The notorious Lou Lamoriello has been at the helm as New York Islanders general manager (GM) for the past six seasons. During his time, the Islanders have gone on two deep playoff runs, made the playoffs in five of six seasons, and gone through three head coaches, all hired by Lamoriello. His tenure has had more good than bad, but it is the future that will ultimately dictate his overall performance. Unfortunately for Lamoriello and the Islanders, the future looks bad, largely due to his disastrous contract philosophies.
The Sunk Cost Fallacy
There are many issues with the contracts signed by Lamoriello, but the best way to describe them is through The Sunk Cost Fallacy. As described by The Decision Lab, The Sunk Cost Fallacy is our tendency to follow through on something that we’ve already invested heavily in (be it time, money, effort, emotional energy, etc.), even when giving up is clearly a better idea. Translating to hockey terms, Lamoriello dictates salaries by past decisions and results such as what was given up, rather than the future of the team.
Evidence of Lamoriello falling victim to this fallacy is when he prioritized re-signing trade deadline acquisitions. Since he came to the Islanders, he has traded first-round picks at the trade deadline for Jean-Gabriel Pageau, Kyle Palmieri, and Bo Horvat, as well as a second-round pick for Andy Greene. All four of these players were brought back for additional seasons and two of them are still on unfriendly contracts.
Both Pageau and Palmieri were acquired and had immediate impacts on the Islanders. They filled a need and addressed it, immediately, proving the acquisitions to be worthwhile. However, the Islanders would undoubtedly have been better off today by having them leave in free agency rather than returning, at least with the contracts they were given. This is not to say they have not been valuable contributors to the team’s success since their new contracts kicked in, but Lamoriello brought them each back at a poor annual average value (AAV) rather than letting them test the free agent market to better gauge their values.
Related: Islanders Must Mirror Panthers’ Analytical Approach to Overhaul Bottom-Six
At least in my opinion, contracts are almost never worth signing if the team believes the player is overpaid. The only exceptions are to retain franchise talents like Ilya Sorokin, Mat Barzal, or even Horvat, or to incentivize free agents to sign during a rebuild on short-term, overpriced contracts. Of course, this is easier said than done, but the decision to retain Palmieri and Pageau at such steep prices rather than to let them leave was objectively bad.
Creating Value Contracts
Signing players to contracts is as valuable as finding late-round steals in the draft. Each player has a dollar value, and the goal of a GM should be to accumulate the highest dollar value team possible. This is done through targeting underpaid players in the trade market or overlooked free agents. Players like Daniel Sprong, Sonny Milano, and Erik Brannstrom fill this criteria. The philosophy here is to find the highest upside players with the lowest risk at the cheapest dollar value. If you do this then complete the roster with bonafide stars like Barzal, Sorokin, and Horvat at a fair AAV, you will create a well-rounded roster filled with upside.
Lamoriello does not believe in this philosophy. Outside of Anthony Duclair and Noah Dobson, no current roster player is signed to a team-friendly AAV. Barzal, Sorokin, and Horvat are being paid adequate salaries, and the argument could even be made no current roster players are overpaid, but the point remains.
The 2024 Stanley Cup-winning Florida Panthers were salary cap compliant, but their roster’s value was worth north of $100 million due to the team-friendly AAVs of Sam Reinhart, Carter Verhaeghe, Brandon Montour, Oliver Ekman-Larsson, and others. Even with Sergei Bobrovsky and Spencer Knight’s hefty salary caps, general manager Bill Zito constructed a roster with more upside than risk.
This offseason, Zito’s strategy embodied this philosophy when he let Montour and Ekman-Larsson leave in free agency and replaced them with Boqvist and Nate Schmidt for less than $2 million combined and over $9 million AAV cheaper. While Montour and Ekman-Larsson are objectively better defensemen than Boqvist and Schmidt, Zito knows, given his roster already consisting of stars like Gustav Forsling, Matthew Tkachuk, and Alexander Barkov, he is better situated to pay Boqvist and Schmidt than overpay for Montour and Ekman-Larsson.
Trade Clauses and Term
Another way of creating value in contracts is by adding no-trade clauses and term. This is Lamoriello’s strategy, which is a great one, but his execution has been questionable. The entire premise of signing a long-term contract with trade restrictions is to land the player on a lower AAV. The player receives security and the team is rewarded with a lower AAV. This is not the case for any current Islander contract.
Teams like the Carolina Hurricanes successfully executed this strategy with the free agent signing of William Carrier on a six-year, $2 million AAV contract, unlike the Islanders who are paying Pierre Engvall $3 million and Scott Mayfield $3.5 million annually for six and seven years, respectively. Again, this is not to say either player is overpaid, but to be handing out such term with trade restrictions, each of the two Islanders should be getting paid at least $500,000 less annually.
While an extra $1 million may not seem like much, creating this surplus with seven or eight roster players would have allowed Lamoriello to add an extra trade deadline acquisition each of the past six seasons. Zito successfully saved a few extra million this past season for the Panthers and landed Vladimir Tarasenko and Kyle Okposo instead of just one.
Of course, implementing this is easier said than done, but the problem with Lamoriello’s contracts lies in a series of decisions, not just one misstep. Every contract should be aimed at adding value to the team, and if it fails to do so, the player should not be kept. This isn’t to say that risky contracts shouldn’t be considered, but when the risk outweighs the potential reward, it becomes clear that the contract should not be pursued.
