 19 and not busting:           15%

Number of All-Stars Obtained through trade ONLY:              38 
Number of All-Stars Obtained through Free Agency ONLY:     4  


F. Forget the Cap!: Like every other team the Knicks can use their mid-level exception to land a solid free agent role player. As for the Knicks unique situation, striving hard to get under the cap to land a franchise player would actually be a bad policy (2010 might be an unusual exception). It would mean letting too many “birds in the hand” get away in order to get under (see Bulls-Tyson Chandler example). And even worse, it would mean giving up the Knicks only singular advantage of being able to acquire superior talent by overpaying for it.


Final Verse: To ask that Thomas not aggressively wield the one trump card that the Knicks have (James Dolan’s pocketbook) in favor of a “lotto strategy” borders on lunacy. While sports journalists, even many smart ones, were telling Thomas and the public how stupid he was, Isiah knew that taking on big contracts as a package deal for amassing greater talent and additional draft picks was the obvious and correct strategy to turn around the Knicks talentless roster.



 Related: Starbury and Sarah: American Retail Revolutionaries

[1] The 10 year analysis showed 47 all-stars obtained via draft; 43 via trade; 9 via free-agency (non-mid level); and 1 via mid-level exception (Chauncy Billups). A handful of players are included on more than one list if they made the all-star roster with more than one team. This summer’s transactions were not included in the 10 year analysis, since it is too early to determine if they will become all-stars with their new team (which was the criteria used). 

[2] *Note: Arenas and Boozer took advantage of a salary cap loophole for 2nd round draft picks that no longer exists. It is not unlikely that they would have been resigned with their original team under the revised regulations.

[3]  A small minority of trades are “sign and trades” that are often mistaken for free-agent signings. Not all sign and trades are beneficial either. A famous example is Orlando sign and trade for Grant Hill to a large contract and sending Ben Wallace to the Pistons as part of the trade package. 

[4] See [1]; As mentioned in the paragraph, 5 all-stars (Shaq, Nash, Divacs, Mutombo, and McGrady) were obtained through BOTH free-agency and via trade. Free agent mid-level exception Chauncey Billups was not counted because he was obtained with the mid-level exception, an option available to all 30 teams whether over the cap or not.