Abolishing The Second Round Two-Way
Written by Joseph Nation
The Looney Bin is primarily a draft website, but often the structure of the CBA can shape draft philosophy. As a result, it makes sense for us to cover it when those things do interact. For example, the current year 3 and 4 option costs to top 10 picks make it significantly more harmful to miss on those picks than before. While we have yet to see a team clearly change a pick on account of that, we have seen other picks like Markelle Fultz and Jarrett Culver become clear limitations on their team’s ability to build while keeping those players. But we’re not talking about the top 10 today, nor are we talking about the first round in general other than tangentially: We’re talking about the second round.
The Problem
Let’s flash back for a second to the 2020 NBA Draft. It was a bit of a weird year due to the ongoing pandemic, but beginning with pick #44, there’s a clear pattern. In order, the remaining 17 picks of the draft were: Stash, tax team, tax team, stash, two-way, tax team, two-way, stash, tax team, two-way, two-way, two-way, two-way, two-way, two-way, two-way, and tax team.
In other words, of the final 17 picks of the draft, the only ones that actually signed full deals with the main club were those drafted by tax teams (who have a clear financial incentive to sign full deals, since under the CBA a drafted second rounder counts at only the rookie minimum, where an undrafted player counts at the 2 year player minimum). Since this is approximately a $700,000 difference, and the tax compounds that further, that can quickly add up to a lot of money.
Meanwhile, in the 2021 draft, let’s start at #44 again: While not all of those have signed yet, we do know that Kessler Edwards, David Johnson, Sharife Cooper, Luka Garza, Sandro Mamukelashvili, Aaron Wiggins, Scottie Lewis, and Jericho Sims have all agreed to two-ways. Dalano Banton, BJ Boston, and Georgios Kalaitzakis all signed full contracts with teams in or near the tax. Juhann Begarin, Marcus Zegarowski, Filip Petrusev, Balsa Koprovica, and Raiquan Gray all appear likely to be stashed. That’s 16 players. The 17th is Charles Bassey. It’s unclear where Bassey falls, but he will unquestionably be in one of these buckets, since the 76ers are in the tax. In fact, you can actually extend the range in 2021 by an extra pick, since Greg Brown signed with a tax team in Portland.
The Relevance
But now that we’ve established that this pattern does exist, so what? Why is it a problem at all that teams are getting the back end of the draft on contracts that players are willing to agree to? Shouldn’t we do everything we can to make sure teams can operate in the way they believe best? And if we want the players to be able to avoid those contracts, why have a draft at all?
Well, to answer that, we have to understand two concepts used in competitive balance: win-more, and rubberbanding. Win-more is primarily used in the card game Magic: The Gathering, to refer to an action that yields a competitive advantage only while ahead. This is how most things function in the NBA. Teams that are good make more money, can spend more money, and also get free agents willing to sign for cheaper for a winning situation. The opposite of this, however, is rubberbanding, which most people most easily picture as the power-ups in Mario Kart. The further ahead you are, the worse your power-ups are. The game is designed for players to be able to get back into the race, no matter where they are in the standings, with the strongest example the infamous blue shell. While these concepts are not inherently positives or negatives from a balance standpoint, what they can do is change the experience of the participants. A well-designed rubber band situation is more exciting, as it means that everyone has a chance without being too punitive on the people currently at the top immediately (Note that the blue shell is a terrible rubber band given how punitive it is to the leader while simultaneously not being that rewarding to the player in last place).
The NBA Draft is a rubber band in a league full of win-more. It is the first way by which teams who are bad have a legitimate talent advantage over those who are good, and it’s the reason that eventually all top teams falter and all bad teams except the Kings, Timberwolves, and Hornets figure things out. Which, by the way, is a strong argument that it’s a successful rubber band since the truly incompetent are being consistently denied.
So what happens then when the end of the 2nd round is a two-way ghost town? Well, the draft no longer rubber bands as well. It’s nowhere near as large an impact as in the early first round, but top level talents for that range like Austin Reaves, Joel Ayayi, and Aaron Henry will all go on to immediately sign two-way deals with the top teams right after going undrafted because if you’re getting a two-way contract regardless, why go somewhere currently poor when you could go get paid the exact same and have a shot at a title?
Now, it’s not like players requesting to go undrafted is a new feature. The difference is the leverage the two-way offer creates: In the past, if you wanted a player in spite of requests to go undrafted but you were willing to offer a full contract to get them, you could at minimum extend the required tender and guarantee that you had them for at least 1 year at the minimum. The team had the leverage, but the player was at least guaranteed an NBA contract out of it or they were just immediately a free agent. But if a team is only willing to pay a two-way contract, which is equal to exactly half of the rookie minimum for this year, then that required tender is twice as much and the player saying “no, I will not take anything less than the required tender” gives them credible leverage.
Additionally, the short duration of the two-way contract is bad for players with risk involved. Not every player develops in one year, but the two-way contract can be no longer than two years long. Having teams setting themselves up with contract structures that don’t allow time for players to actually develop is bad for the players as well, and there’s a specific class of players -- younger, more speculative bets --that’s disproportionately affected.
The Solution
In other words, we have the draft to make the talent equalize across teams in the long run and make games more exciting, but teams are willing to throw away that marginal talent advantage to save some money. This isn’t the first example of teams throwing away their advantages though, having to have their actions regulated by the CBA in order to make them be competitive. Most readers will be familiar with the Stepien rule, which keeps teams from just trading all their 1st round picks away to save money specifically because former Cavaliers’ owner Ted Stepien kept doing exactly that. But also, as of at least the 1999 CBA (I don’t have information on any CBA prior to that, but it lines up with the Glenn Robinson fiasco such that that might have been the first time a rookie scale existed), 1st round picks have cap holds. And while stashing them is still possible, as we saw with Leandro Bolmaro among others, that has to be by mutual consent and very few players are willing to do that.
And that’s where we find our solution. 1st round picks have a cap hold, so give a 2nd round pick the same. Set the cap hold at the minimum, and make it function such that if a player is signed to a deal for less than that (namely a two-way) they still count against the cap at the minimum just the same. While this won’t eliminate all two-ways, especially those due to roster slots, it at minimum removes the financial incentive to make a bad decision. This may just be a stopgap, but it is at least an immediate solution to a problem impacting the fringes of the league. Now, it can’t fix how poorly teams have evaluated the draft in general, but it at least makes it to where their mistakes will be made on grounds of evaluation rather than bad operational practice.