OK, I think it's a little bit unlikely we win 49 games, but we've exceeded expectations in this early part of the season. We've had a pretty brutal schedule and are 8-9. If we can go 41-24 over the remaining games, we'll end up 49-33. And what happens if we win 49 games? Larry Hughes gets $2M I think. So he's got $10M in total incentives, with $2M being earned in a given year. So I'd guess it's the same sort of incentive for each year, and that if the Bulls win 49 or more games, they'll have to pay him another $2M. So what, you say? Jerry Reinsdorf is probably interested in this because if the Bulls have to pay out that additional $2M, they'll be over the luxury tax threshold. So they'll have to pay $2M to Hughes, about $2M to the league in luxury tax fees, and they won't get a share of the tax revenues collected against other teams (which has historically been another couple million). At the moment, it looks like teams will pay, in total, about $90-100M in tax, which amounts to $4M to $4.5M per team. The league has the option to not distribute all of this money back to the teams, but it's a big chunk of money. So in total, winning more than 49 games and having Hughes on the roster could result in an additional $8M expense for the Bulls. That's a lot of freaking money. More than half the teams in the league, for example, claim as operating income. And while the Bulls made about $58M after their basic expenses last year, $8M isn't exactly a drop in the bucket. So what does this mean for those of us who mostly care about the on-court product? I dunno, but I find it interesting as an example of how poorly structured incentives (I wonder what Deng's are) can create perverse outcomes. Suppose, for example, it looks like the Bulls are going to be close to 49 wins or more as the trade deadline approaches. Do the Bulls just suck it up? Do they make a trade they know will make them worse in the short run? How hard do they work to trade Hughes? If they don't make a trade, do they start "resting" their starters and try to lose their last few games? And how much harder is he to trade? Generally when you trade a guy, the team is taking him on because they want to get better. But if they trade for Hughes and get too much better, they're out a couple million more bucks
Wow, nice catch. There's a long way to go before that comes into play though. I wouldn't be shocked if Philly comes in and thumps the bulls tonight even.
