Sunday, October 24, 2010

A Long, Rambling Post About Another Hockey Team

Let’s take a break from all of this Lightning talk to talk about…..another hockey team. How did the New Jersey Devils get to this point? From dressing 15 skaters, 2 wins in their first 8 games and the benching of Ilya Kovalchuk the year has been disaster thus far. It starts with, and ends with, the decision to sign Kovalchuk, not once, but twice.

The man responsible, Lou Lamoriello, has served as the General Manager of the Devils for more than two decades. In that time his team has appeared in the playoffs in 21 of the last 23 seasons and has lifted the ultimate prize, the Stanley Cup, three times. During his tenure his teams have been noted for their tough defensive style, lack of big name scorers and reliance on All-World goaltender Martin Brodeur.

All of that was thrown out in an eventful off-season. The story for those not familiar goes a little something like this.

Lamoriello shocked the NHL world last year by making a trade to pry Kovalchuk away from the Atlanta Thrashers. He sent defenseman Johnny Oduya, a young forward in Niclas Bergfors, prospect Patrice Cormier and a first round pick down south for Kovalchuk and Anssi Samlema.

The prevailing thought was that Lamoriello had made an all in bet to rent the potential unrestricted free agent for a Stanley Cup push. The former first round pick played well in the picking up 2 goals and 6 points in 5 playoff games, but the 2nd seeded Devils were ousted by the eventual Eastern Conference Champion Philadelphia Flyers and the season was over. For the most part the experts assumed that Kovalchuk’s career with New Jersey was finished as well. He was, after all, the most lucrative offensive player on the free agent market.

Los Angeles Kings fans were giddy with excitement, Caps fans were delirious with the rumor the Kovy would take a one year deal to play with Ovie. Even SKA St Petersburg fans were raising their vodka glasses in anticipation of Ilya coming home to play in the “K:”.

Yet in the end it was Lamoriello offering the biggest money as in $102 million over 17 years. This from the same man who traded away fan favorites such as Pat Verbeek and Bill Guerin after nasty contract negotiations. The GM front loaded the contract so as to prevent the salary cap from handcuffing the team 15 years down the road. At the height of the contract Ilya would be raking in a cool $11.5 million a year for five seasons, yet for the final five years he would only be making $550,000 (in other words $300,000 less per year than the Lightning are paying Dana Tyrell this season).

The NHL, already grumbling about long-term, cap-friendly deals handed out to Roberto Luongo and Marion Hossa, drew a line in the sand and ruled the deal illegal. An arbitrator agreed and the contract was voided . For trying to circumvent the CBA the Devils were hit with a $3 million fine, sacrificed a 1st round pick and a 3rd round pick. Kovalchuk was a free agent. The Devils were off the hook!

Yet Lou went back at it, talked tough about appealing the punishment and managed to tweak the deal and signed Kovy to a new deal, this one with league approval. The only problem was the new deal knocked the Devils over the $56 million salary cap. Someone would have to be dealt or the Devils would be in a predicament. Would it be veteran Brian Rolston and his $5 million cap hit or young center Travis Zajak and his $3.15 million hit? In the end Lou couldn’t find a taker for either one of them.

They were able to tweak the roster to get under the cap to start the season, but quickly ran into trouble when Rolston was injured at the same time as Anton Volchenkov. A suspension to Pierre-Luc Letourneau-LeBlond left the Devils with only 15 healthy skaters. With no cap room they couldn’t call anyone up from the AHL. They were stuck with what they had.

Needless to say they haven’t played well. Add to that a coach’s decision to bench Kovalchuk on Saturday night and one has to wonder how the next decade and a half is going to play out for the Devils. How long will an aging Brodeur stick around? How will they rebuild with no cap room and the loss of draft picks? Will Kovalchuk grow tired of skating in Jersey and bolt for the KHL (that might be the best case scenario for the Devils)?

