Fortunately, the Internet has seen a wealth of good writing on the Jeremy Lin saga from its start to the present. At the outset, I would like to point out three standouts from the last week:Will Leich’s beyond excellent take for New York Magazine, Ryan Feldman over at TrueHoop’s comparison piece with Lin and Raymond Felton and The Onion. Keeping all of that in mind, there seemed to be a few gaps in the analysis that needed to be made.
The first centers on the unique financial situation of the New York Knicks. Thanks to the way their salaries are structured along with the tweaks in the new Collective Bargaining Agreement, we already knew that it would be very hard for the Knicks to add new talent after this season even without considering the luxury tax. Future years will have more punitive measures in place for luxury tax-paying teams and the Knicks have been locked in to paying it through the 14-15 season since they put Carmelo Anthony, Amar’e Stoudemire and Tyson Chandler together last winter. In fact, the only ways the Knicks were going to be able to add contributing talent was through maneuvering non-guaranteed deals (as they did to get Raymond Felton and Marcus Camby), unbalanced/lucky trades, or finding diamonds in the rough.
In many ways, that stands out to me as the reason their decision on the Jeremy Lin contract is so remarkable. While he will be expensive for one of the three years of his contract, from an on the court angle he was “free money” since the capital used to retain him could not be used on other individuals. Unlike a team under the cap who can allocate differently, a team with so much committed money has remarkably few ways to get better and even fewer that do so without giving up other players. Regardless of what someone thinks of Lin as a player, it should be an uncontested fact that all other things equal, having him is better than not having him. He would be the best point guard on the team and the only one who should actually get better over the duration of his deal. Incidentally, he could actually get much better because while he has a great personal work ethic, he has had very little coaching as a player worthy of heavy developmental attention. That time and effort could yield surprising returns in a player who has more athletic talent than many realize.
With a background in economics, I often fall back on the idea of marginal costs and marginal benefits. Given the assumption that keeping Lin will not cost the team anything in terms of talent in the next three seasons (since they would have had trouble getting other guys through conventional routes and adding him does not restrict those possibilities), the marginal cost in everything other than dollars is zero. The marginal benefits of having Lin on the team in a non-monetary sense are his actual contributions on the floor and any potential assets he could bring in via trade. Considering he would have been the best PG on roster and the best healthy guard to start the season (I like Iman Shumpert a fair amount), the benefits are pretty high for a guy who was put on waivers twice last season.
With the simple on the team versus off the team personnel issue clarified, we get down to money. While some are focusing on the potent final year of his deal, the best way to analyze an investment like this has to be centered on the contract in its entirety. In 12-13, Lin’s deal simply gets doubled due to the tax so it works out to $10 million. Since there is no repeater rate for 13-14, I will use the baseline of 3.5x his salary (2.5x repeater rate plus the actual contract), which would be $17.5 million. Finally, the fourth season would be approximately $43 million thanks to the repeater tax. As such, a fair workable total for the contract would be three years and $70.5 million to the Knicks.
Can Jeremy Lin possibly be worth $23,500,000 per year? To most teams, the answer simply must be no. However, his cost to them would be much closer to his actual $25 million price tag and no other team in the league, even the Lakers, are the Knicks. While components like jersey sales do not go directly to the contracting team, New York’s cable system and other merchandising opportunities make it a much closer situation for the Knicks on a purely financial sense. Even thinking about Lin’s important role in the settling of the Cablevision fiasco shows his immense worth to the franchise. Even without monetizing his performance on the floor makes the contract close to worth it. When you combine that with actual production (even if Lin proves to be worse than a league-average starter at PG for these three seasons) and the fact that the Knicks have very few options to improve their team, the finances of the deal should not have given James Dolan a reason to say no here.
By making the silly bets they made earlier on their “Big Three” that did not make sense together, the Knicks needed to catch lightning in a bottle at least once and likely twice to make themselves even outside contenders at the conference championship since the knew what Miami had before putting together the Carmelo Anthony trade in 2011. By giving up so many assets in that deal and killing their financial flexibility with the Tyson Chandler signing before last season, the Knicks had made their bed and only had a few ways to make themselves better. Astonishingly enough, that happened when a player they had for minimal money became a legitimate starter at a position where they had a hole. After the ruling that the team had Bird rights, one of the biggest and hardest to correct flaws on the team had a solution. Instead of patching it with a player who also inspires more interest than nearly any player on the planet, they chose to let him go for nothing.
As someone who grew up around the Golden State Warriors and their ownership, it takes an absolute ton for me to feel legitimate compassion for the complaints from a fanbase due to front office incompetence. Fans of the Knicks, you have my deepest sympathies.