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To a degree you are over-thinking this as well. Even if Manuel signed Ollie on the cheap (which none of us should care a lick about) if Ollie is successful he would very likely get a raise. Any scenario that has Ollie doing well and in demand by other schools affords (and probably necessitates) UConn the opportunity to sign and extend him. But Ollie has only been in the coaching game a very short time, he's unproven and other than the UConn pedigree and Jim Calhoun stamp of approval Kevin Ollie's 2nd best job he could get pre-this hire is NBA 2nd assistant or 2-3yr contract at a DII-ish school. So given that getting the UConn job is a major jump UConn giving a one-year contract makes sense on almost every level (other than recruiting which KO can sell thru).The idea that Manuel screwed up essentially due to supply and demand forces is off the mark. Ollie wants to coach at UConn, period. In a sense, Ollie screwed up first in making it quite well known this is his absolute dream job, even forsaking an NBA coaching path for this. In a sense, Manuel would have merely balanced the demand part of the equation by allowing Ollie to prove himself before getting him "on the cheap."
Of course, if getting something "on the cheap" for long term is the goal then, yes, you could say Manuel may have missed an opportunity. But I hope instead that Manuel's main goal is to have a great basketball program, regardless of the cost. If either Ollie signs Parker or does well coaching this year I think we will see an extension before April, and I bet Manuel won't be gnashing his teeth because he could not accomplish the task "on the cheap."
Meanwhile, Ollie parlayed a mere two years as an assistant into a head coaching job at one of the top-10 schools in the country. To say he 'screwed up' in any sense is absurd. KO only gets the UConn job if its his dream job and he only keeps it if he lives that dream of success at UConn every day.
Bottom line both parties want to make it work and will do their best to do so despite the half-baked arguments, pretend contract negotiations and speculation of a bunch of us fans (myself included) with no say in the matter.