Tanking seems to be on everyone’s mind in the NBA these days. Like many sports problems, “tanking” is not singular but an amorphous cluster of problems all housed under one term. The term isn’t hard to define–it’s when a team has a strategic incentive to lose–but it lacks a precise scope. That makes it hard to settle on what exactly is included when different people use the term. Tanking involves teams actively competing to lose games, usually to better their draft position. So sure, we include The Process in Philadelphia. But do we also include Donald Sterling’s original version? For over a decade, he lived high on the proverbial hog supplied by league revenue sharing and high draft picks while displaying next to no commitment to being competitive (or a decent human being for that matter). Do we also include playoff teams who throw late season games to dictate a more favorable playoff match up?
People talking about tanking will include some of these scenarios but not others. Add to that, even where people agree on the boundaries of tanking they often disagree on the extent to which it is a problem for anyone outside a disgruntled team’s fan base (ahem). I’ll make a case for where I think tanking is a problem for the league; one that warrants an intervention. I offer one that basically involves redistributing draft lottery odds. I think it is simple and reasonably effective at removing most incentives for throwing games.
Where One Team’s Process Becomes the League’s Problem
My general axiom is that the NBA ought to shy away from dictating team-level strategy, certainly without clear evidence that established rules or the general dictates of competition are being subverted. Even under those circumstances, league interventions should begin with subtlety and build from there.
So, why does tanking violate that axiom? It creates two problems worthy of intervention: the welfare dependency problem and the “agency problem” problem.
The Welfare Dependency Problem. A major problem involved in tanking is in an odd way quite subtle. It can undermine the goodwill needed to run what is effectively a self-regulating cartel. Former Clippers owner Donald Sterling is a great illustration. For years he operated as a fairly open NBA “welfare cheat,” hoarding the goodies that necessarily go out to bad teams, like a disproportionate share of league revenue and high draft picks. At some point he changed his tactics, but memories are long. When he was recorded making bigoted remarks it became a pretext for owners to exile him, but the reason they united against him is that he’d destroyed so much goodwill through decades of douchebaggery. I don’t think it is controversial to suggest that a different owner might have survived the ordeal. Good riddance to Donald Sterling and all, but the perverse incentives that drove his behavior remain unaddressed. Unlike most single mothers who have received AFDC or TANF, businesses often conform to the stereotype of welfare dependency. This is a critical problem. A 32-team league must subsidize bad teams to a degree to keep up the baseline level of product quality. The question is, what’s the right amount before goodwill is eroded?
The Agency Problem. This is a fairly narrow problem that garners a lot of attention every March, as teams inevitably compete to lose games for more favorable draft lottery odds. It’s not a good look for the TV partners or the paying customer. But it also puts into play some nasty dueling incentives for a given team. Even those that have decided to “play the kids” for developmental purposes must confront disincentives to winning (and thus development) for minuscule improvements in draft odds. The problem here is that teams know that the difference between being in a position to draft Tim Duncan instead of Keith Van Horn is easily significant enough to compete for even microscopically better odds.
Reforming the Draft Lottery to Resolve Welfare Dependency and the Agency Problem
Sports subsidies are meant to be a hand up in tough times, but they cannot be a way of life. (This is the only time you’ll EVER hear me mimic a conservative Southern politician.) So here’s what I’d do.
1. Split the lottery into Tier 1 & Tier 2 teams, each with fixed odds of winning. Right now, the lottery over-rewards teams for what is effectively random noise in their respective records. A 2-3 game difference should not warrant mathematically different odds of drafting franchise-altering talent. So I would split lottery teams into two tiers. Tier 1 would consist of the league’s five worst non-playoff records with fixed odds of winning the lottery at, say 10%. Tier 2 would include the remaining non-playoff teams with fixed odds at 5%. Will teams fight to get into Tier 1? Perhaps. But I’d also arm the commissioner with the power to expand Tier 1 to six or seven teams and lower odds to 8% to deter throwing games. He could announce his decision at the lottery, giving strong incentives not to throw games in a race to the bottom. Again, I don’t mind a team saying, “We’re going to develop the kids,” but at tip-off I want as few structural disincentives to winning that night as possible.
2. No team can draft in Tier 1 for more than four consecutive seasons. I don’t believe teams should get to tank in perpetuity, regardless of whether decision-makers are committed to grifting or committed to game theory. Sam Hinkie’s version of The Process is based on game theory that says if you are allowed to bet double or nothing until you win that’s what you should do, and you should do it indefinitely. There is little argument against the strategy. The more relevant question for the NBA is why it would structure talent acquisition as this kind of game? I don’t think it should.
To be clear, I would NOT bar a team from winning the draft lottery for four consecutive seasons if the ping pong balls fell their way. Any team can win, even with low odds. But, after a third draft in Tier 1 a team would draft in Tier 2 in the fourth year unless they made the playoffs.