> ## Content Index > Fetch the complete content index at: https://behavior-follows-rewards.ghost.io/llms.txt > Use this file to discover other available public pages before exploring further. # Post 11 — The League That Rewarded Losing - URL: https://behavior-follows-rewards.ghost.io/post-11-the-league-that-rewarded-losing/ - Published: 2026-08-08T10:26:56.000Z - Updated: 2026-08-27T04:09:14.000Z - Description: In 1984, NBA Commissioner David Stern announced a fix for tanking. Teams found a way to game it. The NBA has rewritten the rule four times since, and teams gamed every version that has been played. The newest takes effect next season. - Author: Wayne Repich - Tags: Incentive Architecture, Leadership, Strategy *Every week I take one real case — a company, a government program, a league — and show how the reward shaped the behavior. Welcome to Behavior Follows Rewards.* **The NBA spent 42 years trying to fix tanking. The fixes failed, and the 2017 fix made it worse. Here is why that was predictable.** *One note before you start: this is a long post, and I don’t even discuss flopping. That is a case for another day. I hope you enjoy the read.* **The Commissioner Who Thought He Solved It** On June 26, 1984, the NBA announced a new solution to an old problem, and Commissioner David Stern made the case for it. Each year the NBA holds a draft — twenty-three franchises then, thirty now — in which teams select incoming players in a set order. For nearly two decades before 1984, the top pick did not go to the worst team automatically: from 1966 it was decided by a coin flip between the worst team on each side of the league, with the rest of the round running in reverse order of record behind it. Finishing last on your side bought a fifty-fifty shot at the first pick — for whoever owned the pick. By 1984 the suspicion was in the open — rivals believed the Houston Rockets had lost on purpose to get back into that flip, after winning it the year before. The suspicion was bad for the game, bad for fans, and bad for the league’s credibility. The fix Stern announced was the draft lottery. Beginning the following season, the top pick would be distributed by chance among the non-playoff teams. No more reward for being the worst — that was the promise. From that day forward, losing would no longer guarantee even a top-two pick. “We think that will be exciting for all those teams who will have a shot at the No. 1 pick in the draft,” Stern said. “And we think it will put to rest once and for all the issue of, ‘You can win by losing.’” He was wrong. The NBA tried again in 2017 and was wrong in the same way. The next attempt is now on the books, and untested. **Why the Lottery Made Tanking Rational** The original lottery did not eliminate the incentive to lose. It restructured it. The first lottery, used in the 1985 draft, was flat — all seven non-playoff teams had an equal chance at the top pick, regardless of record. The 1984 draft had still been settled by coin flip; Houston won it and took Hakeem Olajuwon first, with no lottery involved. The lottery changed the mechanism, and with it the shape of the incentive. What it did not do was remove one. The league added weighting in 1990 and sharpened it in 1994\. By then the worst team in the league had a 25% shot at the top pick. The best team in the lottery had 0.5%. The gap between the bottom of the standings and the rest of the lottery became enormous. The message the system sent was unambiguous: the worse you finish, the better your odds. If a franchise could not win a championship this year — or next year, or the year after — the rational strategy was to lose as many games as possible. **When you design a system that ties rewards to outcomes, people optimize for the outcomes that produce the rewards.** **They do not optimize for the behavior you hoped the reward would produce.** The Houston Rockets had already shown what the incentive looked like before the lottery existed. In 1983-84, sitting at 24-36 after sixty games, they closed the season losing 17 of their final 22, finished 29-53 — the worst record in the Western Conference — won the coin flip, and drafted Hakeem Olajuwon first overall. It was the second straight year they had won that flip. By the account of former Rockets beat writer Fran Blinebury, in a Grantland oral history, Dallas Mavericks general manager Norm Sonju took the grievance to the Board of Governors and proposed replacing the flip with a lottery. Sonju did not exactly dispute the tanking charge: “\[T\]he whole thing,” he said, “was basically people feeling that \[the Rockets intentionally\] lost games.” The lottery was his answer. In fixing one problem, the league had built another. **A Warning Nobody Answered for Thirty-Six Years** When