Nylon Calculus: NBA and 2017-18 return on investments
With the end of another NBA season brings another offseason full of mock drafts and free agency decisions. Now is a good time to look back on the season to quantify the winners and losers.
Obviously, the world champion Warriors had another great season but so did many other teams. The Celtics literally limped through the playoffs and were within one game of the NBA Finals. Ditto for the Rockets.
In order to quantify the success, I tried to find a metric to measure how well teams performed compared to the price they paid for players. Return On Investment, or ROI, measures the performance of an investment. Finance and business investments use ROI to determine the success of investments and the formula is listed below.
Instead of looking at profits and investments of NBA teams we will look at more on-court performance compared with investments. We will look at a simple formula called Wins On Investment, or WOI. WOI is similar to ROI but instead compares wins to investments and is a measure of how well a team performed compared to the amount of salary. The formula for WOI is listed below.
Now to the main part of the formula, Adjusted Wins. Adjusted wins is an empirical equation based on the number of regular season wins and playoffs wins.
Regular season wins are multiplied by two because a 50-win team that spends approximately near the salary cap value, $99 million in 2017-18, is considered a non-negative WOI. Secondly, each round in the playoffs is worth more adjusted wins and the multipliers for each round grow exponentially. As teams advance in the playoffs, they are closer to the final goal of reaching a championship and the competition is much more challenging and intense. Finally to control teams that had easier matchups, i.e. the Eastern Conference, I added in the opponent’s simple ranking score or SRS, for each round.
The adjusted wins formula provides a simple yet accurate measure of the success of each team. The graph below highlights the total salary, dark team color, and the adjusted wins, transparent team color.
Some highlights are the Houston Rockets, even though they didn’t make the Finals they still had a higher adjusted wins than the Cleveland Cavaliers. The Rockets had a much better regular season with a tougher Western Conference schedule and were within one game of beating the Warriors. After the Cavs came Boston, followed by Utah and New Orleans in terms of adjusted wins.
After calculating adjusted wins we can now calculate WOI. The graph below shows the WOI for each team. The higher the WOI the better return on the investments in player salary for the team. As expected the Warriors had the best WOI with the Rockets right behind. Other notable teams were the Jazz and Pacers. The Jazz, at 37 percent WOI, had a relatively small total salary at $107 million and made it to the second round of the playoffs for Adjusted Wins of 147. The Pacers were the only team under the salary cap with a positive WOI. The Pacers had a WOI of 9 percent with a total salary of $94.4 million and adjusted wins of 103. On the other hand, the worst WOI performers were the Memphis Grizzlies at -60 percent WOI and Phoenix Suns at -55.7 percent WOI.
To sum up, if we were to offer awards based off WOI we might offer some of the following.
Next: Will Robert Covington get squeezed out this summer?
WOI Leaders: Golden State Warriors
Pleasant Surprises: Utah Jazz
Most Successful Rule Followers: Indiana Pacers
Tank Artists: Memphis, Phoenix, Atlanta