The Industrial Organization of the Miami Heat

A new study by Northwestern's Adam Galinsky looked at 11 NBA seasons and found that on average, teams that pay one star a lot and the rest not as much, win more games.  "The study shows how pay is tied up with status," Galinsky says.  Exhibit A: Kobe.  He makes nearly 25 mil a year, roughly equal to all the subs combined.  That payscale ensures his teammates know their roles, and that leads to better team play.  In Miami, LeBron, Chris Bosh and D-Wade all earn about the same.

That is from the new ESPN magazine, not yet on-line.  Here is one related bit:

“Status is such an important regulating force on people’s behavior, hierarchy solves so many problems of conflict and coordination in groups,” says Adam Galinsky, a psychologist at Northwestern University’s Kellogg School of Management who did the research on social hierarchies on basketball teams. “In order to perform effectively, you often need to have some pattern of deference.”

Here is Galinsky's home page, and here, though I cannot find the NBA paper on-line.   

When I look at the Miami Heat, I think of Bengt Holmstrom, and his models of why the input suppliers in a firm require strong external constraint.  When I look at the Miami Heat, I think of Hart and Moore 1990 — their chef, skipper, and tycoon example – which suggests a successful small enterprise should not have three separate veto points.

Overall, I put greater stock in Holmstrom, Hart, and Moore (and Bryant) than I do in James, Bosh, and Wade.


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