K-PoP: The Fuzzy Economics of Jeremy Lin

August 20, 2012

Photo courtesy of Bagumba

It’s been a month since the New York Knicks did not re-sign Jeremy Lin, their restricted free agent point guard and golden goose of a player.  

Linsanity’s zip code change has expectedly left behind a whirlwind of unanswered questions and unexpectedly lots of devastated children.

(You’ll be happy to know that the little boy in the video is consoled by Jeremy Lin himself a few days later).

In the wake of all the talk, chatter, and criticism after the Knicks did NOT keep their own player and Lin signed a three-year contract worth about $25 million with the Houston Rockets, I thought I’d clarify some of the economics, numbers, and logic of this whole mess.

1. "Worth?"  Worth? Worth? We talking about worth? (Said in the same tone as Allen Iverson's infamous practice rant.) The truth is there is no true worth in professional sports, just like there is no true worth in life and love and leprechauns. Worth is created by the proverbial “market.” If the Rockets are willing to pay Lin $25 million, than that’s what he’s "worth." Anyone else telling you otherwise knows little about economics and less about sports (just think of NBA players like Eddie Curry and Rashard Lewis with their outlandishly large contracts and the word “worth” becomes pretty worthless).  

2. Mean, Median, Moded ('80s word!)  In the last year of Jeremy’s contract, he is due to be paid about $16 million dollars. When friends (frenemies?) and fellow Knicks teammates Carmelo Anthony and JR Smith ridiculed this amount, they probably just forgot their basic high school math and how to average, right? Jeremy’s contract averages out to $8 million a year. That’s what the Rockets think he deserves to be paid. Remember, the average NBA player makes $5 million a year. So basically, his new bosses think/hope/predict he'll play $3 million a year above average.  

The Rockets structured the so-called "poison pill" third year so that they could steal Jeremy from the Knicks (who would have faced NBA salary cap taxes--and it worked! The people who look at just Jeremy’s third year salary and not his three-year average are probably the same people who A) owe the government taxes come April, B) run out of gas money at the end of the month, C)  bounce checks, or D) all of the above. (Answer: D) (Don’t be D!) 

3. Sink or Swim.  According to various salary cap experts, if the Knicks had matched Jeremy’s contract offer from the Rockets, he could have cost the team an additional $30 million in salary cap taxes in the 2014–15 season (basically, to try and keep the league competitive, every team is given a budget to pay players and if they go over that number, they are penalized in taxes).   

Now here’s where the numbers don’t lie, but how their interpretation does. Say you were out at sea and your ship sank. Now say you came upon a life raft with three other people in it and when you climbed aboard the raft also began to sink. Is it really the fault of the last person who came aboard? Are we locked into that kind of linear thinking? What if two of the people on the life raft were hoarding gold in their pockets? And one was a little overweight? Or what if one had a bad leg and back and had lost his explosiveness around the rim and another held the ball too long and took too many shots? (I’m just saying).

4. A measly $6 million?  The Knicks were willing to keep Jeremy at $19 million but not $25? Are you telling me that keeping Jeremy wasn’t worth a measly $6 million?

Isn’t this the team that bought a cable network rather than pay cable fees? And isn't this the same team that signed Stephon Marbury, Eddie Curry, Allan Houston, and Baron Davis? (Basically the GDP of  a small country). And if salary cap taxes issues really were the case, there were other ways to play this hand -- like trading Jeremy away after he was signed, or sending away an under-performing (and certainly less popular) player and his always-desirable expiring contract.

Back to worth: Basically, both teams believed Jeremy was worth $19 million over three years. That’s indisputable. Essentially, the Rockets merely paid a $6 million transfer fee (like in professional soccer), only in this case that fee went to the player and not the team giving up the player. Thus, Jeremy pockets an extra $6 million and the Knicks, well, the Knicks just stay the Knicks.

5. It's called back pay, bitches.  Last year, Jeremy made about $800,000 in the second year of a two-year contract. Was he at least an average player? Yes. That’s about $4 million he needs to re-coup. How much was Linsanity worth to the Knicks in terms of TV coverage, ticket sales, merchandise, concessions, and that new Lin-induced cable deal with Time Warner? How about AT LEAST another $5 million?  

The difference between worth and value is that worth is someone’s opinion, and value can be quantified. Jeremy Lin was underpaid about $9 million last year. The Knicks could have re-paid at least half of that just by signing him to the deal the Rockets had offered him.

There's something rotten in New York and it's not just the Knicks team, it's the whole organization's lack of imagination (and understanding of basic economics). 

There’s a lot of talk (and hate) out there, yet most of the “expertise” is just
disguised opinion and bias. (Does the 'A' in Stephen A. Smith stand for a-hole?) So if you really want to know why the Knicks
didn’t re-sign Jeremy, look at the numbers.

They never lie.

K-PoP is short for Ky-Phong
on Pop Culture.
Ky-Phong Tran is an award-winning writer and teacher based
in southern California and he’ll be writing about music, art, literature, Los
Angeles, fatherhood, and other musings.


Ky-Phong Tran


Ky-Phong Tran is a public school, latch-key kid from North Long Beach, CA. He's written for the Nguoi Viet Daily News, New America Media, the Orange County Register, the San Francisco Chronicle, and of course, Hyphen, which published his short story "A Thing Called Exodus." In 2010, he was a Work-Study Fiction Scholar at the Bread Loaf Writers' Conference. He holds an MA in Asian American Studies from UCLA and MFA in Creative Writing from UC Riverside. He's into pop culture, street art, music festivals, literature, clever people, and keen ideas.



Great read. Very objective. As always the numbers never lie, but the bias and discrimination exist. Jeremy Lin is not a ‘typical’ NBA player, his critics and haters had problems with themselves. Some of them are acting like human trash (Steven A. Smith).
Excellent analysis. You need to send this article to NY post or NY times and daily news to let them know how ridiculous their excuses. .They kept saying money is the main reason but that's not true.The truth is knicks wanted to keep lin with possible 10 million for three years not even 15 m. That made lin's camp be more aggressive to get better deals. i believe it's Dolan and Glen and Woody's personal emotions. They just couldn't accept the fact that Houston changed that offer. They thought it's Lin who asked Houston to change it. They should be angry with themselves. If they offered lin some offer earlier, lin would be knicks. Knicks PR strategy was terrible. Shame on Kncisk, shame on them.