What the Hell is a 1st Round Pick Worth?
The last 48 hours of NBA basketball have been particularly eventful, with a flurry of trades, rumors and noise that have left me with one thought:
What is a 1st round pick worth, and how subjective is it?
Alongside are a few examples of the incredible spectrum of both the perceived and actual value of 1st round picks in the NBA market over the last 12 months. On last year’s draft day, the Knicks acquired the 19th pick in a potentially historically great draft for Tim Hardaway Jr., one of the worst defensive players in the NBA who barely got off the Hawks bench this season. Yesterday, the Jazz essentially traded the 12th pick in a weak draft for George Hill, at minimum a league average point guard if not a great fit for their scheme. Today, the Nets traded Thaddeus Young, an incredible value at approximately 3 years, $39 million, for the 20th pick. The Hornets are offering their 1st round pick to anyone willing to take on $6 million in contracts for a year or two.
Sure, there are caveats. The Hawks liked Hardaway Jr. for his raw talent, the Jazz wanted a defensive-minded point guard, the Nets are in dire need of draft picks, and the Hornets desire to be a bigger player in free agency. But also consider: last year, the Hawks sent Adreian Payne to the Wolves for a protected future 1st, while the Celtics got Isaiah Thomas from the Suns for a 1st round pick, and Timofey Mozgov fetched two protected 1st round picks from the Cavaliers. All throughout the first round, there is a drastic difference in perceived value of picks.
In the two charts to the left (thank you @SaurabhOnTap), one can visualize the impact of players drafted in a certain spot over time, and gain perspective in the varying opinions of value in the 1st round amongst NBA front offices. Consider the Pick vs. Peak VORP chart. The 1st pick in the draft has the highest floor and historically almost 60% have become All-Stars. After the first three picks, your chance of drafting an All-Star are less than 25%.
In the second chart, one sees that after the lottery the chance of drafting a rotation player are about 35–45% depending on your draft position. Apply that to the Tim Hardaway Jr. trade. The Hawks looked at their board at pick 19, and deemed that the remaining players had about a 40% chance of becoming a rotation player. Clearly there was no one they thought had a chance to start in their rotation in the short-term. They likely considered Hardaway Jr. to have a better chance of making their rotation given his play thus far, and made the trade.
Conventional NBA wisdom and the Hinkie loyalists of the world (I among them) agree the best way to win in the NBA is building through the draft. But it’s not the only way and trying it exclusively as a strategy does not predict success. Yes, it’s true the Warriors built through the draft selecting Steph Curry, Draymond Green, Klay Thompson and Harrison Barnes. They also traded for Andrew Bogut, Andre Iguodala and signed Shaun Livingston and David Lee in free agency. The Spurs drafted Tony Parker, Manu Ginobli, Tim Duncan and Kawhi Leonard but they signed LaMarcus Aldridge and will pursue Kevin Durant, Mike Conley and Pau Gasol this summer. The Heat drafted Dwyane Wade but won titles after trading for Shaq and signing LeBron and Chris Bosh. The Lakers drafted Kobe but only won after signing Shaq and trading for Gasol and Odom.
The fact is the Draft is a fickle beast, and the odds of drafting a rotation player are generally less than 50%, let alone even a one-time All-Star. Perhaps that’s the reason these picks are traded so frequently, why fans erupt when they are, and why their value is maddeningly inconsistent.
For Utah, the known quantity of George Hill is more valuable than cost-control over 5–8 years of a player who historically has just above a 50% chance of becoming a rotation guy and a 15% chance of ever playing in an All-Star Game. For Brooklyn, the 10% chance of getting an All-Star at 20 is worth far more than the next three years of Thaddeus Young. He’s a good player, but his talent is wasted trying to assemble a contender around him in the next two years. Their market was exhausted on the day of the Draft and made a risk-averse transaction. For Charlotte, they believe the extra $6 million they’ll open up may allow them the space to sign a marquee free agent. And if not, they’re willing to take that risk for the opportunity cost of a player who has a high percentage chance of becoming a bust.
Each situation is its own quantity with different levels of risk-aversion, and the variability in value is only compounded by the low likelihood of success for each draft pick. In a market where a commodity’s value drops steeply after the 1st selection, and more steeply after the first 10 selections, and that commodity is more likely to be worthless but has a small potential of exponential profitability, then those commodities are going to be traded at vastly different prices. Therefore it’s useless to grade or judge trades involving 1st round picks and established players until one sees who that pick becomes. Until that point, one is essentially trading probabilities for known quantities.
In this case, those who are risk-averse will come out on top and ‘win the trade’, like the Pacers acquiring a veteran on a valuable contract for the 20th pick. Those who are less risk-averse, like the Hawks, may be criticized for trading Jeff Teague for the 12th pick, a year after he made the All-Star Game. But Teague is entering the last year of his deal, the Hawks are willing to hand the starting PG position to Dennis Schroder, and they sacrificed a draft pick last season to bring in Hardaway Jr.
You can expect a lot of picks to be traded tonight, and each transaction deserves context through the prism of risk and reward. It’s highly likely players picked in the 1st round tonight don’t develop into more than rotation players in the NBA. But despite that, the risk is worth it for many teams. Draft picks have the benefit of cost-control at an incredibly cheap price in the new NBA salary market; teams generally trust their development staffs to let players reach their peak potential; and history says the more 1st round picks they acquire the better chance they have of winning the championship. Also, if your team is in a market where it’s difficult to attract free agents, the only way they can get (and keep) a superstar is through the Draft. Priorities vary widely across the league. So to answer the question that started this:
What is a 1st round pick worth, and how subjective is it?
Like most things in life, it’s all a matter of perception.