So why would this seemingly reasonable architect go against his nature and invest so much in the prolific Russian winger, especially at the detriment of the team? Luckily for you, my fine readers, I recently read a book that explains everything. Thanks to the Brafman brothers I am an expert on why people make dumb decisions.

I was at the library a few weeks ago looking for Malcolm Gladwell’s bestseller Blink. I like to read books like that on the train because then I think strangers think I’m smart. One thing about this town is that people read on the train. And it’s not just pulp fiction (although Steig Larson’s The Girl Who…trilogy is starting to reach DaVinci Code proportions) these folks are reading classic American literature. In the last week I’ve spotted The Grapes of Wrath, Atlas Shrugged and Native Son, so I have to step my game up.

Anyway, despite showing that it was available, Blink wasn’t where it was supposed to be. As a former library employee, mis-shelved books rank quite high on my list of pet peeves (though not as a high as waving around an unlit cigarette). Since it wasn’t available and I’m too lazy to complain to someone about it I figured I would just find something similar. That’s how I came to check out Sway: The Irresistible Pull of Irrational Behavior.

Written by Ari (a business expert) and his brother Rom (a psychologist) Brafman Sway is a quick 224 page look into why people, even supposed experts make dumb decisions. They jump across all professions from airline pilots, to SEC football coaches to venture capitalists. In analyzing the irrational decisions that are made they stumble across a few common themes. So let’s take a look at, and apply, a couple of their theories to the current New Jersey Devils predicament.

I. Loss Aversion

People have a tendency to go to great ends to prevent loss. Think of people holding on to sinking stocks long after they should have cut their losses. Could the thought of a 50 goal scorer (something the Devils have never had) been so enticing to Lamoriello that it blinded him to the repercussions of signing the winger?

Then he clung to his decision even after the NHL gave him an out. Why invest so much in a player that is the antithesis of Devils hockey? The Brafman brothers talk about commitment being part of loss aversion. People get an idea stuck in their head and cling to it to the point of blocking out other possibilities. Wouldn’t Kris Versteeg have looked nice fore checking for the Devils? With the extra money saved maybe another defenseman to shore up an aging blue-liner?

Possibly it was the price he paid to get the Russian sniper in the first place made him reluctant to part with him after only a few months of services so he threw more money at him, a lot more money. He might have been less willing to give him a large contract if the price had only been a first round pick and a nameless prospect. Having invested heavily by parting with Oduya and Bergfors did he need to justify it by bringing Kovy back? Possibly; and that leads us to the next factor.

II. Value Attribution

Giving a person or thing such an initial high value and sticking to it despite other data that might show you different. The initial value Lamoriello attributed to Kovalchuk was two young NHL-ready players, a prospect and a 1st round pick. Despite not helping the team reach the ultimate goal (the Stanley Cup) the GM continues to value the left-winger at that high cost.

In the book, the authors talk about how NBA first round picks tend to make more money and stick in the league longer than lower round picks even if they have the same or worse stats during their career. Once tagged with the 1st round pick status they carry that value throughout their career even if they don’t perform to that level.

It would have been easier to make this connection if Kovalchuk’s stats had been declining over the last few years, but a quick check on Hockey Database shows that he is churning right along. However, in the “new NHL” what is the value of a 45-50 goal scorer? Especially with a new CBA being negotiated in the next few years. Couldn’t $6.6 million be better invested in two young forwards and cap room? What about the 1st round picks they’ve lost (or will lose)? Keeping under the cap is easier when your skaters are under entry-level contracts.

There is a reason that there was only one other team in the sweepstakes. No one else in the league put his value over $100 million.

Sway has a couple of other attributes that lead people to make dumb decisions, but I had to take the book back to the library before I wrote this so you only get two. Also, it’s running on quite a bit and I’m getting tired so there ya go.

Did any of this make sense?

1 comment:

shoeboxlegends said...

Great post, I like the points you bring up. I've been shocked just like you have as I've been following this story. Very un-Devil-like...