The NBA Draft Lottery is broken because bad teams have an incentive to lose games late in the season.
The worst record in the NBA does not guarantee the first pick in the draft (like it does in the NFL) but it does guarantee the highest likelihood of getting the first pick, which still creates an incentive to lose games.
In any business, incentives must align with goals. The NBA’s goal is to provide fans with an entertaining product on the court and on TV. Teams have an incentive to play attractive basketball because fans and sponsors like winners. However, teams recognize that it’s far less economically risky to try to become a winner via the draft than via free agency. Teams also recognize that having low picks is the best way to make the most of the draft and get a true impact player. If that young player doesn’t pan out, the cost was just a rookie contract rather than a veteran max deal.
So, if you’re a bad NBA team (and if you are, few all-stars will want to join your team unless you’re giving them a max contract), it’s absolutely smart business to tank the rest of the season, and give yourself a high probability of getting a lottery pick. In the worst case scenario, you eat a small contract and admirably tank the next season. Best case you draft Kevin Durant.
Now, the consequences of this tanking approach is criticism from the media and a decrease in home attendance. The consequences of making a bad acquisition in free agency is the same media and fan criticism, plus financially crippling the club for usually about five years. I think any coach or GM would rather deal with criticism from the media than criticism from the guy who writes their checks.
An alternative to an amateur draft can be seen in nearly any other country in the world.
Soccer is played professionally in basically every country and all of these leagues do not have an amateur draft, but instead punish the worst team in the league with a demotion to a lower league where the only thing scarcer than revenue is talented players. Plenty of relegated teams earn promotion back into the top league the next year and a handful keep falling into lower league obscurity, but the teams that hurt the competitive balance in the league are not invited back until they have proven they can compete at the top level.
America does not have sufficient minor leagues to pull off a relegation and promotion system but we can learn from this system that poor performers should be punished, not rewarded.
Think of your own job or responsibilities. If you work on a sales team and you make the fewest sales during a given period, do you think you’ll be rewarded with the best leads heading into the next period? No. You’ll either be fired or have to scrap and work hard to reestablish yourself.
So, now for the solution. There are 30 teams in the NBA and as fun as the annual debate is over whether the NCAA Champion could beat the Wizards, all 30 teams are stacked from top to bottom with actual NBA talent. 16 of those 30 teams make the playoffs. Several factors could lead to a team missing the playoffs, but lack of talent is not one of them. Lack of ability to motivate and optimize talent is often the reason, which means the team needs a management change, not the best 20 year-old in the country.
All NBA teams (should) have a singular goal to win a championship every year and that means the 14 teams that don’t make the playoffs failed their fans and shareholders equally because they won’t win a championship that year. Why reward the team that failed the most?
Punishing the worst team wouldn’t work because there really isn’t an American system comparable to relegation, and any other punishment would probably cause further damage to the competitive balance in the NBA.
So, the best solution is to treat all failures equal. Each of the 14 teams that missed the playoffs should have an equal chance to win the draft lottery: 7.15 percent or a one in 14 chance.
First of all, you don’t need the number one overall pick to select a franchise player. Many of the best active players in the NBA were not picked first. Kobe Bryant was picked 13th, Andre Iguodala ninth, Rajon Rondo 21st. Having the top pick does not mean your team will land the top player. Ask Kwame Brown or Greg Oden.
Many consistent lottery teams are there every year because they stick with an inept GM and an uninspiring coach. This proposed system will expose those managers that either evaluate talent poorly or are unable to maximize it.
Most importantly, with this proposed system, once you are mathematically out of the playoffs, you have no incentive to continue losing. So incentives and goals are aligned.
There are many rich and powerful people involved in the NBA. But make no mistake that fans drive the league, since they fill the arenas and buy the replica jerseys. The league would be making a huge mistake to continue disrespecting the fans by pretending that teams don’t tank their seasons to win the lottery.