Moneyball, by Michael Lewis, is a book I had on my “to read” list for several years. I really should have read it several years ago. As well as being brilliantly written, its lessons are also highly relevant to the industries I’m interested in
The premise is that the Oakland Athletics – the A’s – are a financially limited team competing in Major League Baseball against much better resourced teams (While draft picks go some way to make smaller teams more competitive, financial inequalities are much greater than in the NFL, for instance).
With fewer resources, the A’s will lose if they compete on the same terms as their competitors. They therefore need to change the rules of engagement. They are the challenger brand, so to speak.
They succeeded in this by becoming the first team (many subsequently followed) to employ sabermetrics – the analysis of baseball through objective measures. The name derives from the Society of American Baseball (SABR).
First championed by Bill James in the late 1970s, sabermetricians argued that the baseball statistics given most credence to were the wrong ones, and thus the game was inefficient. Baseball statistics had been institutionalised in the 1850s by a Brit raised on cricket. As the game evolved, the flawed measures on which players were assessed become ever more misguided. For instance
- In the 1850s, amateurs were playing in long grass. Fielding errors weren’t a consideration.
- Walking a hitter (throwing four balls outside of the strike zone) was considered to be the fault of the pitcher, rather than a ploy to entice swing-happy hitters to chase difficult balls
However, the biggest problem was relying on dependent variables, rather than independent variables
- For pitchers, earned run average (ERA) was prioritised. But a low ERA needs a good fielding team (explicit errors are counting as unearned, but a fielder needs to be in position to commit an error in the first place)
- For hitters, the number of home runs is independent but overvalued, due to prominence on highlight reels. Runs Batted In (RBIs) are dependent though. If a home run is scored and the bases are empty, one run is scored. If there is a runner on each of the bases and the same shot is hit, four runs are scored. The second batter is credited with four times as many RBIs for exactly the same shot
Over time, this faulty knowledge became institutionalised. The success of the sabermetricians was in forgetting everything they had been taught to believe. They started afresh to theorise, measure and validate new hypotheses – even going to matches to physically keep scores when the monopoly for recording statistics refused to track more metrics.
In my mind, their most powerful observation was in simply stating how a baseball game is completed. A game is over when teams make 27 outs (3 outs over 9 innings). Therefore, to prolong a game, a team should avoid getting out.
This is profound in its simplicity. Rather than swinging for the home run, a hitter should protect his strike zone. A walk is as good as a hit to first base.
This ability to walk was vastly undervalued by the market in terms of salaries. Billy Beane and the A’s therefore ignored home run and RBI stats, and focused on the ability to get on base (ie to not get out).
Internally, the scouts and staff were heavily opposed. The opposition regarded it with bemusement – Beane was taking all these out-of-shape nobodies and leaving them with the “athletes”.
Beane fought this, because he was once one of those athletes. He had the “look” and expected to succeed, but his mental strength couldn’t match his physical strength. Because of this, Beane ignored the high-school hot prospects, and instead focused on college players – since these players had a greater chance of making it in the big leagues.
The book follows the 2002 draft and season (where rookies and prospects include Nick Swisher, Prince Fielder and Kevin Youkilis – “Euclis, the Greek God of walks”). While the A’s had a wildly successful season, they dropped out of the playoffs.
This is because Moneyball is ultimately about percentages – the focus on statistics improves your probability over the long-term, over the 162 game season. In the play-offs, luck becomes more important.
Moneyball is principally restricted to baseball due to this and one other factor – being able to divide the game into individual plays, where each person has a defined role and an agreed metric for success or failure. The NFL has this, but only over 16 games a season. NBA teams play 82 games, but in a dynamic environment.
Aidy Boothroyd famously tried, and failed, to use Moneyball principles while managing Watford in the Premier League. But in football Moneyball restricts you to free kicks, corners and throw ins. And a side effect of Moneyball is the play is generally effective but ugly, since the pretty, eyecatching traits are all overvalued. His team won few fans.
As Moneyball caught on, the A’s became less competitive, since they were once again playing the same game as better resourced competitors. I’m sure Billy Beane’s principles will have been widely adopted
- No matter how successful you are, change is good – so don’t uphold the status quo
- They day you have to do something you’re screwed – so make your move before you are backed into a corner
- Know exactly what everyone is worth – so place a monetary value on skills and compare to others
- Know exactly who you want, and go after them – so you get them while others are still scratching their heads
- Every deal you make will be scrutinised by the public – so ignore the media
You don’t need to be a baseball ban to enjoy the book. It is exceptionally well-written, and at times even reads like a thriller (Soderbergh and Pitt were at one point attached to a film version). But it is the core precis of the book that resonates with me.
Ensure that the metrics you are tracking are the right ones.