What is basketball?
Is it strictly the game on the court? Plus coaching? Plus player management? Plus business management?
Basketball purists say it’s all about the single game on the court and winning that game at all costs, but are there other valid interpretations?
And how does this all tie into your own evolution? Let’s explore.
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We are all witnesses to a brand new sports strategy being pioneered by a few select teams. Using prolonged, aggressive, and unapologetic tanking as a long-term winning strategy is a new version of Moneyball, and within 5 years, I believe we’re going to see a lot more of it.
One of the first teams to introduce the strategy is baseball’s Houston Astros, who after claiming the league’s worst record in 3 consecutive seasons (they are the first team ever to hold that dubious distinction), built up a vast store of talent, and now sit comfortably in their division’s first place. They are covered brilliantly in this Grantland article.
For the purposes of this piece, I’m much more interested in basketball and my hometown Philadelphia 76ers, who are in the early-to-mid stages of their own aggressive rebuild. They’re doing it amid plenty of controversy, detractors, and debate.
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In 2013, the Philadelphia 76ers were in shambles. Their team was ill-constructed around a decent 3rd option in Jrue Holiday being utilized as a #1 option, and a failed 2nd overall pick in Evan Turner being utilized as the #2 option. They were a team annually destined to fight for the honor of an 8th playoff seed. To make matters worse, a host of poor and/or unfortunate decisions – among them an Andrew Bynum mega-trade and a draft day trade for the bust formerly known as Arnett Moultrie – whittled away their future assets.
Facing a depressing future, ownership ushered in Sam Hinkie, an 8 year Houston Rockets’ front office veteran. He was named General Manager, bringing a cutting edge analytics approach and a new-school way of thinking.
The team’s direction was forever changed.
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What do you do when you have a losing hand? What happens when you realize that your current ceiling is a lot lower than you’d like it to be?
The answer depends on your worldview. Are you content fighting for 8th seeds? Or is a championship all that matters?
In the Philadelphia 76ers’ (and Houston Astros’) case, they emphatically chose the latter.
First you choose, then you pursue.
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The pursuit began with a new interpretation of “basketball”.
Typically there is pressure to win now. Winning drives fan interest, increases ticket and merchandise sales, and boosts immediate revenue. General managers and coaches are given short shelf-lives that depend on their season-to-season success. Have a few losing seasons in a row and the axe falls quickly.
The issue with winning now is that it often biases decision making. Instead of going for the gold and increasing the chance of championship(s), it leads to good but not great. It leads to avoiding risks and sticking to safer options.
Philadelphia 76ers ownership allowed Sam Hinkie to think differently. With their blessing, instead of a micro season view, he adopted a macro multi-season view. Cut the cord to winning now, take risks, and pursue championship(s) in the future.
That begs the question – what produces championship(s) on the basketball court?
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The NBA is a superstar driven league. 34 of last 35 title teams were led by superstars – top 5 players in the league – with names like Magic, Bird, Jordan, Shaq, Duncan, Kobe, LeBron, and now Curry. More often than not these Batmans also had Robins (co-superstars) in Worthy, McHale, Pippen, Kobe (on the Shaq squads), Parker/Ginobli, Gasol, Wade, and Thompson/Green.
Yes, for those who pulled for the Atlanta Hawks and “team basketball” in 2015, it would be both fun and exciting to see a superstar-less underdog win. While idealistic, it’s simply not realistic based on history. The size of a starting lineup (only 5 players) and the time a superstar spends on the court makes his impact monstrous. Throughout history you’ll find the occasional exception (2004 Detroit Pistons), but the rule remains the superstar.
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Sam Hinkie’s magic word is optionality.
“I believe in optionality – a lot,” he said. “I believe a lot in flexible.”
Rumor has it that when Sam Hinkie applied to the General Manager position, he prepared an impressive presentation. It revolved around a now infamous trade, when in 2013 the Houston Rockets leveraged a package of assets – draft picks and players – to acquire James Harden.
The web Daryl Morey (Houston’s General Manager at the time) and Hinkie wove to acquire Harden is intricate. On the surface it looks simple: Kevin Martin, Jeremy Lamb, 2 first round picks, and a second round pick exchanged for a certifiable superstar. Dig deeper, and you find a collection of many smaller transactions – draft pick acquisition and exchange, salary cap manipulation, young talent, and a veteran player acquired on a reasonable deal – executed over years.
