A simple model of Kawhi Leonard’s indecision

As a free agent, he is being courted by his current team, the Toronto Raptors, as well as the Los Angeles Clippers and the Los Angeles Lakers (now the team of LeBron James). And the internet is making jokes about him taking so much time for the decision.  In Toronto, helicopters are following him around.

Due to the salary cap and related regulations, there is no uncertainty about how much money each team can offer.  The offer that can vary the most in overall quality, however, is the one from the Los Angeles Lakers.  For instance, if Kawhi is playing in Los Angeles with LeBron James, he might receive more endorsements and movie contracts (or not).  If he is waiting on the decision at all, that is a sign he is at least sampling the Laker option, and seeing how much extra off-court value it can bring him.  So the existence of some waiting favors the chance he goes to the Lakers.  That said, if he is waiting a long time to see how good the Laker option is, that is a sign the Laker option is not obviously crossing a threshold and thus he might stay with Toronto.

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Or he's leading the Lakers on so that all the good FAs will sign elsewhere and the Lakers will be a less formidable opponent should the Raptors meet them in the finals.

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I hope he moves to one of the LA teams. America needs to win back the title from the Canuckistanis. Even though the Lakers and the Warriors dominated their eras, California will continue to make a run because those orgs know how to make winning moves. Trump should buy the Knicks and fire everyone. I can't think of a more dysfunctional group in the NBA.

Trump can't even come close to affording the Knicks

Eminent domain?

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'he might receive more endorsements and movie contracts (or not)'

This is precisely the sort of insightful analysis that makes MR stand out (or doesn't).

Kawhi might go to LA or he might not. He might also go to Toronto or he might not. But he's waiting so we are just going to have to wait to see (or not).

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Football players on the Los Angeles Rams, like Merlin Olsen, Fred Dreyer, and Bernie somebody, once had amazing opportunities to become TV actors, but I don't think the sports to acting career path is too common anymore. Actors tend to be more technically proficient these days, which is hard for a 30 something jock too get up to speed on.

And don't forget OJ, who managed it from Buffalo...

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This kind of post is what keeps me coming back. Where else could you get this kind of analysis?

Here you are

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Kawhi is attempting to avoid committing the ultimate sin in the secular religion that defines America, leaving money on the table.

This isn't about money

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More interesting question....what is Kawai’s free market wage??

300 million per season?

What was peak lebron? 500 million?

What is Tom Brady’s? 600-700 million a year?

It’s amazing that the front line mega stars give up 100’s of millions of dollars a year in order to keep the unions and owners happy....

They are sacrificing in order to make the league better, which benefits them.

You think Dan Gilbert wouldn’t of happily payed LBJ 500 mil a year to avoid having him leave?

I’m not sure how depriving the elite mega stars their real value makes the league better.

If anything it makes it worse because it forces the best players to make free agency decisions based on things not pertinent to money....

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Five Thirty Eight estimates he was worth about $100M last year https://projects.fivethirtyeight.com/carmelo/kawhi-leonard/

And Jon is right about the theory of it - a competitive league should boost overall revenues, raising the value of everyone in it. Whether the caps and limits are correctly calibrated or not. I think of it as a game theoretic construct - if actors can be credibly committed to limits, they get a better outcome overall....

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Lebron James is still underpaid, Planet Money

https://www.npr.org/sections/money/2018/07/11/628137929/episode-427-lebron-james-is-still-underpaid

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He's too tall to be in the movies.

Like Kareem, Shaq, and Durant were?

Some scrub named Jordan

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Good analysis - coming with a rock of salt since we know a lot less about Leonard's intentions compared to average Joe Johnson.
However, there's an obvious additional benefit of waiting (and keeping the Clippers in play) even from a game-theoretic perspective: driving the price up - salary is fixed, perks are not (might also explain the degree of secretiveness).

