The Cost of Protection
Is there time value to draft picks? Should there be time value when built into trades?
The Miami Heat would argue that there should not. Past history would suggest the Heat would argue that, disregarding the potential talent in any given draft, a first round pick in one season is worth exactly one similarly-numbered first round pick in a future season. Possibly even less.
How do you feel? It is an interesting question in light of recent events.
The Utah Jazz have reportedly agreed to accept $24 million in expiring contracts – those of Richard Jefferson, Andris Biedrins, and Brandon Rush – from the Golden State Warriors. It cost the Warriors first round picks in 2014 and 2017 and two undisclosed second round picks.
Jefferson and Biedrins were dead weight, and Rush, after missing nearly the entire 2012-13 season with a torn ACL, is still rehabbing and surely isn’t being counted on to offer much. It was a salary dump that can’t help but make you wonder.
Think back to June of last year.
The Heat selected Mississippi State power forward Arnett Moultrie with its No. 27 pick in the 2012 NBA draft, but then promptly dealt the SEC’s leading rebounder to the Philadelphia 76ers. The Sixers got the big man many figured they would take with their No. 15 pick.
In exchange, the Heat received a future first round pick from the 76ers and the No. 45 pick in the second round of the draft, which Miami used to select LSU center Justin Hamilton. The first-round pick the Heat acquired was lottery protected for the next three seasons, meaning the Heat would get the pick as soon as Philadelphia made the playoffs. If they missed the playoffs in all three seasons, the pick would turn into two second round picks — one in 2015 and another in 2016.
The Heat negotiated what appeared at the time to be a nice deal. At the time of the trade, the Sixers had just made the playoffs with a lowly No. 8 seed. The teams below the Sixers in the conference were moving backwards, or at the very least sideways. The Heat had the cushion of knowing that one team above the Sixers, the Orlando Magic, was about to be dismantled. A return trip to the playoffs for Philly with a low-level seed was all but assured – a terrible outcome for a Sixers team looking to improve, but a wonderful outcome for the Heat. Miami appeared to have traded its No. 27 pick in exchange for a No. 45 pick and a No. 15 or so pick one year later. A great outcome.
But things didn’t work out as planned. Philly traded its best player, Andre Iguodala, for Andrew Bynum. Bynum never played. As a result, the Sixers slipped just one spot in the standings, from eighth to nine, but it was enough to eliminate them from the playoffs. Miami’s return on its trade went from the best it could possibly be to possibly the worst it can be.
Things have since gone from bad to worse. Philly again traded its best player, this time Jrue Holiday, for a player who may not play for some, most or even all of the upcoming season, Nerlens Noel. Philly’s strategy now seems to revolve around tanking the 2013-14 season in hopes of acquiring the current consensus 2014 first overall draft pick, Andrew Wiggins, and pairing him with would-be 2013 first overall pick Noel and several other highly-valued draftees. It’s a risky endeavor and one that, even if it does work out, will certainly take several years to materialize.
The Heat now appears to have traded its first round pick in exchange for three future mid-second round picks – hardly a favorable outcome.
The upside was there. It didn’t work out. That happens.
But should the Heat have better protected the downside?
Should the Heat have protected itself against the possibility of an intentional Philly tank? If the Philly first round pick were Top-14 (i.e., lottery) protected in 2013, what protections should it have had in 2014? Should the protections have eased over time?
When the Heat traded for the draft rights to James Ennis just last week, their trade partner – the Hawks – demanded the protections on the second round pick the Heat will send back in return to ease over time. It’s a top-40 protected pick in 2017. Just one year later, it becomes fully unprotected.
Exchanging a No. 27 pick for three second round pick is hardly a bad outcome as an unlikely worst-case scenario.
But what if things were different? Rather than devaluing into a pair of second round picks over time, what if the protections were to instead have eased over time to reflect a theoretical time value for waiting on the pick? What if the Heat had utilized the philosophy that a guaranteed pick today is worth more than being forced to wait for a potentially similarly-valued pick in the future, and so asking the Heat to wait for each additional year should come at an incremental cost for each additional year?
What’s a better salary dump package – Jefferson, Biedrins and Rush, who make a combined $24 million, or Mike Miller and Joel Anthony, who make a combined $21 million (and far less if they decline their options after the coming season)? What is more attractive as a sweetener – with the Warriors now a perennial playoff team, a pair of low-level Golden State 2014 and 2017 first round picks, or the Philly future first round pick (subject to whatever reducing protections you feel are appropriate), a 2017 first round pick from the Heat in the post-Big-Three era?
Does the Heat option put together a better package of draft picks and a better package of players in this hypothetical scenario? Perhaps. But maybe that doesn’t matter. Maybe the goal for the Jazz was always to tank the season Philly-style anyway, in hopes of winning the draft lottery in 2014.
Would it have mattered to the Jazz that the Warriors package includes players with expiring contracts while the theoretical Heat package includes players with contracts that do not expire for another year (assuming Miller and Anthony pick up their options)? Perhaps. The 2014 free agent class may not necessarily be deep, but it has the potential to be incredibly top-heavy. Maybe that’s why a deal with the Heat falls through.
Or maybe the Jazz really only cared about the picks. Maybe the potentially monumentally better first round pick conveyed from the Sixers to the Heat and onto the Jazz (subject to whatever reducing protections you feel are appropriate), as well as the potentially better Miami 2017 first rounder, would have swung the Jazz toward the Heat. Maybe they would have preferred the better players. Maybe they would have preferred the $3 million in savings.
Consider the ramifications.
If the Heat were to have executed such a deal with the Jazz, it would have solved the team’s entire financial problem – clearing roughly $30 million in payroll and luxury tax payments for owner Micky Arison for next season alone. The savings for 2014-15 would have been even more astronomical.
With that kind of savings, the Heat could surely have utilized its Mid-Level exception this season if so desired (perhaps a Dalembert/Birdman/Oden center trio?), and pocketed its amnesty provision as an insurance policy for future use.
This is exactly the type of trade the Heat will be (or should be) seeking this offseason. Only, now, the Heat doesn’t have the assets to pull it off.
Which trade package would the Jazz have accepted? If you believe the Jazz would have favored the Heat’s package — the better picks, the better players, the cheaper contracts, but the slightly longer contracts — then that becomes the cost of ongoing draft pick protections that never figured to matter.