the lottery was adopted on 26 June 1984, Commissioner David Stern said it would settle the question for good. “We think it will put to rest once and for all the issue of,” he said, “‘You can win by losing.’” In the next paragraph of the same Washington Post report, Bob Ferry — then the general manager of the Washington Bullets, speaking by phone from Salt Lake City — raised a question the league would not confront for another thirty-six years, and has since reopened. “I’m not 100 percent sure it (the new draft system) won’t create a bigger problem. Some teams that might barely make the playoffs and don’t have a realistic chance of winning might prefer not making the playoffs.” Ferry was describing, in the form of a doubt, the incentive problem that would consume the NBA for the next forty-two years. The league did act inside that window — it re-weighted the lottery in 1990 and again in 1994 — but both rewrites moved odds around inside the lottery. Neither touched its edge: missing the playoffs still bought a ticket, and reaching them still bought none. The one measure that did answer Ferry came much later and from another direction — the Play-In Tournament, in its seven-through-ten form from the 2020-21 season, which gave the ninth- and tenth-placed teams in each conference a way in and put the seventh and eighth at risk of losing what they had previously been handed — at exactly the boundary he had named. Hold that thought. A 2014 flattening proposal fell six votes short of the twenty-three it needed, and when the league next moved on the lottery itself, in 2017, it moved on the bottom. **The Fix That Made It Worse** By 2017, tanking had become a recognized strategy. The Philadelphia 76ers had spent four consecutive seasons, 2013-14 through 2016-17, trading established players for future picks and losing at an industrial scale — posting win totals of 19, 18, 10 and 28 over that stretch. “We don’t want to be 41-41,” owner Josh Harris would later say of the strategy. He wanted a championship contender, and the road his franchise chose ran through being far worse than 41-41 first. The NBA tried again. In September 2017, the Board of Governors passed a new lottery reform 28-1-1\. The key change: flatten the odds for the three worst teams, giving each of them the same 14% chance at the No. 1 pick instead of a graduated scale where being the absolute worst paid the most. It took effect with the 2019 draft. The theory was straightforward. If the worst team and the third-worst team had the same odds, there was no longer a reason to race to the bottom. Tanking would become less rational. The theory was wrong. “Instead, the opposite played out,” CBS Sports reported in May 2026\. “These changes helped launch some of the most widespread tanking in NBA history.” The mechanism was not hard to see. By taking odds away from the worst three teams and spreading them across the field, the NBA made every slot from No. 4 to No. 13 more valuable than before. What it took from the bottom had to go somewhere. Where it went was into the hands of teams in the middle of the lottery, who now had much more to gain from tanking than before. Being the fourth-worst team, the sixth-worst team, the ninth-worst team became more lucrative. The field of rational tankers expanded. The behavior got worse, not better, because the reward for losing now extended further up the standings. By the 2025-26 season, nine of the ten teams that missed the postseason entirely could be argued to have given up on it — that is CBS Sports’ reckoning, not the league’s. Yahoo’s Tom Haberstroh counted, for the month of March alone, the games those nine teams played against the twenty-one still trying. They won twelve and lost ninety-eight. It was the worst month of the season, and it had been getting worse every month since December. The NBA fined the Utah Jazz $500,000 for conduct detrimental to the league and the Indiana Pacers $100,000 for violating the league’s Player Participation Policy. Commissioner Adam Silver: “Overt behavior like this that prioritizes draft position over winning undermines the foundation of NBA competition and we will respond accordingly to any further actions that compromise the integrity of our games.” He added that the league was already working with its Competition Committee and Board of Governors on further measures. The fines were levied on February 12\. Fifteen weeks later the league changed the rules. **Round Three: The 3-2-1 System** On May 28, 2026, the NBA’s Board of Governors approved a full rebuild of the lottery. ESPN’s Shams Charania, citing league sources, reported the vote at 29-1, with the Memphis Grizzlies the lone dissent. It takes effect with the 2027 draft, so the 2026-27 season is the first played under