Friday, May 15, 2009

The Moral Hazard


Pick any league in North American sport that has a draft.  The NBA, NFL, NHL, and MLB all have drafts.  This is the process where teams select players who aren't yet professionals and draft them to play for their team.  It is not a complicated process and as far as sports go it is not only the life stream of the game but it is also valuable entertainment to the fans.

Who doesn't love draft day?  It is a day that can give hope to any fan whether their team be a perennial powerhouse, a fringe contender, or a basement dweller who needs a chance.  On draft day anything can happen and it gives general managers and owners a way to rebuild not only their franchise but also the interest of their fan base.

While draft day does have its many benefits it also has one vital flaw.  Every draft day of the above mentioned sports is a day in which losing is rewarded and where the values of society are tossed out the window. 

What I am talking about is the system by which the team that finished last in the regular season gets the #1 overall pick.  Yes I know some leagues have lottery but the basic principle is still the same, the worse you do the greater your reward.

Imagine this system was adopted in other areas of society say for instance in the workplace.  When employers see someone working hard they promote that person as a way of rewarding their achievements.  What they don't do is find the guy who shows up late, leaves early, and doesn't get his work in on time and give him a company car and the corner office.  The very idea of rewarding someone for losing is laughable and yet it is commonplace in sports and likely always will be.

So by looking at the system in place if I took over the role of a GM in let's say the NBA and my team isn't very good and we are headed towards a lottery pick what incentive is there for me to try and make my team better?  Yes, I could trade players and try and sign guys in free agency, or I could tank the season and try and get the next LeBron James or Kobe Bryant.  Free agents cost a lot of money and if my team is untalented then executing trades will be difficult. It is much easier to select a college player and sign him to a rookie contract.

This argument is usually attacked by people saying that the reverse order draft is the ultimate leveler when really this is only a myth that is perpetuated by idiots.  If the reverse order draft is such a great system then why haven't the Pittsburgh Pirates won more than 80 games since 1993?   Or the Charlotte Bobcats made the playoffs in their 5 years as a franchise?  And why did it take the Columbus Blue Jackets 8 seasons to finally make the playoffs?

People tend to think that the more top draft picks a team gets the better it will become but that simply is not the case.  Success in sports is based on the quality of the organization.  The ability to hire good coaches and draft the right kind of players are what make the good teams good.

To prove this point look no further than the Detroit Red Wings.  Arguably the most dominant team of the past decade and a team that didn't have a 1st round draft pick from 2000-2007.  During this period they finished 1st in their division every single year and won 2 Stanley Cups.  They achieved this success not by getting lottery picks but by being an excellent organization that didn't use the draft as a crutch.

I think the solution to this problem is a simple one and a fair one at that.  Every team in the entire league should have an equal chance at the 1st overall pick.  Does this system make it more difficult for weaker teams to improve their chances to get better?  I don't think so.  I think that it would not only make the draft more interesting but eliminate the current incentive to fail.  GMs would have to be smarter and there could be no more tanking in order to get a better draft spot.

This system would make any league infinitely more interesting.  Imagine if Crosby and Ovechkin were on the same team.  Or LeBron and Kobe.  That would be amazing.  Yes it is awesome to see them go head to head and everything but the history that they could make playing on the same team would be even greater.

The Moral Hazard is the principle that that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.  In this case that a team would act much differently if drafts weren't reverse order.  Maybe if there was no incentive to come last we wouldn't see the same teams huddled in the basement of the standings every year.

The idea that someone is rewarded for failing or being inferior is a bizarre one that is only prominent in professional sports.  Yet it is contradictory to everything that I feel sports stands for.  The point of sports is to compete against an opponent and to beat that opponent.  If you lose the game there is no second prize there is only defeat.  The current draft system in the 4 major North American sports leagues needs an overhaul.  Teams need to stop losing every year in order to get great draft picks. 

In the immortal words of Herm Edwards, "You play to win the game!"

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3 comments:

Draper004 said...

You are right, clearly teams getting the first draft pick doesn't help them all that much. Crosby has done nothing for the penguins right? Ovechkin has done nothing for the capitals (I realise not a first pick, but still an early draft pick). LeBron has obviously done nothing for the cavs since his draft. I hope you have caught my extreme sarcasm here.

It is not called rewarding teams for doing poorly, its called giving teams that are obviously going to be in a rebuiling stage a leg up in their rebuilding. Giving a first draft pick to a 1st or 2nd place team is like putting a cast on a guy who's leg is not broken. Its obviously not something they need, and if the time comes when they need it, they will get it. And No team is going to start a season thinking "hey if we lose this, we might have a 25% (or whatever the actual number is) chance of getting the first draft pick if we bomb this season! And even when that does happen it is at the end of the season when these teams are going to be fighting for the last 2 spots anyways, so what difference does it make.

James Choleras said...

LeBron is probably the only exception to this rule but as shown in his first few seasons he cannot do it all alone. A supporting cast is needed by making trades to get guys like Mo Williams and Delante West. If the Cavs hadn't gone out and gotten better players around him the team wouldn't be where it is. They didn't do this through the draft they did it by having an excellent organization.

Now for Crosby and Ovechkin. I forgot when hockey turned into an individual sport. Also don't remember either of these two players being a goalie or a defenseman. Yes they are both great players but they are just 1 forward on a team with 11 other forwards and 6 defensemen. What both the Penguins and Capitals do is build great teams around their star players. They don't get top 5 picks every year and then hope to turn it around. Yes the Penguins had some top picks but Whitney is no longer with the team and Stall is not what people thought he would be.

You also managed to find just 2 examples. I didn't see you mention the Florida Panthers or the New York Islanders in your response.

You have basically said it yourself that a bad team will always be bad until the fluke out and get a once in a generation player like LeBron or Crosby if they rely solely on the draft.

That is not the way that sports should operate.

Draper004 said...

Yeah, what you said about pittsburgh and washington pretty much supports my argument. The draft gives these teams the oppourtunity to get that key player needed to help in their rebuilding phase. I never said Crosby was pittsburgh, but they got a captain out of the deal and a player that they were able to build around. Same thing with LeBron and Ovechkin. The draft gave these teams that leg up needed in their rebuilding phase. Detroit isnt going to need a player to build around next year, neither is chicago, carolina or pittsburgh. That is my point.

And those examples were all I could come up with off the top of my head. I am sure with research I could find more. Not all of us are sports player encylopaedias like you sports informer.

And the islanders and panthers are plagued with bad management. One team signed a mediocre and injury prone goalie to a ridiculously long term contract and the other kept jay beaumeister just to let him walk while getting nothing in return.