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.


Well, Gasol has a max deal, and you hear announcers blabbering on and on about how he's perhaps the best big man in the league (they seem sure that he's the best offensive big man in the league). Of course I think all that stuff about Gasol is so much hot air, but still.

In any case, Shaq and Kobe seemed to be able to win a lot together, as did Shaq and Wade. (Malone and Stockton, etc.)

probably completely wrong for multicollinearity reasons

It is going to be interesting watching every Miami game on TNT and ESPN this year.

Is the most effective basketball team one which creates the star position, even when it is absent from the rules? Consider specialization in roles on the court, you have limited specialization, limited players and not all combination possible. So a production network evolves to move the ball, but using a limited set of passing sequences. Specialized play to take better advantage by economies of scale.

Matt Young, if I understand you correctly, I think you have it exactly backwards. Every player faces diminishing marginal efficiencies as he selects more (and therefore worse) shots and the defense keys in on him more. If players did not have disparate abilities (it is impossible to underestimate the extent to which they do), a balanced attack would generally be more efficient.

Deference to hierarchy is only effective when the hierarchy is constructed on the basis of competence and meritocracy, and there are no parallel hierarchies based on clan and family relationships within the broader society.

There was a piece somewhere a few years ago that argued convincingly that Arab armies always performed so poorly against Israel in large part because of issues of deference and extreme reluctance to cause loss of face to commanding officers. This threw military efficiency completely off kilter (eg, officers refusing to outperform their social superiors on written tests or marksmanship competitions).

I wonder if this holds for the WMBA, who's members were raised in a less hierarchy-obsessed side of our culture.

In think that Shor might be summarized by saying, "Competition within an organization leave less energy for competition outside".

I was always amused watching my fellow Airmen figure out that they were in a dictatorship. A dictatorship dedicated to the preservation of a republic. Militaries have strong motivations to keep the guns pointed outward. It doesn't always work...

The Miami Heat will be a great team this year, there can be no doubt about that. They have three superstars and a surrounding cast of good players to accompany them. Roles will be defined early in the year as well as in the actual games they are playing. James and Wade could be on fire on any night, and both these players understand when the other is having a good shooting night. When this happens the other will act as a shot creator for the other rather than wanting the ball, especially if they are having an off night. All three of the Heat's stars were on the USA Olympic "redemption" team that won the Gold Medal a few years back. This team was full of stars who found a role and stuck to it rather than being selfish and wanting the ball more than others.

Also teams with closer salary ranges can be just as good as teams with one or two high salary players. The 2008 Boston Celtics won the championship while Kevin Garnett, Paul Pierce, and Ray Allen all probably took less money than they could have earned. Also, the Detroit Pistons of 2004 was a team full of medium salary players.

This whole thread and the Galinsky study is a textbook example of why economists should work on things they actually understand. Hierarchies sounds like a cool story and if I pretend I'm an idiot and interpret the data without any context of the process by which it was generated I can make it seem like hierarchies are an important determinant of NBA success. Stuff like this is where wages of wins comes from and is why the public is often (or should be) wary of imperial economists. (*I have not seen the paper, but) I would be shocked if this entire result could not be explained away by a passing understanding of the NBA collective bargaining agreement, but that would make for a much less interesting paper.

Finally the notion that hierarchies are important in baseball is incredibly lol...its fricking baseball, almost every single interaction is entirely one on one. You could make a world series winning team out of cannibals if you could refrain from tearing each other apart on the field and they could get on base 37% of the time. Moreover, the amount of variance involved makes it impossible to infer which teams are actually better based on the outcome of one playoff series (much less drawing further conclusions about why they are better).

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