On Moneyball

I recently finished reading Moneyball – The Art of Winning an Unfair Game by Michael Lewis.

This book tells the story of the Oakland A’s general manager Billy Beane and his team building philosophy/approach. Billy has focused on drafting undervalued or overlooked players and building a great team on a budget. Unlike most of his GM peers, Billy and his team rely on empirical statistics to make decisions on a more systematical fashion. He understands that to beat the other teams who have much largers budgets he cannot play the same game they are. Instead he applies – what I call – a Benjamin Graham value investing style approach to picking players (stocks) and building a team (portfolio). The outcome a team that pays the lowest on a per win basis within the league.

Michael does it again, with his great story telling approach to reporting. A recommended read for any baseball or business enthusiast alike.

Below are key excerpts from the book:

1) “The meetings, from their point of view, are all about minimizing risk. They can’t afford to have guys not work out. There’s no point in taking risks on players temperamentally, or legally, unsuited to pro ball.”

2) “We’re blending what we see but we aren’t allowing ourselves to be victimized by what we see.”

3) “When Alderson entered the game he wanted to get his mind around it, and he did. He concluded that everything from on-field strategies to player evaluation was better conducted by scientific investigation – hypotheses tested by analysis of historical statistical baseball data – than by reference to the collective wisdom of old baseball men. By analyzing baseball statistics you could see through a lot of baseball nonsense.”

4) “Managers tend to pick a strategy that is least likely to fail rather than pick a strategy that is most efficient,” said Palmer. ” The pain of looking bad is worse than the gain of making the best move.”

5) John Henry: “People in both fields operate with beliefs and biases. To the extent you can eliminate both and replace them with data, you gain a clear advantage. Many people think they are smarter than others in the stock market and that the market itself has no intrinsic intelligence – as if it’s inert. Many people think they are smarter than others in baseball and that the game on the field is simply what they think it is through their set of images/beliefs. Actual data from the market means more than individuals perception/belief. The same is true in baseball.”

6) “The important thing is not to recreate the individual,” Billy Bean would later say. “The important thing is to recreate the aggregate.”

7) “No matter how successful you are, change is always good. There can never be a status quo. When you have no money you can’t afford long-term solutions, only short-term ones. You have to always be upgrading. Otherwise you’re fu**ed.”

8) “The day you say you have to do something, you’re screwed. Because you are going to make a bad deal. You can always recover from the player you didn’t sign. You may never recover from the player you signed at the wrong price.”

9) “Know exactly what every player in baseball is worth to you. You can put  dollar figure on it.”

10) “Know exactly what you want and go after him.” (Never mind who they say they want to trade.)

11) “Every deal you do will be publicly scrutinized by subjective opinion. If I’m [IBM CEO] Lou Gerstner, I’m not worried that every personnel decision I make is going to wind up on the front page of the business section. Not everyone believes that they know everything about the personal computer. But everyone who ever picked up a bat thinks he knows baseball. To do this well, you have to ignore the newspapers.”

12) Bill James: “1) Every form of strength covers one weakness and creates another, and therefore every form of strength is also a form of weakness and every weakness is a strength. 2) The balance of strategies always favors the team which is behind. 3) Psychology tends to pull the winners down and push the losers upwards.”

13) “I learned that if you look long enough for an argument against reason you will find it.”

Regards,

Omar Halabieh

Moneyball