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Speculative :)

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So, his entourage waited for the official free-agency period to start to make those estimates - that they could have made at any point in the last year or so? Even if winning the title with Toronto would change things, it's already been a few weeks.

A much more plausible explanation: he made up his mind but, like Durant a couple of years ago, his agency/sponsors asked him to announce on July 4th to increase exposure.

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No love for the Clippers? Better run organization, excellent coach, and a shot at showing up LeBron in LA. Unlike the Lakers, the Clippers were a playoff team who will improve more with Kawhi than the Lakers with Davis. On the other hand, Toronto offers better international reach. If he wants to expand his brand abroad, Toronto is the place to be.

How so? (1) California has more people, and a larger foreign-born population, than all of Canada, let alone Ontario.

(2) Historically, Lakers jersey sales are very high abroad.

Simply because Toronto is in Canada doesn't mean it has more international reach.

I was going to give a snarky "Oh really, show me the data". But then I figured I could google it as much as anyone else. And you know what? There are 11 million foreign born people in California vs 7.5 million in Canada.

Hat tip.

But wait! Aren't California's numbers inflated by all the Hispanics? Apparently not. It turns out Asians are the biggest foreign born cohort in California.

Double hat tip.

To be fair, if you took away the Hispanics then Canada and California would be pretty comparable, eh! (But California still wins.)

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When do we get a Conversation with Zach Lowe?

Or Steve Kerr. Popovich would be the ultimate, but I'm pretty sure he would not be interested. But Kerr might be.

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Movie contracts? Are we still talking about Kawhi Leonard?

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you forgot about the Drake effect.

seriously, rich americans pay peanuts in taxes compared to canadians, but toronto is a fabulous city. Obama made a comment about how diverse the attendance was in Toronto compared to american cities.

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Simple and plausible, but wrong. Kawhi cares most about winning basketball games. The Lakers would be reliant on the health of two other superstars with a high risk of injury. Anthony Davis has missed 15.5 games per season and his expected games missed next year is absolutely higher than that. Lebron is 35. If either goes down, Kawhi'z workload goes way up while the team's chances of going deep in the playoffs fall off a cliff. Not worth it.

Kawhi will sign for 2 years with Toronto. He will announce it on the 5th or the 6th, exactly never on July 4th. Ask me how I know.

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Shaq was not yet a Laker when he made his movie. Jordan was never a Laker and made Space Jam. Kawhi will be super famous no matter where he plays.

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Perhaps typical that an econ blog would reduce the decision to purely $?

There can be many factors at play here, and an enigmatic player like Kawhi can be motivated by much more than pure profit.

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Funny how all the analysis is about how much money he'd make in salary and endorsements if he signed with such and such team. Yet every summer FA leave money on the table to go to their team of choice (Anthony Davis, Al Horford this year for example, Demarcus Cousins last year, Lebron James, to go to Miami, Duncan, Parker, Ginobili to stay with the Spurs, David West to go to Golden State, etc.. the list is much longer)
Is it really that hard to update our thinking and consider that MONEY isn't everyone's primary motivator? Everyone just falls on the lazy rehashing of the same arguments rather than come up with anything authentic (and more accurate).

I get that this is an economics blog and I get that the popularity of a pundit has nothing to do with how accurate their analysis id but, please make an effort and deliver something more valuable...

BTW where Kawhi ends up will have nothing to do with who the highest bidder is...

Is it possible for us to actually know the truth of the various financial offers made to any pro athlete? Inflated salary negotiations are a way of keeping leagues and teams in the news, just like the generally meaningless player drafts, most of the picks never playing at that level at all.

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the distribution of possible outcomes in terms of wins, workload, credit, and blame is much, much worse in LA than in Toronto. it really isn't even close.

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I wonder if anyone has mentioned California's 13% state income tax to him

Are California+US taxes lower than Toronto's? Genuinely curious.

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This article’s thesis and supporting arguments are deeply flawed.