Optionality: The value of additional optional investment opportunities available only after having made an initial investment.
Hinkie’s optionality-based approach revolves around making many initial investments. He acquires and grows assets, consistently trades them up, and compiles a warchest of draft picks, young players, attractive contracts, and cap space. Any move that is an upgrade – even acquiring 2nd round picks that others often dismiss as “meaningless” – matters. All asset upgrades put the team in a better position to acquire a superstar(s) and/or useful pieces.
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Optionality allows you to capitalize on the future – however it presents itself.
Monday morning quarterbacks everywhere look back and say “the Houston Rockets got lucky that Harden was available” or “the Oklahoma City Thunder were dumb for trading James Harden”. The point they miss is that the Houston Rockets were ready for anything. They were ready for any superstar to come available. It didn’t have to be James Harden.
They put themselves in a position to be lucky and to have the most attractive collection of assets when opportunity knocked. Sam Hinkie’s Philadelphia 76ers are doing the same. At a moment’s notice, they may become lucky too.
The landscape of the NBA is constantly changing, team needs are constantly changing, and the perspective of most teams is rooted in the short-term.
This offers long-term thinkers an edge.
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These are various strategies employed by Sam Hinkie. While certain details are specific to the basketball court, their logic and implications extend far beyond it.
Strategy #1: Sell what isn’t working for maximum return.
Global Takeaways:
Be honest with your present situation. If it is destined for a level of mediocrity that you are not ok with, pivot and pivot hard. If your ladder is on the wrong wall, change walls.
Philadelphia 76ers:
Building through the draft (and/or executing mega-trades) requires picks, which are allocated based on season-to-season success. The 76ers tore their team down to essentially nothing, thus assuring several losing seasons and several prime picks.
Jrue Holiday. Evan Turner. Thaddeus Young. Spencer Hawes. Gone. In their place – you guessed it – draft picks.
Strategy #2: Accept risk in pursuit of high upside.
Global Takeaways:
The public overreacts to risk, thus opening doors. Property values during a real estate downturn. Business assets during a crash. If you remain sane and accurate in your valuations, you have an edge.
Philadelphia 76ers:
Hinkie targets superstar talent that is discounted due to injury. That level of talent is rare enough that the chance of re-injury is an acceptable downside.
In both the 2013 and 2014 drafts, the 76ers drafted two players – Nerlens Noel and Joel Embiid – who were widely considered the #1 players in their classes prior to being injured. Both fell into their laps. In 2013, the 76ers traded for pick #6 to snatch Noel, while in 2014, they used their own #3 pick to claim Embiid.
Noel has stayed healthy and developed into a defensive game changer (he looks like a potential Robin to a future Batman), while Embiid recently experienced a significant injury setback. The risk, however, was worth it.
Strategy #3: Exchange your assets for better assets, even if better isn’t a guarantee.
Global Takeaways:
When you make a bet, there is rarely a 100% chance of success (arbitrage is the exception). In fact, your odds of success in a winning trade or bet may be as low as 51%. Sports gambling titans check in with a success rate around 57%. 60% makes you an all-time legend.
If you push all-in on pocket rockets – AA – in no-limit Texas Hold’em, you are at least a 77% favorite over any other heads up hand. Does that mean if 56 hits a straight and beats your AA that it was a bad bet? If you buy an undervalued house and smartly renovate it but run into a shocking real estate downturn immediately thereafter, does that mean it was a bad decision?
Absolutely not. You do your due diligence and take a calculated risk (the part you control) and then hope for the best outcome (the part you don’t control).
Philadelphia 76ers:
Sam Hinkie recognized that his 2014 point guard – Michael Carter-Williams – was flawed (he has an abominable shooting stroke) and not suited for his championship aspirations. So he traded him for a sweet Los Angeles Lakers pick that was top-5 protected in 2015 and top-3 protected thereafter. Unfortunately the Lakers received the 2nd pick in the 2015 NBA draft (thus assuring that the 76ers didn’t receive it this year) and their record in 2016 is so far undetermined. If they have a good year and the 76ers receive a lower pick, does that make it a bad trade?
