As anyone reading this knows, the Jazz recently traded Kevin Murphy and his unguaranteed contract to the Golden State Warriors for Andris Biedrins, Richard Jefferson, Brandon Rush, 2014 and 2017 unprotected first round picks, two second round picks, and cash. While many Jazz fans have applauded the direction the team is going with this trade, many have argued the Jazz significantly overpaid for the two first round picks it acquired (of the SLCDunkers, Peter Novak has been the most outspoken about this, while nationally, Kevin Pelton and Zach Lowe, among others, have also made this claim). I was initially in this camp as well. When news of the trade broke I thought the Jazz should have acquired either Harrison Barnes or an additional first round pick as part of the deal. But the more I thought about the details of what the Jazz received, the better I felt about the return the team obtained in the trade. The goal of this post is to take the reader through this thinking, evaluate what the Jazz really paid for the picks, and consider whether or how badly the Jazz overpaid for those picks.
What the Jazz Really Paid
The narrative that has emerged since this trade happened is that the Jazz essentially paid $24 million for two likely late first round picks (the remaining salaries of Biedrins, Jefferson and Rush equal $24 million). And because late first round picks can often be acquired on draft day for ~$3 million, the story goes that the Jazz grossly overpaid for the picks the team acquired in the trade. While I don't believe anyone is intentionally misrepresenting what the Jazz paid for those picks, anyone that makes that statement is being lazy and hasn't thought through what the Jazz received in the trade because when you look at the entire package, there is no rational way to claim the Jazz paid $24 million for the two first round picks. Let's break it down.
- First, in addition to Biedrins and Jefferson, the Jazz also acquired Brandon Rush. Rush has one year left on his contract at $4 million. Had the Jazz not acquired Rush, there is a good chance the team resigns Randy Foye or signs a similar player. For comparisons sake, Denver acquired Foye as part of a sign and trade with the Jazz and Warriors and is paying Foye $9 million over three years. Other three point shooters and so called "3 and D" players received even larger contracts this offseason (Korver, Mayo, Martin and Reddick come to mind - all of whom received contracts in the $24-$30 million range). So instead of Foye, the Jazz have Rush for $1 million more next year, but no commitment beyond that. Rush is a career 41.3% three point shooter while Foye is a career 37.7% three point shooter. Rush is also bigger than Foye and a much better defender. So in essence, the Jazz acquired a better player than the alternative on a better contract. Rush is coming off knee surgery, so there is risk he won't perform as well as he did pre-injury, but he will also be in a contract year and highly motivated to rehab hard and play well this year. Given all that, a strong argument can be made that Rush is a net plus in the deal, not a mere contract as Biedrins and Jefferson are. But at a minimum, Rush should be deemed neutral given the alternatives so his $4 million should not be included in the price the Jazz paid for those picks. That brings the payment down to $20 million.
- Second, the Jazz received two second round picks in the deal (a third if you include the pick from Denver as part of the sign and trade for Foye). Second round picks typically are valued around $1 million each (perhaps higher if you read Zach Lowe's article, where he credited the Jazz $2 million for each second rounder). Even if we go with only $1 million here, that still lowers the total cost of the picks to $18 million.
- Finally, the Jazz received cash in the deal. We don't know the amount, but on 1280 on Friday, Dennis Lindsey called it a "considerable sum." Given the annual limit placed on the amount of cash teams can spend in trades, a reasonable estimate is $3 million. That lowers the price of the picks to $15 million, or $7.5 million a piece. While still high, it is quite a bit lower than the $12 million per pick being thrown around in most discussions.
What is the Proper Value of the Picks
Now that we have established the true value of what the Jazz paid for the two picks, let's examine the value of those picks. As mentioned above, late first round picks on draft day have typically sold for around $3 million. Lottery picks have sold for more. In 2011, Cleveland took on $12 million in excess salary to acquire Baron Davis and an unprotected first round pick from the Clippers for Mo Williams and Jamario Moon. At the time of the trade, LA was projected to pick in the 8-10 range and ultimately ended up with the 9th worst record. Cleveland got lucky and ended up with the #1 pick (and Kyrie Irving) because the pick was unprotected but it is safe to say Cleveland made the trade expecting to pick around 8-10. In a similar trade, Charlotte took on about $14 million in excess salary by trading Corey Maggette last year to Detroit for Ben Gordon and a 1st round pick. That pick was lottery protected in 2013, top 8 protected in 2014, #1 protected in 2015 and unprotected in 2016.
