Jurassic Park: The Miami Heat and The Lakers Are The Raptors.

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Jurassic Park: The Miami Heat and The Lakers Are The Raptors.
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You're undoubtedly wondering how a dinosaur picture, and the NBA could possibly have a common thread. Neither would appear to have any similarities at all. 

One, of course, is a film about "tall creatures" that roamed the earth before recorded history, and the other is about a sports league containing "tall creatures" of today, but that comparison would be both "campy", and disconnected at best. Certainly not enough to build an article around.

Many questions arise.

How could there possibly be a connection between the two? After all, the Jurassic period and the NBA are separated by no less than 144 million years. That's a really long time. So long ago that Lindsey Hunter was just a rookie then.

Furthermore, how could the Lakers and Heat (two of the NBA's strongest rosters) have anything in common with the lowly Raptors?

Confused?

If so, then this author has already won. It's called misdirection. 

You have been sucked into a piece about economics, and didn't realize it until this very second.  Your attention was caught by something "shiny"-- such as a title-- and fell right into the snare that was set.

Your in.  And you're reading.

In 1993 Steven Speilberg directed what would become a hallmark American film. What made the movie so dynamic, was it's stunning blend of story (first), originality, and cinematography.  The computer aided graphics were brilliant. Unlike many films of today, the graphic work supported the film instead of dominating it.  Genius.

Trying to pick a favorite scene from the movie would seem to be a daunting task. All 127 minutes were packed with epic scenery and memorable moments; however, there is a single sequence that has stuck with me throughout the years.  So poignant that I have felt a need to work it into a piece about the NBA.

In the movie, park owner John Hammond, employs a crafty game warden from Kenya named 'Muldoon'. Muldoon had always been keen to the potential danger of dinosaurs, and in particular, the Velociraptors who he felt were too cunning to be controlled.

While hunting down two escaped Raptors, he preforms a precision flanking maneuver to establish an advantaged position of attack.  Just as he has one in his sights, a second Raptor appears from the bushes where Muldoon has taken up position. Recognizing his grim fate, but overcome with admiration for having been outflanked, he smiles and  compliments -- "Clever girl."

This year, we have seen a similair genius at work. No. Not my misdirection tactic to get you in here reading.  I'm referring to the work performed by both Los Angeles and Miami, to establish an advantaged position on the rest of the league.

The Heat and the Lakers are the 'Raptors'.

A collective bargaining session will begin at the end of the 2010-11 NBA season.  Of the many topics (and expected demands) from the owners, will be the elimination of the mid-level exception, and the implementation of a hard salary cap.  Should these two critical items fall in-line, the trap set by the Lakers and Heat will be complete.

The current mid-level exception states that teams are allowed to sign new players, as long as they do not exceed the total mid-level exception. The mid-level exception is set at what the average NBA salary is, and applies only to teams that are above the cap. This means that, with creative cap economics, teams above the cap can continue to add talent an "MLE" increment at a time.

The second issue, a 'hard' salary cap, is similar to what the NFL uses. It means that every teams final payroll, must not exceed the final agreed upon salary cap figure. It's an inflexible number, that cannot be circumvented by using the current NBA luxury tax loophole. With one exception. 

It is believed that all existing contracts would be 'grandfathered' into the new Collective Bargaining Agreement, as they are legally binding deals that were signed under current rules.  To overturn existing player deals, and force teams to not honor them, would be welcoming a litany of legal action. This benefits both the Lakers and Heat greatly.

In Los Angeles, the Lakers are sitting on back-to-back championships, and a proven formula.  What's more, they have locked Pau Gasol and Kobe Bryant into equal length contract extensions. Combined with Ron Artests 5 year deal, Los Angeles has essentially  'grandfathered' it's core players into just about anything the CBA can throw at them.

Additionally, all three deals end at the exact same time, meaning that LA (free of 3 huge contracts) would have nearly unlimited resources (within the constarints of the new CBA rules) to go out and build a new competitive team from scratch. Genius.

In Miami, it's a different coast, but the forecast is the same.  Pat Riley, pulled off the un-thinkable, and locked three of the NBA's biggest stars into concurrent deals that all expire in 2016. While Miami doesn't have a proven formula for winning championships yet, it's hardly a stretch to imagine that LeBron James, Dwyane Wade, and Chris Bosh will contend for a title each and every year they are healthy. 

The rest of the NBA will be handicapped in that they will all be forced into the new CBA rules.  This is precisely why teams like Atlanta went out and overpaid for Joe Johnson, or the New York Knicks dropped so much for Stoudamire.  They're all scrambling to get as much of their teams 'grandfathered-in' as possible, but are doing so with second tier stars, and without the benefit of having proven formulas.

Under a hard cap, and no mid level exception to add talent above and beyond the cap limit, the NBA will look more like teams of the 90's where you have 2 stars at most, sorrounded by the typical supporting casts.

Advantage LA and Miami. Big advantage.

Sure. Predicting the future is a volatile business.  Both Los Angeles and Miami are an injury away from obsoleting this entire story your reading; however, in the the sports world and in portfolio management -- risk management is king.  Teams that consistently manage their risks, and set themselves up economically, are able to compete year in and year out (see New England Patriots).  This is exactly what the Lakers and Heat have done.

Pat Riley and Mitch Kupchak have outsmarted and out flanked every other GM in the league.

"Clever Girls."

 

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