Investment opportunity? Photographer: Jim McIsaac/Getty Images
Investment opportunity? Photographer: Jim McIsaac/Getty Images

March Madness is under way, and this afternoon, we’ll get our first tournament glimpse at college basketball’s consensus player of the year, Creighton University’s Doug McDermott.

Interesting fact about McDermott, who led the nation in scoring this year and is fifth on the all-time Division 1 NCAA scoring list: He’s technically a walk-on.

Here’s how this came to be: Last summer, Creighton’s point guard, Grant Gibbs, was given an extra season of eligibility due to the many injuries he had sustained over the course of his college career. This was good news for Creighton. The only problem was that the NCAA allows Division 1 programs only 13 scholarships, and the school had already awarded them all.

Creighton’s coach, Greg McDermott -- Doug’s father -- devised a solution. He would give his own son's scholarship to Gibbs, and pick up the cost of Doug’s $40,000 tuition himself. It was a noble gesture — “heartwarming,” in the words of the New York Times. Unfortunately, in the fun house that is the NCAA, nothing is quite as it seems. The NCAA's corruption of “amateur sports” creates perverse incentives, warping even the most generous and sincere act.

For starters, consider the absurdity of the two rules that made this necessary. Why does the NCAA cap basketball scholarships at 13 in the first place? After all, teams can have 17 players on the bench, and an unlimited number on their rosters.

The answer? To keep costs down for member schools. Without that arbitrary cap, a lot more high school players would be going to college free. And, of course, Coach McDermott couldn’t pay Gibbs’s tuition directly; helping a “student-athlete” pay for his education is strictly forbidden.

Now let’s dig a little deeper. Coach McDermott is in the middle of what is reported to be a 10-year, $9 million contract. (It’s probably a good deal higher, when postseason incentives are included.) McDermott and other high-profile college coaches earn such high salaries because they are the only talent colleges have to pay for. Their players, of course, don't cost anything. In a market system that paid talent according to the value it provides, the money would be distributed very differently. Coach McDermott might well be making less; certainly, his son would be making a lot more than the cost of a year's tuition at Creighton.

It’s actually in Coach McDermott’s financial interest to have both his son and Gibbs on his team. The better Creighton does, the higher Coach McDermott’s stock climbs. He can leverage his success for a significant pay raise or jump ship for a bigger salary at another college.

Having Gibbs, the team's starting point guard, in the backcourt also helps Coach McDermott’s son: More assists from Gibbs translate into more baskets for the younger McDermott. With every basket, his position in the NBA draft improves.

Taking all of the NCAA's perverse incentives into account, that $40,000 in tuition begins to look like a pretty shrewd investment. So, was it a generous, sincere gesture? Or a cold, calculated business decision? In the upside-down world of the NCAA, it’s impossible to say.

To contact the editor responsible for this article: Francis Wilkinson at fwilkinson1@bloomberg.net.

To contact the writer of this article: Jonathan Mahler at mahlerjonathan@aol.com.