🏀 How much do big ballers make?
06.01.2020 - Today's market sizing exercise
Hello Case Dojo,
After going through this question, I wish I was 10 inches taller. Holy shit NBA players make a lot. Good luck have fun!
Reminders
Spell out your thinking process, state your assumptions, and evaluate your final answer. There are many valid approaches to each problem.
No calculators are allowed, so make the math easy for yourself.
Try to come to an answer within 3-4 minutes at the longest (here’s a timer).
Today’s Question
What is the combined salary of all paid NBA players?
There are 30 NBA teams.
Our sample answer
How we broke things down
Let's first figure out how many NBA players there are. We do this by multiplying the number of teams by the number of players per team.
Next, let's calculate the average player salary.
We calculate the average salary by splitting the players into three skill levels: superstars, stars, and average players. It would make sense that there are very few superstars and a ton of average players.
For each player category, we can guess at the average salary and multiply by the percent of players with that skill level to get a weighted average salary.
Assumptions we made
Each team has 15 players. This estimate is because only 5 players can be on the court per team and we assume two backups for each position.
5% of NBA players are superstars, 25% are stars, and 70% are average players
NBA Superstars get paid $50M/year on average, stars get paid $16M/year, and average players get paid $2M/year.
Our evaluation
We arrived at $3.24B per year. The average player salary we calculated, $7.2M, feels high - we may have overestimated either the number of stars and superstars or their average salaries.
Other potential approaches we like
Try to calculate the total yearly revenue an average basketball team makes and estimate what proportion goes to paying players.
Segment players by career duration (newbies and oldies get paid less).
Actual answer
NBA teams paid their players $3.74B in 2019.
Extras
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🤠Fun Fact
Manute Bol is the tallest player in NBA history at a towering 7’7” (2.3 m). He paid 80 cows for his wife and killed a lion with only a spear at age 15.
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