it. The system is called 3-2-1, after the number of lottery balls a team gets. The lottery grows from 14 teams to 16\. The No. 9 and No. 10 seeds in each conference get two balls each, and the losers of the No. 7 vs. No. 8 games get one. Teams that miss the postseason entirely get three balls — except the three with the worst records, who are “draft relegated” and lose one of theirs. Today those three teams have the best odds in the league, at 14%. For the first time, a system is designed to give the three worst teams worse odds than the band of teams that finished just ahead of them. The flat lottery of 1985 only made them equal. The logic is appealing. But look at where the best odds went. The highest tier in the system belongs to the teams that missed the postseason without being among the three worst. Not the worst teams. Not the ones who reached the Play-In. The ones in between. The league’s own word for what it did to the bottom three is relegation. The behavior this creates is predictable. If missing the postseason outright pays better than finishing dead last, the rational strategy is no longer to race to the bottom. It is to land in the band just above it — bad enough to miss the Play-In, good enough to escape relegation. And it does pay better on Kevin O’Connor’s modeling for Yahoo Sports. Relegation buys one thing, a floor: a pick no worse than 12th, where everyone else can fall to 16th. It pays for that floor everywhere else. The league has not removed the incentive to finish low. It has moved where low begins. And then there is the Play-In game. The winner of the No. 7 vs. No. 8 game takes the seventh seed and receives no lottery ball at all. The loser gets one, and is not eliminated — it plays again, and can still reach the playoffs. Nothing in the league’s release takes the ball back if it does. The Play-In was the one place the league had answered Ferry. The new system puts lottery balls inside it. The league also gave itself what the release calls expanded disciplinary authority: the power to cut a team’s lottery odds, modify its draft position, and impose significant fines. It had already used the last of those, in February. Bob Ferry was right when the lottery was announced. The 2026-27 season will test whether he is right again. --- > *Time out. Forty-two years, one rule rewritten again and again, one proposal that died on the floor, one doubt that outlived every rewrite. The NBA didn’t fail to notice the problem — Ferry named it at the outset. What it lacked wasn’t insight. It was any reason, inside the lottery itself, to act on the insight it already had.* **What This Looks Like From the Inside** Every team in this story made a rational decision. The Houston Rockets in 1983-84 behaved exactly as a team would if its best path to a dynasty ran through the draft. They finished worst in the West, won the flip, and took Olajuwon to pair with Ralph Sampson, the No. 1 pick the same coin flip had bought them the year before. The 76ers in 2013 made the same calculation and ran it for four seasons instead of a closing stretch, before returning to the playoffs at 52-30. The teams CBS Sports says you could argue were tanking in 2025-26 were not doing it out of malice toward the league. They were acting in the interest of their franchises, in exactly the way the incentive structure told them to. The reward was draft position. The behavior was losing. The connection between the two was written into the rules. This is what happens inside any organization when the reward system is misaligned with the outcomes it was designed to produce. People do not behave badly because they are bad. They behave rationally in response to the rewards in front of them. When the system rewards losing, losing is what you get. The NBA has rebuilt this rule again and again, and failed to rebuild it once more in 2014\. Each enacted attempt moved the reward without removing it: losing still buys lottery balls, and lottery balls are still how rebuilding teams win. The reward keeps being relocated. It has never been detached from losing. Commissioner Stern said in 1984 that the lottery would put to rest the idea that you can win by losing. Forty-two years on, the Board of Governors met and passed another one — by ESPN’s reporting, 29 votes to 1\. Whether it will finally make that true is what the 2026-27 season will begin to answer. One last season — the one that just ended. In 2018-19, the first year the flattened odds were in force, the New York Knicks finished 17-65: the worst record in the NBA. Fourteen percent bought them the third pick. The first pick went to a New Orleans team sixteen games better. Four and a half years later New York sent RJ Barrett — the player that pick became — to Toronto, alongside Immanuel Quickley, in the trade that brought back OG Anunoby, who started this season for the NBA champions. So the pick that the worst record bought did eventually turn into something — seven years late, through a player they gave away, in a currency the system never meant to issue. That is not the reward structure working. That is a front office working around it. *You have been in a room where someone announced a fix to a problem, and someone raised the obvious objection on the spot, and the fix was rewritten again and again without any rewrite ever successfully answering the objection. The NBA has been in that room since 1984\. Bob Ferry was in it at the very beginning. The incentive never went away.