The TownhallBusiness

The NBA’s scam in Silicon Valley

Incubating top prospects will dilute their future earnings 

By Rich Danker 

Like the middle-age venture capitalist that lurks in a hoodie and Allbirds at Palo Alto coffee shops, the NBA is looking for high potential amateurs to join its own incubator in nearby Walnut Creek. Their pitch is training and guidance from industry veterans, topped off by a six-figure Bay Area living wage.  

A year ago, in the chaos of Covid, the NBA’s startup, G League Ignite, persuaded a point guard to de-commit from UCLA and the top shooting guard of the 2020 high school class to join ranks. This spring, Ignite hopes to pry 2022’s mock number one draft pick away from college too.  

Signing with the NBA’s developmental squad is the basketball equivalent of giving away equity to outfit the office with kegs and ping pong tables. It dilutes a star’s future earnings for superficial upside. 

Commissioner Adam Silver and fellow NBA executives may dismiss college basketball and its fanbase as too rural, too religious, and too conservative – a mismatch for their conception of the most woke pro sports league. Surely, they think they could better prepare prospects with league-issued wristband trackers, J&J vaccinations, and copies of The Autobiography of Malcolm X. They can offer next year’s lottery picks everything except what would be to their greatest advantage heading into the league: name recognition among casual fans.  

Modern college basketball always provided future pros with a marketing platform they could get nowhere else thanks to the connections between fans/alumni and their schools. College superstars acquire a following that would otherwise be unavailable to them until they become NBA All-Stars. It’s the difference between the future earnings of jersey sales, endorsements, and investment opportunities that come with the name ID offered by college basketball and the relative anonymity of a public debut through the NBA draft that steepens the hill to those riches.  

Would Zion Williamson have started his rookie training camp with a $75 million shoe contract if he had played on the developmental team instead of Duke? Would anyone know Jalen Suggs’s name if he had opted for the incubator over Gonzaga? Nineteen million people watched his overtime buzzer-beater against UCLA. Thanks to that Final Four season, Suggs is projected to be a top-three draft pick. Daishen Nix, the de-committed point guard that Suggs was supposed to match up against, will be lucky to get drafted.  

Suggs’s high school teammate, Chet Holmgren, the projected top pick next year, is expected to follow him to Gonzaga instead of becoming an NBA guinea pig. Still, the league will likely claim two of the top five picks in this year’s draft as Ignite alumni. Their endorsement deals, particularly in comparison to those of high lottery picks and college stars like Suggs and Baylor star Davion Mitchell, will be of note since this is the first draft where they can be compared.  

Like any vulture investor, the NBA swooped in on college basketball when it showed weakness.  

College offenses had been sputtering before changes to the three-point line and shot clock were made before the 2019-20 season. Overcoaching plagued the game to the point that Sports Illustrated lamented the staying power of the laborious “Vomit Basketball” pioneered by Indiana legend Bob Knight. In 2017, a dozen major programs were investigated by the FBI in a bribery probe that produced criminal charges for assistant coaches and recruiters across the country. Academic scandals generated moral outrage from a public weary and wary of higher education’s largesse. 

However, an honest look at college basketball and its university bosses has to recognize the myth that has been allowed to fester. Greed appears to be the effect rather than the cause of how high the money stacks for brand name schools. Studies show that tuition prices have skyrocketed because parents associate high tuition with quality and prestige. When a school cuts tuition, it falls in the college rankings. Elite parents implicitly want to spend more money, not less, on their children’s college education. The money that pads endowments, administrators, and athletic budgets are the gift of status-seekers desperate for the right bumper sticker.  

College basketball’s critics object that the cash doesn’t trickle down to the players, but this sentiment discounts the hundreds of millions of dollars in annual exposure provided to the superstars and the value of the non-cash compensation all players receive through their scholarships (tuition, room, board, training, tutoring, et al.). Nearly all players in a game that has relatively few celebrity players extract more direct value from their programs rather than the other way around.  

Still, the Supreme Court appears ready to mandate that the NCAA pay all its athletes, not just those in the two money-making programs of football and basketball. During oral arguments on March 31st for NCAA v. Alston, the court appeared to side with the lead plaintiff, a former West Virginia running back. Ironically, most of the justices’ arguments centered on how much value the schools already pass on to athletes as the reason to compel them to throw in cash too.  

“They get lower admission standards,” Justice Samuel Alito said. “They get tuition, room and board, and other things. That’s a form of payment. So, the distinction is not whether they’re going to be paid. It’s the form in which they’re going to be paid and how much they’re going to be paid.” 

Chief Justice John Roberts added, “Schools can pay up to $50,000 for a $10 million insurance policy to protect student-athletes for future earnings. Now that sounds very much like pay for play.” 

If they end up with regrets about hearing this case after suddenly learning the economics of college football and basketball, the justices can be forgiven. Nevertheless, before the justices rule, they should consider the absurdity of the ideas coming from the leading advocates of paying players. 

Jay Bilas, a 57-year-old commentator so scared of the next round of ESPN layoffs that he tweets rap lyrics before starting work each day, has proposed that colleges make contract offers to high schoolers that promise them a salary in exchange for multi-year commitments.  

Bilas is advocating that high schoolers – at the nadir of their career earning power and with no experience in making complex choices – consider where to spend their brief time in college based on salary. Focusing on earnings at that stage of life is silly.  

Bilas also decries how coaches can make millions while the players go without pay, skating over the fact that coaches handle the long-term performance of the program and players are there to use it as a springboard to their profession (which often turns out to be coaching itself).  

Perhaps sensing that this long-stewing litigation would force the NCAA to pay players, the NBA beat it to the punch last year with the G League Ignite. League executives couldn’t sell team owners on allowing high schoolers back into the draft because the owners didn’t think they were age or quality appropriate. So, the developmental team was forged as the way station to indebt players to the league without the albatross of a college program and fan base’s influence.  

Of course, high school rankings often don’t translate to pro success. The NBA may eventually decide to spread its bets by opening a full minor league for prospects.  

Young people are always going to be tempted by adult promises of coddling in exchange for conformity. It’s a model that has worked from Wall Street to Silicon Valley. The golden handcuff – whether it’s free food, stock options, or $500,000 first-year salary – can make it hard to consider the long-term tradeoffs that come with giving up control over one’s future so early in one’s career. Here’s one: the high school prospect that chooses the G League over college might end up the athletic equivalent of the founder who sells to Google way too soon.  

For all its faults, college basketball remains the last chance a player has to guarantee himself the badly needed combination of coaching, playing time, and exposure before turning pro. Bypassing that for the NBA’s wannabe venture capitalist offer is likely to produce regret. 

Rich Danker


Rich Danker worked in politics from 2010-2019 before entering the business world. He served in the Trump administration as a senior advisor at the U.S. Treasury and the Commodity Futures Trading Commission after running several federal election and advocacy campaigns. His writing has been published in the Wall Street Journal, Washington Post, and he was a columnist for Forbes.com.

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