While those picks are not perfect comps for the Warriors picks because each of those teams was projected to be in the mid-late lottery at the time of the trades, whereas the Warriors were a playoff team last year and may be even better with Andre Igoudala this year, they do provide a good baseline for the price of lottery picks. If you use $12-$14 million as the value of a pick in the mid to late lottery and $3 million as the value of a pick in the late 20s, then for $7.5 million, it seems reasonable to expect a pick somewhere in between - probably the mid-late teens.
So what did the Jazz get? Last year, Golden State picked 21. The Warriors added Andre Igoudala thanks to the Jazz, so it's reasonable to assume the Warriors will improve this year. But Golden State also lost Carl Landry and Jarrett Jack - two key contributors on last years team. So if everything goes perfectly and the team doesn't suffer any key injuries, next year's pick is likely to be in the low 20s again. But if things don't go perfectly (if Steph Curry or Bogut get hurt, for example), perhaps that pick could be in the mid teens or even in the lottery? As for the 2017 pick, it is impossible to project where it will be. Outside of Bogut, most of the Warriors current core will likely be with the team in 2017 (though you never know for sure). But the Warriors also won't have much flexibility to improve because the team will be over the cap and its ability to trade draft picks between now and then to get under the cap or acquire more players will be limited due to NBA rules (teams can't trade picks in back to back years, so the picks going to the Jazz will limit the picks GSW has available for trade until 2019). And it is this unknown, as well as the chance that the pick ends up being really good (or at least better than the late teens), that the Jazz are paying for. Because the Jazz are never going to sign Lebron James or Dwight Howard in free agency, the team's best chance to acquire a star is through the draft or trade. So the Jazz need to take chances every now and then, acquire as many assets as possible, and hope to get lucky. Acquiring unprotected picks is one way to do this. Even if the odds of those picks being really high aren't great, Dennis Lindsey and Greg Miller were willing to pay a little extra in order to have that chance.
A couple of other quick points to consider regarding the picks the Jazz acquired: (1) the 2014 draft is widely considered the best since 2003, so a pick in the early 20s in that draft may have the value of a mid teens pick in a typical draft; and (2) under the new CBA, the value of draft picks may be going up because as teams strive to avoid the luxury tax, low priced rookies on team friendly contracts will likely be more and more valueable in the years to come.
The Opportunity Cost of Doing the Deal Now
A significant reason Kevin Pelton did not like this trade for the Jazz is because he felt other opportunities may arise between now and the trade deadline for the Jazz to get more value for taking on bad contracts than the team received in this trade (either in the form of an additional pick or two or a good young player). This is a valid point and cannot be ignored because it very well could have happened. It will be interesting to see if any other trades like this arise that the Jazz miss out on where it could have received more. But, as Hamfist pointed out in his fanpost from a few days ago, it would have been risky for the Jazz to pass on this deal chasing an unknown better deal that may or may not happen. In addition to the draft picks, the Jazz also were able to maintain flexibility in 2014 because all the players the team acquired have expiring contracts. Who knows if one of those better deals out there would have required the Jazz to sacrifice that space (and the ability to make a similar trade next year) by taking on players with contracts that don't expire next year? Or what if that trade never materialized and the Jazz were forced to overpay a veteran or two on multi-year contracts in order to meet the NBA's minimum salary requirements (look at what Milwaukee and Detroit have done with their cap space this offseason - and to a lesser extent Atlanta)? Either way, although there is a chance a better deal may have come along, there was also a good chance one would never have surfaced.
The Bottom Line
The bottom line is that if everything plays out as projected now, and the Warriors continue to be a playoff team for the next several years, then the Jazz may have slightly overpaid for the picks (but not to near the extent may have claimed). However, things don't always go as projected and a big part of what the Jazz paid for is the possibility that the Warriors have an off year that enables the Jazz to acquire a high pick. And when you consider the true value of what the Jazz paid for the picks (closer to $15 million than $24 million) along with all of the other benefits to the Jazz from the trade (read Hamfist's post if you want to read more about these benefits) I think it was a smart trade to make and the Jazz were wise to take the deal now instead of hold out for a better deal that may or may not ever surface.