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Ball Don't Lie

Two with good hoop knowledge try to explain where all the NBA’s money went

Kelly Dwyer
Ball Don't Lie

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There are two ways of looking at the financial landscape of the NBA. Then there's a third way, which you really shouldn't look at.

Starting with the uncounted third way -- don't pay attention to me, or most other punters attempting to play economist while they prattle on about the numbers behind a sport that they care about. There are exceptions in the NBA blogosphere realm, but I mean that. I have a fair idea as to what I'm talking about regarding this lockout, but at the end of the day I'm revealed as a hopeless mug. Were this a typical late-October Thursday, I'd be telling you about what the Sacramento Kings should be doing with their backcourt, and not their cooked books.

The other ways? You can listen to those who are biased and have an agenda to serve (two different things, if we're honest), or those that know what they're talking about.

NBA union employee and MacArthur Foundation genius grant winner Kevin Murphy is a renowned economist, to say the absolute least, and bias might play a role in his take on the NBA's ongoing lockout because of his work with the NBA Player Association. His take, I'm sorry, is too insightful to ignore; much less dismiss outright. Murphy knows what he's talking about, and he doesn't really need this gig in order to prove his acumen.

NBA.com, in an admirable show of journalistic integrity, allowed the venerable Steve Aschburner to interview Murphy and post his expertly positioned rants against the NBA owners and how badly they've gone wrong. We'll post parts of the interview, but even if you're not out for NBA owner blood this is an utter must-read beyond what we'll post. Please follow up, starting with this take from Murphy:

I would say the primary disagreement is not over the accounting numbers. It's what you include and how you interpret the numbers. For example, the accounting picture of the NBA isn't very different from what it was five years ago or 10 years ago in terms of ratio of revenues to costs and all the rest -- it's changed very little. Which immediately tells you, wait a minute, if the underlying financial picture is similar today to what it was five years ago or 10 years ago, and people are paying $400 million or whatever for franchises, and you're telling me that these things lose money every year, something's missing, right? These people aren't stupid, right? These guys are worth billions of dollars. So why did they pay all this money for franchises that, it looks like, lose money?

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Well, the answer is pretty clear. There are a couple of things that are really attractive. One is, historically, you've seen franchises appreciate in value and that appreciation has more than outstripped any cash-flow losses that you've had. And if you're in the right tax position, it's actually pretty good because you've got a tax loss annually on your operating and you've got a capital gain at the end that you accumulate untaxed until you sell it and then pay at a lower rate. So you get a deferred tax treatment on the gains and an immediate tax treatment on the losses, that's not a bad deal.

[…]

But who bought anything in '07 that they're happy with the price they paid? If you bought a house in '07, if you bought stocks in '07, if you bought bonds in '07 -- I don't care what you bought, you're not happy with the price you paid. When you buy at the top, you don't make your money. That's not unique to the NBA, that's everywhere in life. But by and large, NBA franchise ownership has been a good investment. You can't base long-run projections on how you did in the biggest financial downturn of the last 50 years. On that basis, there are no good investments out there. But we know that's not true."

On the flip side of this, more toward my realm of unknowing, is Paul Shirley barely housing his contempt for those he used to share a locker room with, at the Wall St. Journal. Yeah, that forum doesn't sound right to us, either.

Paul is using big words again, feebly attempting to hide his utter and abject disdain for those he was apparently forced to commiserate with under the guise of pulling the covers off a subject we'd never considered. I mean, NBA players are terrible at saving money? You mean J.R. Smith isn't playing in China because of a deep-seated love of pro basketball?

The idea that NBA players are better prepared this time around is, for the most part, poppycock. The passage of 13 years has not turned NBA players into CPAs. When this year's lockout ends, it will probably be for the same reason as the last one: On average, NBA players are not particularly good with money, and NBA owners know this.

[…]

Most people assume that pro athletes are lousy with money because they're stupid. Some professional athletes aren't very smart, and some of the time, this leads to horrendous financial decisions. But stupidity isn't what usually drives sportsmen to the poorhouse, or, in the case of team leagues, back to the bargaining table during a work stoppage. The trait that causes most NBA players to burn through their savings is the same trait that allows them to become NBA players in the first place: an almost unlimited capacity for irrational behavior.

Readers and even friends and family sometimes take me down for the way I attempt to stave off ennui while I put fingers to keyboard using rhetoric typically unread during their usual trolls through the Internets. The problem, and it is a big problem (especially in the smart-aleck circles I tend to run in) is that I actually talk this way. I'm that weird. Does anyone believe that Paul Shirley actually speaks as he writes?

Geez, what a ponderous mess. It's no news that NBA players aren't that much better off when it comes to saving scrills as compared to the last extended lockout in 1998, but Shirley somehow tops me in terms of haughtiness, and that's like beating Steve Kerr in a 3-point shootout. He's not wrong, in most of his points, but with the abject lack of respect that he's earned following his (of its time, groundbreaking; I suppose) breakthrough as an ex-NBA blogger in 2005, he has to do a lot better to convince us. And perhaps use words that he actually says out loud, in actual conversations. I'd start with losing "poppycock."

Apologies for losing the bit, as I attempt to run. Just trying to keep it real, compared to nonsense.

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