Economics and the NBA's 1%

A couple of vox populi type questions arise today. Occupy Blazersedge anyone?

Dave,

Sorry, but even the excitement of a new season doesn't make me forget the money grubbing these guys just engaged in. The fight cost us part of a season. Their new rules might cost us Brandon Roy. Don't they realize how much money they make already for PLAYING A GAME? I wonder what they'd do if they had to work for my salary? I'll be happy when they give it back and live like the rest of us. Show some appreciation!

You packed several issues in there. I don't think anybody is happy about the lockout or the missed games. That includes everybody involved with the NBA. I agree that the league should come back humbly and with a sense of appreciation. I'd love to see refunds given to season ticket holders for each team's first home game on or after January 1, 2012 (they still get to keep their tickets and come to the game) and then all excess tickets for that game being given to charity. Fill the arena with kids and common folks for a game and let them cheer. So there...I agreed with your first and last points. In the middle it gets mushy though.

The new luxury tax rules didn't cost the Blazers Brandon Roy. If he leaves the combination of bad knees and expensive contract will have cost the Blazers Brandon Roy. If he could still perform at an All-NBA level every night the Blazers would be happy to keep him on the team and on the cap roll no matter what tax burden they bore because of it. If they end up losing him it'll mean they don't think he can do that anymore.

The part about giving back money sounds high and evokes sympathy but it's disingenuous. You draw a salary. That's what the market has determined your combination of skills, experience, education/training, and work ethic is worth. The guy working the counter at McDonald's probably makes less than you do. How reasonable would it be to ask you to cut your salary by 90% to line up with his? No way, right? That doesn't mean you think less of Counter Guy, nor that you don't appreciate his services when you want a Big Mac.

I'm not sure that a professional basketball player brings anything more intrinsically valuable into the world than I do, or than a teacher does. I'm not sure a boss affects the world in a much better way than his secretary. But I'm also not sure anyone is qualified to make those judgments across the board, let alone fit a dollar figure to them. The world wouldn't necessarily be a better place if engineers were paid like taxi drivers or vice versa. Nor would it be a better place if we all made exactly the same amount of money. Fewer people would have incentive to do great things. Even when they did, how would we determine who got to own them? Without money we'd just be finding a different way--politics, position, power--to grab at what we want. I'll skip the fistfights over Gucci bags and just let Paris Hilton and her ilk pay obnoxious amounts for them. I'll also skip the angst over how much an NBA player makes. If he can get it, good for him! I hope he enjoys it, spends it well, and realizes that money is no substitute for leaving a good legacy and making the world a better place...even if "better" just means playing hard and allowing people to forget their troubles through you for a while.

Dave,

If I were the billionaire owner of the Blazers I'd just spend whatever I needed to get great players and contend for a championship. Otherwise there's no point. Why not just ignore the tax no matter how high it goes and keep the players you need to win? How greedy can you be when you already have so much money?

Hey, I agree with you. I'd do the exact same thing. And that is why you and I are not billionaires. You don't make that much money by pouring it down the drain.

Look, I'm the last person to defend or apologize for the ultra-rich. As I've said previously, at a certain point money becomes just glorified score-keeping. You should try and get enough to do what makes you happy. The rest is unnecessary excess. Cosmic-level greed--including chasing after more zeroes in a bank account when you already have plenty--is one of the most incomprehensible things I can imagine.

At the same time having that much money creates issues that you and I don't understand from our perspective. You can't just stuff a billion dollars in your mattress. Even if it would fit (unlikely) it would be a bad idea. Inflation alone would eat away at its value as it sat there. You'd steadily lose the stuff you'd been hoarding without a single bill leaving your room. And that's not even taking into consideration fluctuating currency value. We tend to think of the dollar as stable and the price of products as fluid. In reality both move relative to each other. I went into the store three weeks ago and bought some broccoli (one of the three veggies my son will eat) at around $1.30 per pound. I went back two weeks ago and it was $2.60 per pound. To my utter shock, the price had doubled in a week! Or, putting it another way, the value of my dollar relative to broccoli had been cut in half. Now, after the heart-attack first moment of realization this turned out to be no big deal...a couple of bucks worth of difference. Multiply that by a billion and you'll start to get the idea of what these guys face every day with all their money in play. Clearly in my little economic microcosm consisting of dollars and broccoli I did not want to be holding the dollars that week! I could only prosper if my money was properly invested on the broccoli side of things. So it is with the billionaire. He can't hold his money static. He has to invest in something. In fact life is just an endless cycle of continually investing in things, keeping your money active and in play. There's no real neutral "cash out and keep it" option. You must invest and those investments must pay off or you're going to lose money...at that scale sometimes millions at a time. People always want to dream about the fancy houses and yachts but imagine looking in the paper one morning and seeing that some storm in the Guatemalan broccoli region just wiped out $50 million of your net worth. I don't care how rich you are, that's going to make you sick to your stomach.

Therefore it's probably less greed and more prudence that even the ultra-rich insist that their investments pay off. If they're not making money they're losing it. For many I imagine it becomes a religion of sorts...investing in a losing cause being anathema. On this front I'd say Paul Allen has done about as well as possible. He's done a bunch of interesting things with his money: bought the Blazers, kept the quality up despite the cost, invested in space travel, built a sci-fi and music museum, traveled the world. This guy isn't a miser. He's doing it right. In fact he's doing pretty much what I dream I'd do with his wealth. He and I could have been hatched from the same egg...except his egg is solid platinum of course.

Perhaps instead of saying, "I can't believe this greedy owner won't just do 'X' with the team" we should be saying, "If even Paul Allen is finding he has no chance to compete and make money in this league at the same time something is wrong." Whether you agree with his decisions or not, he's put in the time and the money with this city and this team. It's great that he's done so, but he also has the right to stop it should he wish. This could mean selling the team but it also could mean just saying, "I have to stop the financial leak here". If the Blazers can only be successful taking glorified charity from a rich owner then they're not going to be successful for long. Their only shot for viability in the current sports climate is to be successful AND a good investment.

I don't know if the new CBA can accomplish that, either from a competitive or financial standpoint. But I don't begrudge the owners for trying.

--Dave (blazersub@gmail.com)

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