The Salary Cap: The Hidden Secret of Modern NBA Dynasties
Why managing contract negotiations may decide the fate of many NBA contenders in the near future
IN LATE 2012, the foundation of the greatest modern dynasty in NBA history was laid out: Steph Curry, a young, talented point guard, was in the midst of contract negotiations with the Golden State Warriors.
Golden State was beginning to commit to him, having traded away fan-favorite guard Monta Ellis in the season prior, but, at this point, Curry’s career was defined by ankle injuries and the looming possibility that he would never fulfill his potential.
By league rules, the maximum amount the Warriors could offer Curry was four years, $61 million or five years, $78.9 million. They were prepared to do so, with a catch: Curry would have to stay healthy for an entire season to prove himself to Golden State.
Around the NBA, with a deadline to sign extensions for players on rookie-scale contracts, the pressure grew. Players like DeMar DeRozan, James Harden, Ty Lawson, and Rick Rubio (all from the ’09 draft class) had inked their new deals. Now it was Curry’s turn.
Interestingly, the player who became known for defying the odds and the perceptions of what is possible in the NBA wouldn’t bet on himself. Curry did not bet on his ankle being healthy, and he didn’t bet that he would be able to command a maximum contract at the end of the year.
And so he signed a four-year, $44 million extension, which quickly became the biggest bargain in the league. It was this contract that allowed Golden State to become a dynasty, as they were able to allocate their resources elsewhere, and they eventually created a team that perfectly suited a player that became a 2-time MVP.
At $11 million per season, Curry’s production relative to his small contract was what helped Golden State win championships for so many seasons — including what helped them sign Kevin Durant in free agency, retain Klay Thompson and Draymond Green, and acquire key role players like Andre Iguodala.
In the larger context of the entire league, Curry’s contract extension in 2012 was the golden example of how managing the salary cap was the greatest asset, or detractor, to building a dynasty in the NBA.
IN 2014, WHEN LeBron James penned his infamous “I’m Coming Home” letter, one thing was clear: the Cavaliers were not going to let inaction cause their prodigal hometown superstar to walk away for a second time.
This process began early, as James, knowing that Cleveland had the #1 pick and the chance to draft one of Andrew Wiggins or Jabari Parker — who were seen as generational talents back then — pushed the Cavs to trade for disgruntled star forward Kevin Love.
Cleveland, during James’ first stint, had a similar opportunity to the one they had in 2014 when they had to chance to acquire Amar’e Stoudemire, but they instead saved asset capital and financial resources by instead keeping J.J. Hickson and later getting an old, slow Shaquille O’Neal.
But the Cavs weren’t finished.
At 19–20, they were quickly falling behind preseason expectations, and that led to GM David Griffin quickly renovating his roster, including trading away talented pieces like Dion Waiters, and getting veteran pieces like J.R. Smith, Iman Shumpert, and Timofey Mozgov.
These changes worked: the Cavs finished at 53–29, behind only the Atlanta Hawks, and they were clearly the favorite to make it out of the East.
A few major shifts occurred in the postseason:
- Tristan Thompson proved to be invaluable after slotting in for the injured Kevin Love as the Cavs’ power forward, nearly averaging a double-double in the postseason.
- J.R. Smith was at times the Cavs’ second-best scorer when Love and Irving went down with an injury, and he had a strong postseason.
- Timofey Mozgov came up huge in many series, including against the Atlanta Hawks in the Conference Finals and against the Warriors in the NBA Finals (until Golden State played small-ball).
With these changes, it was clear what Cleveland would do next.
Firstly, they locked up Iman Shumpert for four years and $40 million, hoping that he could grow offensively while being a backcourt defensive stopper that complemented Kyrie Irving (who had his fair share of defensive issues).
Secondly, and more damningly, after keeping J.R. Smith and Timofey Mozgov on below-market value contracts, the Cavs massively overpaid for Tristan Thompson and Kevin Love.
In hindsight, Cleveland should have recognized that Love did not fit very well with James and Irving (going from 26 points per game in 2014 to just 16 in 2015), and also that he was at times a liability against Golden State, but nevertheless, they resigned him approximately $113 million over 5 years.
Thompson, meanwhile, signed a five-year, $82 million extension after a contractual stalemate with the Cavaliers that notably included pressure from James on social media to “Get it [the deal] done.”
Just like that, the Cavaliers went from a team that was balancing their salary cap sheet well to one that was on the verge of paying crippling taxes on their roster. They catered to James’ decision-making at every junction — one of the lessons they learned in the aftermath of “The Decision” — and they paid the price for it.
This trend continued in 2016 when James pressured Cleveland to resign J.R. Smith, who had just enjoyed another strong season with the Cavs, and David Griffin was forced to pay a 4 year, $57 million contract.
Overnight it seemed, a team that had Kyrie Irving and LeBron James on below-market value deals handed out inflated deals to Kevin Love, Iman Shumpert, J.R. Smith, Tristan Thompson.
Only Thompson and Shumpert had any realistic chances of improvement over the lifetimes of their deals, and Shumpert never improved due to injury and overall inconsistency, while Thompson’s skillset became less valuable over time — which was compounded by the fact that is “Iron Man” streak of avoiding injury halted as aged.
Smith, meanwhile, became one of the worst contracts in the league, as his three-point shooting was extremely streaky and his defense — until the postseason — was below average.
