Thoughts on the Luka Doncic Trade
Last night, the sports world was shaken by the Luka Doncic trade, arguably the biggest trade in sports history. Yes, not just NBA history, but sports history. Out of nowhere, around midnight eastern time, Shams Charania broke that Luka Doncic was going to the Los Angeles Lakers for a return of Anthony Davis and change.
And the NBA world woke up. The podcasters recorded immediate reaction pods. Shams had to tweet that he wasn’t hacked and that the trade was real. Even commentators from other sports felt the need to translate this news so that their followers could understand how momentous this was.
On the surface, this trade is not just crazy, its insane because on a bad day, Luka is the third best player in the NBA. And he’s 25. And he is under contract for another year and a half. And his contract is cheap compared to his peers. And he is still getting better. And the Mavericks made the finals last year! Nobody makes a trade like this. The only thing that even comes close to the pure tonnage of this trade is maybe, maybe the Herschel Walker trade.
Aside from the golden rule of the NBA that you don’t trade young, MVP-caliber players, everyone else had the same first thought. The trade was lopsided. Anthony Davis is a great player and will be loved by Lakers fans for winning the bubble championship. He might still be in the 10-15 range of best players in the NBA today. But he’s in his early 30s and struggles with injury. He is certainly on the way down while Luka is on the way up. The Mavericks only got one of the Lakers’ picks as compensation. The Lakers absolutely win the trade.
But to me, I can’t help but think about the economics of the Luka Doncic trade and what it means for the Lakers’ future. I’m talking about Luka Doncic losing out on the ability to sign his supermax contract.
The Economics of the Luka Doncic Trade
In the 2017 CBA between the NBA Players’ Association and the NBA, a provision was laid out to help small market teams retain their talent. Without the supermax, players are eligible for up to 25% of a team’s salary cap. Their contracts can’t go over this value. But if a team drafted a player, held on to them for 8 or 9 years, and that player proves to be all-NBA quality or better, the hometown team can offer that player the supermax. This lets the team give the player up to 35% of the salary cap.
The idea is that players will tend to stay with the team that drafted them because they’ll get an extra 10+ million per year. And it…kind of works. Some stars stay home. But still other go ring hunting. The supermax is controversial.
Luka Doncic lost out on his supermax contract, costing him $12 million a year for the next four years. From the Lakers’ perspective, though, this is an absolute boon for the team building process. They would gladly pay Luka way more than his contract value because he is that good. But because of the rules in place, the Lakers will have a top 3 player on a discount for years going forward.
NBA roster construction is all about optimizing talent with the resources you have. One of the largest limiting factors is the salary cap. Trying to fit in talent around the roster within the confines of the salary cap is difficult. But because the Lakers just got Luka on a guaranteed discount, they have a competitive advantage going forward. A while ago I did a calculation that showed adding one team to your teams’ total was worth about $3 million. Luka playing on a regular max instead of a supermax is probably worth 4-5 wins on its own. Adding 4-5 wins would have taken the Lakers from the 8th seed to the 4th seed on its own last year.
So when thinking about this trade going forward, its import to remember that its so much more than just getting a young star for the future. Its more than winning the trade by getting more than they gave. The real cherry on top is that the Lakers now have a competitive advantage in team building because Luka, by rule, is going to be playing for them on a discount.
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