The Worst Trade of All Time

Luka Doncic is arguably the greatest player in the NBA today. 

He was named All-NBA First Team selection in five of his first seven seasons - more than Steph Curry in his 16 year career.

He carried his team to an NBA Finals appearance last year - falling just short of the pinnacle of success in basketball.

And he is only 25 years old. In other words he’s hitting the prime of his, already legendary, career.

However, late on Saturday night February 1 2025, Luka was traded to the Los Angeles Lakers. And not for a fistful of first round picks and elite super stars. Luka Doncic, the young face of the NBA and Dallas sports broadly, was traded for an aging Anthony Davis, a first round pick, and a couple middling players.

Sports fans across the country were blindsided by the move, many dubbing it the most shocking trade in the history of the NBA. And rightfully, the fans who so adored Luka, who wanted Doncic to be a Dallas Maverick for life, who had watched him mature from an 18 year old Slovenian to the greatest player in the history of the franchise wanted an explanation.

Nico Harrison - the GM for the Mavericks - when asked ‘why he made the trade’ said: “The easiest thing for me to do would be ‘nothing’ and everyone would have praised me for doing ‘nothing’”. 

Doing nothing would have been the easy move for Harrison, but it also would have been the correct move. A conflation Harrison inaccurately makes is that doing the productive thing must be painful. And it’s clear to see why. For almost every endeavor in life, the more you practice, the more kinetic energy you bring, the more moves you make, the more pain and difficulty you endure, the better you will perform.

Think about basically any hobby: the more effort you put into shooting free throws - the better you get, the more effort you put into learning guitar licks - the better you get, the more effort you put into writing - the better you get. But there is a small minority of activities where this isn’t the case and included among them is roster management.

Many people would rather feel useful at the expense of being useful, especially highly ambitious people who become sports executives in their mid 20s. But the decision that would have brought the most utility to the Mavericks organization was stagnancy. Keeping Luka on the team was the best decision for the organization and the Dallas community but it wasn’t a decision that made Harrison feel smart or useful and it wasn’t a decision that felt difficult or progressive.

So at the expense of his career and professional reputation, Harrison blundered into the worst trade of all time. 

“Your average wall streeter, when faced with nothing profitable to do, does nothing for only a brief time. Then, suddenly and hysterically, he does something which turns out to be extremely unprofitable. He is not a lazy man.” - Fred Schwed, Where Are the Customer’s Yachts?

Like roster management, investing is an activity where more action, counterintuitively, generates worse results. Many investment professionals constantly tinker with the portfolios they manage in order to justify their massive fees. They will compile endless research reports, hedge the firm’s positions, and anticipate changes in the macro environment when low cost index funds that you can “buy and forget” outperform 90% of active managers.

The reason for this behavior is clear - it’s hard to charge a client millions of dollars to do nothing! Charlie Munger described this phenomenon when he said “There is a tendency to think that level of activity is somehow correlated with value.” Client’s think they are getting more value when their investment managers are making moves that appear sophisticated and well researched, when oftentimes the ideal decision is simply to limit your number of decisions.

So while an extremely active portfolio manager is more likely to underperform the market, they are more likely to make themselves feel intelligent with their complex strategies, and their clients feel well justified in the payment of their fees.

Investment managers who believe the purpose of their job is to purchase and sell stocks are wrong. The purpose of an investment manager is to achieve superior returns to their benchmark. General managers who believe the purpose of their job is to make trades are wrong. The purpose of a general manager is to assemble a roster that wins games. Trading assets and players are a means to an end, not an end in themselves. When professionals in these fields forget this, they are doing a disservice to their employers, clients, and fans. 

Jeremy Giffon once said - “People don't actually want the best returns. They want to feel clever and do some weird little thing that makes them feel interesting or different or something. But sometimes you just have to do the obvious thing and just be really strong on it. I always admire those managers who have been paid 2 and 20 for like 40 years to just own Berkshire.”

Nico Harrison had the Berkshire Hathaway of basketball on his team. But his desire to feel smart superseded his desire to do the smart thing.