On Money from salary, Cowen says all of the offers are the same. False.
-All three teams can offer the same $ per year.
-Both LA teams can offer a 4-year deal.
-The Raps, as the incumbent team, can offer a 5-year deal. (A league initiative to incentive staying with the current team).

On Money from endorsements, he says Lakers have huge advantage. It’s complicated.
-Let’s agree LA > Toronto for endorsement dollars.
-Cowen omits reference to the Clippers, also based in LA. Granted, Lakers >>>>>> Clippers in terms of popularity.

Complication 1: Kawhi is incredibly introverted. His rare commercials usually show him playing ball with music playing, instead of him saying anything.

Complication 2: Kawhi has shown zero interest in material wealth or fame.
-He signed a shoe deal with New Balance, the least cool brand on earth. And one that doesn’t even really have a basketball line of shoes.
-He drives a 1997 Chevy Tahoe, the same truck he’s driven since high school.

On waiting, he says some waiting favours the Lakers. False.
-The window to sign free agents opened Sunday at 6:00pm (though teams and players secretly negotiate for 2 weeks prior. Otherwise, how could people announce deals at 6:01pm…)
-This year features the best crop of free agents in a decade.
-Within 12 hours, 24 of the top 25 available players were signed (Kawhi the exception).
-Lakers currently have LeBron and Anthony Davis (2 of best 6 players). They have a so-so young player (maybe 150th best) and no one else who play regular minutes. Signing Kawhi would take all of their available salary space. They would need to then sign players willing to accept minimum contracts (like 1-2$ million). That usually means cast-offs or old players trying to win a title.
-Waiting this long has complicated things for both the Lakers (4 players under contract) and Clippers (6 players under contract). The Raps aren’t in that boat (10 players under contract).

The article also misses a key point: Kawhi is relentlessly competitive and wants to win, above all else.
Three very different options for success:
-Lakers offer chance to unite 3 megastars (but with scraps). Also: franchise is highly dysfunctional. The GM recently told a story about Kobe meeting with Heath Ledger to discuss the process of “locking in” to the role of the Joker. Kobe then used Heath’s ideas when playing the Knicks. Of course, Heath was dead before movie was released, so this story is a Trumpian lie.
-Clippers have up-and-coming players and money. Also a stable owner (Steve Ballmer) who is willing to do anything.
-Raptors have the best current roster and could challenge for a title next year (but then fall apart as players age). Also: Raps have best sports medicine staff in pro sports which has been essential for Kawhi. He demanded a trade from previous team because the team doctors conflicted with the second opinions he sought.

Bottom line: Kawhi could very well sign with Lakers, but it won’t be for reasons in this article.

Great post, though this is frighteningly ambiguous and unclear: “Kobe then used Heath’s ideas when playing the Knicks. Of course, Heath was dead before movie was released, so this story is a Trumpian lie.”

Wha!?

Related: why does LeBron not give the Lakers a bigger salary discount? Isn’t he all about his legacy, meaning: he needs some more Finals trophies? Surely he can make up the difference by doing some more endorsements?

What the original commentator meant is:

The Lakers front office is in shambles and their GM is a famous liar in NBA circles. An illustrative lie is that the GM claimed to have facilitated a meeting between Kobe and Heath Ledger during a time after Ledger's death (when such a meeting would have been impossible, or at the very least, highly unproductive).

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"Cowen says all of the offers are the same"

Where did he say that?

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No mention of negotiating load management. Kawhi may want the same money for only playing 60 regular season games. Toronto has already shown a willingness to accomodate him. Lebron probably needs a similar amount of time off. Hard to plan a team around so much scheduled time off. Kawhi's health is a huge question mark.

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interesting analysis, but in the final event, utterly incorrect.
Kawhi told the Clippers that if they could swing a deal for Paul George, he would sign. He was just giving them time to do so. Simple as that.

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You sure missed this one, Tyler. You didn't even mention the Clippers.

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