To devilz -- nah, I'm just trying to get people to commit to talking to me. I'm very lonely.
Non-nerds, you can skip everything that follows.
I've actually done a little research into the optimal amount to spend on salary. Overspending can lead to more team success (like BOS), or not (like NYK), but what I was curious about wasn't winning percentage but profitability in a business model. If you spend too little, you save money on payroll, but nobody shows up to watch your team (or buy your merchandise) and you lose money. If you spend too much, you might not get enough extra fans to increase the revenues an amount that justifies buying that extra player. Commonly, GM's seem to settle on the lux as their optimum level of spending.
Fans usually don't like this, because their optimization function is on "wins" and not "profits." I remember a long discussion on the CanisHoopus site explaining why Glen Taylor shouldn't have been ripped so badly for not trading Ratliff's expiring and taking on more salary. Clearly, its not our money, so telling other people how to spend it, and how to run their business makes us all sound a little bit like self-important hypocrites. But in a business model, adding a talented and expensive player that might add a few more wins does not necessarily mean that you're going to draw in new fans, or get old fans to shell out more money.
Finally, I think for all of us Minnesota fans, we can see this in action more dramaticly when the Twins play the Yankees. The Yanks pay $209 mil on their players, and the Twins pay $62 mil, and clearly this gives the New Yorkers a big (but not insurmountable) advantage on the field. However, to the Yankee's credit, they've developed an economic model that works for them. They started with a big market, and made it a national and international product. They did this with wins of course, but the YES network etc. If the Yankees have three times the Twins payroll, do they have three times the revenues? The surprising answer is "YES," though their Operating Income is in the toilet. However, these numbers are always complicated, because of personal accounting decisions where a team ends and the business subsidiaries begin.
http://www.forbes.com/lists/2007/33/07m ... _Rank.html(btw, I didn'trealize the Twins were #1 in the 1-year value change of the baseball team! Hooray for the new stadium!)
Anyway, stumbling back to my original point, it seems to be the consensis among most owners that the best way to use their finances is to spend up to the lux (to get a competitive team), and stop there. Could we see a "Yankees-style" team that ignores the lux (there's no luxing in baseball) to create a dominant team that can still draw the revenues to support itself? I suspect not. Rookies, on their cheap 4-year rookie contracts by the mechanics of the system keep getting sent to the worst teams. And while salary-matching (again, not in baseball) doesn't keep teams from going light-years over the lux, they need to do it in only +25% chunks, so it would take a while for a team to try to get up to that level of, say, a $200 mil NBA team. .. and it would cost them $340 mil to do it. For this reason, I think the NBA system is one of the better collective bargaining agreements in sports, maintaining competition and keeping owners and players in a soft-cap situation they can both make money from.