Only Love’s deal was remotely close to market value, and yet, though Love’s performance improved over time, it was always clear he was never worth a maximum contract within the context of the Cavs’ situation.
Things got so bad that in 2016 when the entire sports world was fixated on Cleveland after they won the NBA Finals, Cavaliers owner (or Team Governor) Dan Gilbert took a loss of $40 million due to the taxes he was hit with from the Cavs’ reckless management of the salary cap.
In 2017, when Kyrie Irving requested a trade, Cleveland got a blessing in disguise: they would finally be able to escape the hellish luxury taxes they had paid for the previous two seasons.
James, seeing an older roster with no true opportunities to improve, moved on to Los Angeles in 2018 — which, for all of its pitfalls in terms of roster construction, still had extreme financial flexibility — while Gilbert and the Cavs suffered the consequences of their over-catering to LeBron from 2014–2018 and the inflated contracts they handed out.
At times, Cleveland had the makings of a dynasty with their stranglehold over the East, but their choice to overpay a below-average supporting cast put a ceiling on their ability to contend, and ultimately led to James and Irving’s departures.
WITH THE VACANCY left by the fall of the Warriors’ dynasty, now is the time for most contenders to go “all-in” for winning a championship. And if the stories of the Golden State and Cleveland Cavaliers are any indication, some teams are positioning themselves well financially, while others may be restricting their future.
The Lakers, who just won the 2020 NBA Championship and are still favorites to win again in 2021, are about to get expensive. Between keeping players like Dennis Schröder, Talen Horton-Tucker, Alex Caruso, and Montrezl Harrell, and their decisions to resign Kentavious Caldwell-Pope and Kyle Kuzma to sizable deals this summer (roughly $40 million over three seasons for each), they may encounter troubles from a flexibility standpoint.
In fact, recent rumors suggest that, if L.A. is to make a major move before the trade deadline, they would do so in the hopes of freeing up financial flexibility for this summer and the future. Doing so, however, could harm L.A.’s chances at winning a title this season, as trading players like Caldwell-Pope, Kuzma, or Harrell would hurt the Lakers’ roster.
If there is a consolation for L.A., however, it would be that they still have LeBron James and Anthony Davis, who both have more on-court value than their maximum contracts can reflect.
The Clippers haven’t been much better at managing the salary cap, however, as they gave above market-value deals to role players like Patrick Beverley, Marcus Morris Sr., and Luke Kennard. Morris’ deal isn’t likely to age well, much like J.R. Smith’s deal, and Kennard hasn’t shown nearly enough progression to justify his hefty extension.
Between this overpaid supporting cast and Paul George’s 5-year extension with the Clippers, L.A. might not have many means of improving their team on a year-to-year basis outside of using exceptions (like signing Serge Ibaka for the mid-level exception, for instance).
While L.A. was somewhat justified in locking up its key pieces to signal to Kawhi Leonard, an impending free agent, that they were all-in on contending, it feels as though they must win within the two or three seasons, before their lack of flexibility costs them in the future.
Lastly, the Milwaukee Bucks, having traded for Jrue Holiday, are now essentially locked into their current core. In recent seasons, all of Giannis Antetokounmpo, Khris Middleton, and Brook Lopez have inked large deals, while Holiday is sure to follow, as the Bucks gave up significant draft capital to acquire him.
At one point, Milwaukee had Antetokounmpo, Middleton, Lopez, and Malcolm Brogdon on extremely valuable contracts; now, outside of Giannis, who is worth more than the maximum salary, they are either overpaying their core pieces or simply paying them their market value — which is fine in the short term, but harmful in the long term.
In fact, Brooklyn might have the best cap situation out of all current top contenders in the NBA, as they potentially avoided overpaying for supporting pieces like Caris Levert, Jarrett Allen, and possibly, Spencer Dinwiddie, in exchange for a player in James Harden who is guaranteed to be worth his max contract until his deal expires.
By having three bonafide star players, Brooklyn can retool on a year-to-year basis (especially if they get off of Spencer Dinwiddie’s $12.3 million player option), which in many ways is more favorable than having to overspend on role players.
IN REFLECTING ON the individual cases presented in this article, there is one clear takeaway to be had: there is a reason why having the most star power wins out in the NBA.
As it stands, there is an overvaluing of role players (especially after the cap spike of 2016) and an undervaluing of star players. Currently, the top five or top ten players in the NBA have a value that far exceeds the number put on their cap sheet, and that reaffirms the ideology that having the most superstars wins out in the NBA. Meanwhile, the top role players, who sign expensive, multi-year deals, tend to not outperform their contract’s value, hence why there is an overvaluing of role players.
This idea of this imbalance of salaries is why it didn’t matter that the Golden State Warriors were playing minimum-level players around their “Hampton’s Five” from 2017–2019, and it’s also why the short-lived trend of contending teams having “Dynamic Duos” (e.g. LeBron James and Anthony Davis, Kawhi Leonard and Paul George, etc.) instead of “Big Threes” was never meant to last.
Given the league’s current climate, there probably won’t be too many more situations similar to Golden State getting Steph Curry on a discount, or the three stars of the Miami Heat all taking pay cuts from 2011–2014. That’s why teams are settling for the next best alternative: stacking up as much superstar talent as possible, and keeping the flexibility to change the pieces around that superstar talent.
All contractual data via Basketball Reference