Absolutely not. My guess is that Sam Hinkie knew down to the percentages the chances to receive the pick in 2015, as well an accurate projection on the Lakers in 2016 and beyond. He also knew that most teams valued the pick more than MCW himself, opening doors to future trades. He held the pocket rockets, weighed the odds, and pushed all-in.
Sub-Strategy: No regrets.
Strategies #2 and #3 are closely tied together and revolve around smart risk-taking. If risk rears its head and the downside transpires, have no regrets. You acted intelligently, and regrets are wasted energy. Sink your energy into future opportunities, and do not allow yourself to become gun shy. Pocket rockets win in the long run.
Strategy #4: Find ways to use existing assets and competitive advantages creatively.
Global Takeaways:
Get creative with what you have in your possession – your unique combination of skills, opportunities, and material assets. People everywhere are AirBnB’ing their homes while they’re away, making low risk loans with stagnant capital, and renting vacant lots to seasonal beer gardens. Heck, one of my favorite stories is my grandfather finding a vacant lot (not his) and charging people to park in it!
Philadelphia 76ers:
The NBA has a salary cap, an amount each team must spend annually to ensure competitive balance. The 76ers didn’t see value in using their salary cap space for the very veterans making them mediocre. Instead, they used theirs to take on other team’s unwanted contracts while adding draft picks as the price for doing so. This goes back to understanding the short term motivations of others. Team X has no salary cap space, Team X sees a player they want to sign, Team X presents the 76ers a prime draft pick for helping them clear the space they need (see Strategy #8 for a specific example).
Strategy #5: Acquire devalued assets.
Global Takeaways:
Do you see an opportunity in something that others see as worthless? Keeping pristine baseball cards that other kids stuck in bike spokes nets a million dollar collection. Or how about an art-aficionado client of mine seeing a piece on the wall of a store she frequented, purchasing it, and flipping it for 16x its cost?
Philadelphia 76ers:
To such an extent that they are now the butt of many jokes, the 76ers sought as many 2nd round draft picks as possible. They relentlessly asked and received these picks as throw-ins to trades, noting that other teams typically tossed them around like candy. If every year 2-to-4 2nd round draft picks become useful players, then holding 5 of 32 possible picks (in 2015, for example) drastically increases your odds of finding one of them. 2nd round picks also allow you to pursue strategy #6.
Strategy #6: Emulate the successful models of dynasties.
Global Takeaways:
If you look hard enough, you find role models in any walk of life. Seek applicable tactics that contributed to their successes and apply them to your own journey. Do this via personal contacts – I have several friends and clients who are invaluable mentors – or via impersonal content circulating web/audio/print media – Gary Vaynerchuk on social media branding, for example.
Philadelphia 76ers:
The 76ers saw the San Antonio Spurs as a model of lasting success (5 championships in 15 years). A strategy the Spurs employ is stashing players overseas. While NBA teams are allowed an active roster of 15 players, they are permitted to sign and hold the rights to foreign players in various European and Asian leagues. This essentially gives them a larger roster, and if a player(s) shows considerable talent, the team clears a roster spot and imports him. The Spurs not only acquired a Robin this way – Manu Ginobli – but they also imported supporting championship pieces like Tiago Splitter and Patty Mills.
In his 3 drafts with the team, Sam Hinkie has stashed at least 2 players overseas each year, with none higher profile than last year’s 12th overall pick, Dario Saric. At a maximum these players are more chances at the elusive superstar and at a minimum supporting team pieces to import when ready.
Strategy #7: Do not take action just for the sake of taking action.
Global Takeaways:
I used to play a lot of no-limit Texas Hold’em poker (hence the poker analogies). Each and every time I sat down, it was easy to pinpoint the player who could not sit still, the guy who simply had to be involved no matter what. If he was being dealt a string of good cards, he amassed chips and looked like a genius. In many more instances, he went broke.
What’s the right move? Sometimes no move is the answer. If there is no edge to be had, sit tight. Patience can be a massive virtue.
Philadelphia 76ers:
Leading up to the 2015 draft, Sam Hinkie developed a reputation as a mover and shaker. Philadelphia fans anxiously awaited a night of big trades. When the team’s draft transpired with no notable moves, many were disappointed.
By all accounts other teams with high draft picks protected them like gold bars this year. In fact, there is a story that Boston Celtic’s GM Danny Ainge offered seven – 7! – draft picks to move to a higher slot and was rebuffed. Sam Hinkie found nothing worth doing, and so he did nothing.