* --- In your organization, the reward system is producing behavior right now — just not necessarily the behavior you designed it to produce. Your organization has a reward system. Compensation, recognition, promotion, bonuses, metrics. When you look at the behavior those rewards actually produce — not the behavior you intended — do you see alignment or a 42-year loop? > Behavior Follows Rewards. The pattern shows up wherever people are measured and rewarded. *Ask yourself: does any element of your competitive structure make underperformance the rational strategy? When losing produces a better draft pick, some teams will choose to lose. The answer to this question is uncomfortable. The question is still worth asking.* *If you are working through an incentive design challenge in your organization — trying to understand why a policy, initiative, or team isn’t doing what you designed it to do — that is the work.* [*Advisory Services →*](https://behavior-follows-rewards.ghost.io/advisory-services/) [*Subscribe for free*](https://behavior-follows-rewards.ghost.io/#/portal/signup)*. Share it with someone who needs to read it.* *—Wayne* --- ## Going Deeper *If you were the general manager of an NBA team that had finished .500 for three straight years — never bad enough to draft a franchise player, never good enough to win a title — and the league used to give better lottery odds to the worst record in the league, what was the rational move? And if you took it, were you cheating the system — or following it?* [Leave a comment →](https://behavior-follows-rewards.ghost.io/post-11-the-league-that-rewarded-losing/#comments) *Last time: Vietnam’s collective farms met their quotas and produced almost nothing beyond them, and by 1988 the country was appealing for emergency food aid. That April the government stopped rewriting the policy and rewrote the reward instead.* *Next: Saudi Arabia’s sovereign wealth fund hired a golf legend to build, and paid him for building. He signed the players, staged the events, filled the schedule. What nobody measured was whether any of it made money.* *In development — a corporation whose internal ranking system made employees compete against each other instead of the competition; a UK welfare reform that moved the cost of illness off the government and onto the ill; a streaming service that replaced a standard performance review with a single, uncomfortable question. More on the way.* --- ## Sources “Lottery to Decide No. 1 NBA Pick.” The Washington Post, June 27, 1984 (dateline Salt Lake City, June 26, 1984). Quinn, Sam. “Complete History of the NBA Draft Lottery: 40 Years of Tanking and Trying to Stop It.” CBS Sports, May 2026\. cbssports.com NBA Communications. “NBA Board of Governors Approves New Draft Lottery System to Address Tanking.” Official release, NBA.com, May 28, 2026\. nba.com NBA Communications. “NBA Fines Utah Jazz and Indiana Pacers.” Official release, NBA.com, February 12, 2026\. official.nba.com O’Connor, Kevin. “The NBA’s 3-2-1 Lottery System Is Here. How Will It Impact Future Drafts?” Yahoo Sports, May 29, 2026\. yahoo.com NBA Communications. “NBA Announces Structure and Format for 2020-21 Season.” Official release, NBA.com, November 17, 2020 — the Play-In Tournament format and bracket. pr.nba.com Dobbins, Austin. “Why the Grizzlies Opposed the NBA’s New Lottery Rules.” Sports Illustrated, May 28, 2026, reporting Shams Charania of ESPN. si.com Fran Blinebury, quoted in a Grantland oral history of the 1980s Rockets, as relayed by Quinn, above. Haberstroh, Tom. “Welcome to the NBA’s new A-League, B-League phenomenon. Is it here to stay?” Yahoo Sports, March 31, 2026\. sports.yahoo.com “1983-84 Houston Rockets Roster and Stats,” “1983-84 NBA Standings,” “Philadelphia 76ers Franchise Index — Year-by-Year Results,” “2018-19 NBA Standings,” “2019 NBA Draft,” “2025-26 New York Knicks Roster and Stats,” and the RJ Barrett player page. Basketball-Reference.com. *BFR is written to be accessible, welcomed, and celebrated by every reader — not simplified, not elevated. Just clear.*