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Saturday, March 1, 2014
Adam Silver talks to Malcolm Gladwell about tanking

By Aaron McGuire and Timothy Varner
Special to ESPN.com

Today's MIT Sloan Sports Analytics Conference featured a one-on-one interview of Adam Silver (AS) conducted by Malcolm Gladwell (MG). In their wide-ranging discussion, Gladwell asked Silver about the problem of tanking in the NBA. What follows is a transcript of that portion of their conversation.

MG: "All right, moving on. First serious question is about the draft. Lots and lots and lots of buzz about the draft, ideas of what might and might not be wrong about it. Let’s start at a high level. Satisfy my curiosity as a relative outsider about how weird it is that in the context of sports, we reward favor. We know the famous quotation by Marx about how communism was “from each according to ability, to each according to his need.” This precisely describes the draft and the luxury tax. The parallels of having a group of billionaire Republicans who get together to behave like Marxists is just … overwhelming!"

AS: "So … it’s a great point, and every cycle of collective bargaining we end up hiring economists to help us bargain as I said, as economists as well. I always get a kick out of hiring the economists. They first come in, we have a general meeting where they take our current CBA, our bylaws, our constitution, our guidelines, how we operate … they go away, they’re academic. They say, 'We’ll study this and we’ll come back, we’ll present ideas for you.' It always happens. They go in, they come back, they’re always really excited, they want to play something … and they say 'You have it all wrong! You've created an incentive for teams to be bad!' And that’s of course what the draft is, and why we created a draft lottery. And I always say, it’s the same issue. It’s the reason why historically, so many commissioners have been seen as untrustworthy for sports leagues. And that is that the case we present is that we aren't true economic competitors. If we were true economic competitors, our teams would be trying to put each other out of business. In fact, they agreed to give to the worst performing team arguably the best player coming in. They agree to share all kinds of revenue – not just the direct revenue sharing transfers where the Lakers write a check for $50 million to their partners and say, 'Hey, it’s important for us that you operate in a way that you can afford a competitive payroll.' We share enormous amounts of collective revenue. So much so that the way our TV deal is set up, the more popular your team is, the greater number of local broadcasts we take away. And that’s a DIRECT cost to the team, especially as local deals go up. I’d say … if you want to call it a form of socialism, as some do, in terms of how sports leagues operate, I would say from an economic standpoint, we’re a single enterprise. We’re trying to create competition among teams. And that’s what makes our system. The lottery in particular, and our draft, we continue to tinker with it. By definition that’s why we have the draft lottery, we’re concerned about the disincentives to win that are built in the system."

MG: "Do you think at the present time the disincentives towards excellence are too great in our lottery system?"

AS: "You know, I’m not sure. As we become more sophisticated, as conferences like this exist ... I mean, even in the short time I've been here, I've been handed a lot of business cards already from people saying, 'I have a better idea for how you do it.' I've read in the last few days here, Mike Zarren's wheel proposal from the Celtics … also an interesting idea. I’m open to taking a fresh look at it. We've experimented to changing things. One of the fundamental mistakes we made years ago when we were less sophisticated about analytics, where the worst-performing team would historically have a lottery of type. If you had the worst record, you’d have a 1-for-1 chance of getting the first pick. So what we did, we fixed that with the draft lottery to dramatically reduce the odds that they’d get the first pick. We kept building it over the years. But let’s say now that it’s a 25 percent chance that you get the first pick if you have the worst record. But the analytical people with the team are saying that even a 20 percent chance is better than a random chance, so I’m not really sure we’re at the optimal point. At the same time –- and I know there was some discussion yesterday about so-called tanking –- these are to the extent that teams believe they may have an incentive to perform poorly. I’m not sure analytics bear out that being the optimal way to operate in that situation. In terms of the word tanking, I think it’s used differently by different people. To me, tanking means a team goes out to intentionally lose the game. I think there’s genuine rebuilding in our system. Especially when you have a cap-type system and you have to plan for the future. Just like any business, there’s short-term and long-term results. I think given their desire to win, they make the decision that this player will not optimize our chance to win a championship, because this player will lead to two or three more wins this year. But our goal is to win a championship, and that player just isn't going to help us meet that long-term goal."

MG: "Let’s talk about this. You mentioned about the wheel. For those of you who aren't familiar, this is the notion where you assign draft positions in a fixed order so that each team would have the first pick once every 30 years. Suppose you wave a wand and that’s in place tomorrow in the NBA. Can you tell me about the impact you think that would have on the NBA?"

AS: "So, my point here came up with this proposal. Over the course of 30 years, you move throughout mathematically in terms of your draft pick. This goes to show some issues. When Mike first showed it to me, I thought, 'Wow, that solves our problems.' Teams can plan for the future, they have absolutely no incentive to do anything but win the maximum number of games per season, they know where the draft pick is coming from. And I said, 'Let’s socialize this a little bit, let’s send it out to other GMs and get other team reactions.' And what came back … maybe it’s an obvious issue, but it’s one that surprised me was when teams said, 'Hold on a second.' There’s a belief that certain markets have advantages. That players may choose to be on the coast, be in a larger market as opposed to a smaller market. I’m not entirely sure that’s the case, but that’s the perspective. The concern by some of the teams was that if a player going into college or coming out of high school … Say that he knows the hometown team here, the Celtics, has the No. 1 pick in two years. I’m going to wait those two years to come out, because I can game the system as a player. I can choose to be a Celtic. Maybe another player wants to be in Orlando and he waits till he’s a junior to come out. Because if I’m in Orlando … In return, appropriately so." [MG interruption]

MG: [laughing] "I've heard that objection. And that objection strikes me as really lame. I mean, it proposes that the player can actively predict where they’re going to be taken in the draft, that’s No. 1. And two, that the teams themselves wouldn't react to this very thing simply by trading their draft picks. If the Celtics really want to take Joe Blow, and he’s No. 1, they can simply swap their picks." 

AS: "That’s what we heard about from the teams. As I said, I liked the idea initially. We’ll still study it. Basketball is so unique. It’s both a team and an individual sport. In terms of you and I, or a group of basketball experts here, and if we put the cards on the table. 'There are 450 players in the league. We want NFL-style parity.' I think the issue here is that if you don’t have one of the 12 or 15 players in the league, maybe it’s a smaller number, you have a very small chance of winning a championship. Because an individual player can be so dominant in this league. And then there are these players that come around once every few years, once in a generation … But I think, I remember reading about LeBron in ninth grade. We saw him coming along. Could we predict how many championships he’d win? I don’t know. But there was no question that he was a game-changer for any team that could get him. So I think then there’s that sense among teams. It’s once every 30 years, guys come across, and suddenly the player says, 'Don’t bother, I’m not gonna play for you. I’ll wait a year or two and choose my team.' Look, it’s definitely not the perfect system we have right now. And based on the discussion we had about it, it’s one of those topics …"

MG: "I’d like to talk about the fact that when you first heard that idea, you were quite taken to it. So there’s some element of dissatisfaction in your own mind with the current system?" 

AS: "Yeah. In part, and again … Because I’m not sure the analytics support this notion that you can game the system and lose this many games to have this specific record, it requires a lot of precision. In terms of how good someone’s going to be, where he’ll come out in the lottery. But I’d say in terms of the business of the NBA, the fact that there’s so much chatter about the notion of tanking … Of course that concerns me from a business standpoint."

Transcription provided by Aaron McGuire.