Strategy #8: When the time is right, take massive action.
Global Takeaways:
First you do your homework and when you see an opportunity, you act. Trust the philosophy and system that you have in place. If you second guess yourself, you sabotage the work you’ve done.
Philadelphia 76ers:
Shortly after the 2015 draft, opportunity hit. The Sacramento Kings needed something – salary cap room (remember Strategy #4?) The Philadelphia 76ers had it. Sam Hinkie struck hard and fast, and in a borderline criminal return haul acquired 2014’s #8 player, a 1st round draft pick, and future draft pick swap options.
In the 2014 draft, Sam Hinkie held the 10th pick. He knew the Orlando Magic, at the 12th spot, desperately wanted Elfrid Payton. Hinkie had no need for a point guard, and instead wanted Dario Saric. He trusted his information, saw an opportunity, and took Payton anyway. Holding the leverage and the player the Magic wanted, he squeezed them for a future 1st round and 2nd round pick, along with the 12th slot. Who did he get at #12? Dario Saric, of course.
Strategy #9: Stay ahead of the curve. Seek cutting edge, outside of the box opportunities.
Global Takeaways:
Get creative. Look for fresh connections between ideas and fields. Make calculated bets on concepts with significant upsides. Seek new technologies that further your existing business interests.
Philadelphia 76ers:
The team leaves no stone unturned. They employ the best analytics. They experiment with game pace, shot selection, and team construction. They embrace sports science in prioritizing sleep, nutrition, and training methodologies. They are constructing a state-of-the-art practice facility. And if a new opportunity presents itself, you had best believe they’ll explore it too.
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Credit: http://corbisimages.com
Never tank on the court.
This is less of a revolutionary strategy and more of a social commentary.
“If a man is called to be a street sweeper, he should sweep streets even as a Michaelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.”
– Martin Luther King, Jr.
The 76ers get a lot of criticism for tanking, but anyone who watches the team knows that they never tank on the court. From the coaching staff to the players, they’ve developed a culture of working their asses off. Once more talent hits the court, this will pay dividends.
No stage is too small, and the mindset of expending maximum effort no matter what is the sign of a winner. Steve Liberati (listen to our podcast discussion here), who owns Steve’s PaleoGoods, once went to work for his Dad’s pest control company. Coming from the corporate world, he expected to be handed the keys. Instead he ran routes on the streets of Camden, NJ. Did he bemoan his fate? Nope. He dug in, ran those routes, and cultivated relationships that led to his non-profit – Steve’s Club. Interact with Steve today, and he is humble, hard working, and leading an exceptional company.
Consistent effort is underrated.
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There is a lot to be gained from long-term perspective.
It’s not natural. We’re wired to be short-term thinkers. We’re wired to look for and shy away from the risks in our immediate environments. When you overcome your wiring, go macro, and think long, you capitalize on a huge opportunity.
Relentless Actions:
- What’s your game, what is your definition of a championship, and are you playing the game to win it? There is nothing more frustrating than striving for the top of a mountain when your ladder doesn’t reach the summit. Does your strategy need subtle tweaks or do you need to pull a Sam Hinkie and hit the restart button?
- What is your collection of assets? Where are your competitive advantages?
- What is everyone else doing, and what can you do differently (and productively)? Can you leverage a long-term outlook? Are others missing the forest for the trees?
- Can you employ any of the 9 strategies listed above? What are other strategies not listed?
- Do your homework, develop your philosophy, and be prepared to strike quickly and ruthlessly when the time is right.
- Stay humble and pour your effort and energy into every rung of the ladder, no matter how low or how high. If your ladder is on the right wall, every single rung contributes to a better future.
For the Philadelphia 76ers, the only question is time. The foundation is strong – several top flight talents, a growing overseas base, as many as four 1st round draft picks next year, and more. But in the ruthless, short-term sports world with heaps of fan pressure mounting, will ownership stand strong enough for long enough to bear the fruits of Sam Hinkie’s labor?
Fortunately you have a longer timeline. Overnight successes are rarely overnight and are instead a collection of positive decisions and efforts made over years. When you consistently act on behalf of your brand – whatever that means for you – with the long-term in mind, you win. Trust the process.
