The draft and the lottery
Incoming players enter the league through a draft in which the worst teams pick first. The intent is competitive balance: give the teams who need help the first chance at the best available player. The obvious flaw is that it rewards losing, so a lottery sits on top of the order, randomising the earliest picks among the teams that missed the playoffs.
The lottery does not remove the incentive to finish badly, it only makes it probabilistic. Weighting the odds so that the very worst records no longer guarantee the first pick has flattened the reward without abolishing it, which is roughly the compromise every league in this position ends up making.
Why a rookie contract is the most valuable thing in the league
Drafted players sign contracts whose value is set by where they were picked, not by how good they turn out to be. A player selected near the top of the draft who develops into one of the best in the league is, for several years, paid a fraction of what he is worth on the open market.
That gap is the single largest source of competitive advantage available to a team, because the money saved can be spent on the rest of the roster. It is also why draft picks are traded like currency: a future first-round pick is not a player, it is an option on cheap talent.
Free agency, trades and the cap
Players whose contracts expire can sign elsewhere, but the market is not open in the way it is in leagues without a cap. Each team has a spending limit, and the mechanisms for exceeding it are narrow and specific — most importantly, a team is allowed more room to re-sign its own players than to sign someone else's.
That asymmetry is deliberate. It keeps stars with the teams that developed them and makes a straight cash bid for another team's best player almost impossible. When a star does move, it usually happens through a trade in which contracts of similar value are exchanged, which is why deals so often include a third team whose only role is to absorb salary.
The practical result is that roster building is a sequence of trade-offs. Every contract is an opportunity cost, every long deal reduces future flexibility, and the teams that stay good for a decade are usually the ones that were disciplined about the fourth-best player on the roster rather than the first.