More on payroll and competitive balance

I wrote about the red herring that is competitive balance last week. And then Tom Haberstroh came along and did it way, way better.

Thanks to the rookie scale that keeps salaries artificially depressed for several years, the Thunder paid Kevin Durant, the NBA’s leading scorer, about a third of what the Jazz paid for Andrei Kirilenko last season. Similarly, the Bulls paid Derrick Rose, the league’s official MVP, about a third of what the Magic paid Gilbert Arenas, the league’s unofficial LVP.

Paying Durant $6 million is an enormous competitive advantage on its own, but the real benefit here is that it frees up Oklahoma City GM Sam Presti to spend money elsewhere when he needs to. The opportunity cost of paying Arenas is that you forfeit the chance to use that money on other things (like a James Harden or a Serge Ibaka or a Russell Westbrook).

This concept isn’t unique to NBA general managers. Do you pony up $30,000 for a fancy car or do you buy a slightly less fancy car and deposit the leftover cash into a savings account to help send your child to college? NBA teams face a similar choice when choosing to spend their money. With a soft cap on payroll, it becomes imperative to spend your money wisely, and if you study successful franchises, those who spend money wisely seem to be bargain shopping at the draft.

Like I said in my thing, it’s no coincidence that the Thunder always have three or four guys in the “Most Underpaid” lists. Why? Because rookie contracts are kind of a scam. The fact the Bulls are paying Derrick Rose less than $7 million a year is criminal. But that’s just the way the system works. And honestly, it’s probably the best way for it to work. Otherwise, you get inflated rookie deals and when players bust — i.e. Adam Morrison, Greg Oden, etc. — teams aren’t left to trying recover from paying on a bloated contract where they got zero production.

Rookie scale deals are the cheapest labor in the league and it’s how Sam Presti built a contender in small town OKC. The question is though: What happens when those guys grow up? Already one guy got his payday (KD), but next up is Russell Westbrook. After he gets maxed out — or close to it — what kind of money will the Thunder have for James Harden and Serge Ibaka? It could be an either-or situation for Presti. Kendrick Perkins is already getting paid and while Nick Collison’s deal was brilliant because of how little he’ll count against the cap down the road, money could get a little tighter. Which is where the larger markets have the deep pockets to bust into the luxury tax and keep paying to retain stars.

It’s something I’ve wondered about before. Is it possible that Presti has done too good of a job? That’s ridiculous, I realize, but paying all these guys has always kind of been the shadow on the wall. It’s possible, but it could prove to be tricky.

Which is one reason Presti and the Thunder draft players like Reggie Jackson. Other teams like the Lakers don’t value draft night at all, but Oklahoma City sees it as a chance to add another piece at a cheap price. Consider this note from Haberstroh:

“What we’re seeing is a strong tie between drafting efficiency and win percentage, but not so much for winning and payroll. In fact, draft efficiency alone explains 34 percent of the variability in a team’s record over the past decade. How much does payroll explain? Just 7 percent — a tiny amount in comparison.”

So say the wheels come off and a few players have to walk away from this roster. The Thunder are in good hands because their GM knows how to restock and reload, but not through big spending. It’s through drafting.