Wilcox in Your Cap

(5/8/02)

Chris Wilcox was in all of our mouths two weeks ago, as university denizens dissected his momentous decision to forfeit his final two years of collegiate eligibility and go on to bigger and (he hopes) better things in the NBA draft. Everyone agrees that he has a good chance of eventually succeeding among the pros. The question was, "What could we have done to keep him here?"

Some said Juan Dixon and Lonny Baxter were at fault, for playing so well that Wilcox tasted ultimate triumph at the collegiate level last season. Some said that we could have done nothing, that Wilcox was chasing the dollars because the adulation he would have received as a Terp was not sweet enough for him. Having undertaken an economic analysis of the situation, I blame NBA labor rules, and I will use the rest of this column to tell you why.

One disclaimer: I don't have any special knowledge about Wilcox's reasons for turning pro. All I know about that is what I read in the papers. But I can say that if Chris Wilcox is an economic actor focused on profit maximization above all else, the NBA's current labor rules virtually demand that he leave.

Why should he leave? Well, what would he gain from staying? Wilcox is almost certain to be a top-10 pick coming out of college right now. [He was picked in the eighth spot, as it turned out.] If he stayed for a year, and learned to consistently make that little jump shot on which he seemingly elevates six yards above everyone else, he would probably be an even higher pick - for the purposes of this argument, let's say a #1 pick.

You'd think that NBA teams would be willing to pay a premium for a player who could contribute right away. However, lucky them, they don't have to. Currently, a rookie salary cap sets maximum contracts based on draft position; everyone signs for the maximum, but it's pretty modest. In 1994, the last year without the rookie salary cap, Glenn Robinson signed a 10-year, $68-million contract as the first pick in the draft. Today, the first pick in the draft is limited to $10.4 million over three years.

Now, that is still a lot more than $4.5 million over three years, which is what Wilcox will make if he is drafted tenth (a conservative positioning) this year. [The three-year contract in the eighth spot calls for $5.2 million.] But it's not quite that simple. If he stayed with us for another season, Wilcox could become an awesomely dominant player, embarrassing Mike Dunleavy time and time again on national television. Or he could tear an ACL and end his career. Or his performance could suffer as he is expected to carry the load and defenders key on him. Or NBA scouts could discover a tribe of Estonian mystics with the ability to mentally guide the ball into the basket, and draft all of them. Lots of things could happen.

So if Wilcox stays he might get $5.9 million more. He could also get a lot less, or even nothing. What would you do? There's so much uncertainty about the future benefits that it's hard to argue against Wilcox taking a not-inconsiderable sum right now. He said as much to the Washington Post: "I know one more year would help me out a lot, but you never know what the next day may bring." Spoken like a man who knows when his utility is maximized.

One other facet of NBA labor law comes into play here, too: the seven-year maximum for the length of a contract. Rookies are bound to their teams for five years (teams have options for fourth and fifth years after the initial capped contract runs out), after which they become free agents. If you're any kind of superstar, teams will want to obtain your services for the full seven years.

So if you're a budding superstar entering the NBA at 19, like Wilcox, you will probably sign two big contracts: one at age 24, when you're just entering your physical prime, and one at age 31, when you're still good enough to earn another cashalicious payday. But each extra year you wait to enter the pros makes you more likely to decline physically, and thus makes teams less likely to pony up the large dough on that second contract.

Without the contract length maximum and the rookie salary cap, Wilcox's decision might have been different. If the difference between $4.5 million and $10.4 million may be a dump truck filled with money, the difference between $4.5 million and $68 million is fifty dump trucks made entirely out of gold and filled with money. That whopping premium, if it still existed, might well outweigh the uncertainty and induce young athletes to stay in school and hone their skills - as it did, in most cases, for many years.

But now most high draftees are players with great potential and relatively few accomplishments, because by capping rookie salaries and contract lengths, the NBA has essentially removed all incentives for teams to value, and thus for draftees to acquire, professional-level skills. If a team pays a player $68 million, he'd better be ready to come in and make a major contribution, as Robinson did by averaging 21.9 points and 6.4 rebounds a game in his rookie season. However, if a team only has to pay a player $4.5 million, that team can afford to let him warm the bench and learn the ropes for a couple years, as Wilcox will probably have to do. And as a player, if increasing your skill doesn't mean you'll get a lot bigger payday, why not spend as many years as you can making millons of dollars?

So it's hard to argue against Wilcox leaving us, at least from a profit-maximizing perspective. Of course, we would give him love next year that no NBA fans could ever match. But our love won't get Chris Wilcox any money.

Best of luck to you, Chris.

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