Moneyball and What We Can Learn From It
If you try working against the biggest companies of this time now – that would surely be a feat. You would be competing alongside for example, Apple. Would you survive?
What if you found a way to beat the rest of them? Sounds incredible, but what if it’s possible? We will learn today lessons from a baseball story and how we can apply this to our business.
Billy Beane was a baseball player – a professional one. He had the potential to be a big player in the major leagues.
He had the talent but for some reason his career didn’t show it. His great potential as a player didn’t reflect in his stay in the major league.
After playing for a number of years, Billy decided to take a front office career in baseball instead. He became an advance scout for the Oakland Athletics or Oakland A’s. Soon enough, Sandy Alderson the general manager of the team noticed Billy and made him an assistant.
However, the owner of the Oakland A’s died and the new owners have cut a large portion of the budget for the team. This has pushed Sandy to make do with what they currently have.
Imagine having less funds than the other leagues (with salary offers playing a large role as well), what can you do to keep up and still win games?
With limited resources, they needed to be creative – they turned to Sabermetrics. Sabermetric Principle is developed by Billy James as a method of empirically analyzing baseball statistics, it measures in-game activity.
James doesn’t have a background on baseball as some game analysts does but he understood it through the numbers. He used science when dealing with baseball performance.
Not a lot in the baseball scene are keen in using James’ sabermetrics. When Beane finally became the general manager of Oakland A’s, three of the team’s best players were given better offers by the other leagues.
Beane then asked Paul DePodesta to become his assistant manager. DePodesta is a Harvard graduate but didn’t have any background in baseball either.
Together they used to build the team using sabermetrics. It was a lot of risk that time because they were putting everything on the line.
And amazingly it worked! The following season they won 20 whopping games in a row. They finished the season with a total of 103 games.
Comparing it to the New York Yankees, they also finished with the same number of wins – however, their budget was 3x of what Oakland A’s had. Just amazing. What do we learn from this?
Oakland A’s had limited resources. When you don’t have much budget to start with, you have to think of a way to lessen costs. You should think of other ways.
As early as high school, players are recruited early with the belief that they should be discovered before other team does. Naturally, people would assume that you aren’t talented enough if you have not been recruited as early as high school.
You see, the other leagues had more money, had more reach. Beane can’t compete with the high school recruitment. He focused on another method, which other leagues didn’t really think about. College players do better in the big leagues anyway.
So instead of recruiting high school players, they focused with the college ones. With that, think about where you can minimize risk in your business to achieve better results.
Learning and Upgrading Skills
When drafting the team, scouts would check out the talents and predict how they would fare during the game. They wanted those who can hit for power. They choose those who can do this and just improve their swing for higher hitting average later on.
Contrary to that belief, it was empirically analyzed that a person can be trained to hit for power. Some scouts don’t know that and that’s how Mark Teahan was bypassed because he didn’t hit for power.
He didn’t have that but he was patient at the plate. On the other hand, patience on the plate can’t be learned. With that, Teahan was drafted to the Oakland A’s and the rest is history.
Similarly to your team, know what skills are needed and ask these questions. What are the skills needed to achieve the goal? What skills can be learned? What skills can be enhanced?
What skills can never be acquired? It’s important to identify them to push on. Also, look for people who are not afraid to learn new things. That’s important for success as the scene continuously changes. There are a lot of things to learn to be able to adapt.
Understand that your experience doesn’t always have to be the rule. Some big league scouts with baseball backgrounds highly base their decisions on their own personal experience.
It’s really tempting to make your experience your guide in the business. First of all, it’s your experience alone – it’s not representative of the whole picture. It will differ from one person to another.
Your experience may not be the norm so base decisions on empirical analysis instead.
Don’t let the most recent performance influence your decision. Some scouts would tend to recruit those who showed a great play at the latest game they have watched. This should not be the case, things can still turn around.
In business, it could be this way as well. Few successive triumphs and you declare that it’s a success. There’s no guarantee that it will remain as is. Your work is not done yet. And when things go wrong one after another, don’t be disheartened. You can still work on it.
Recent success or failures doesn’t determine the outcome.
We have our own weaknesses, same with baseball players. When Scott Hattiesburg was playing for Boston Red Sox, he would constantly strike on pitches he should have swung at.
However, the coach noticed that he has a lower hitting average compared to his statistics when he swings on the first pitch. Hattiesburg has a higher chance of hitting when swinging on the first pitch.
Hattiesburg knew and understood his weakness and he worked around it. He didn’t change his swing to be better – he acknowledged his weakness. The chances of getting on to the base is higher if he swings less – and that’s what he did.
And we can apply that to ourselves, to our businesses. You personally know what your weakness is – instead of trying hard to change the unchangeable, work around it instead. Acknowledge and manage your way around it.
Using Your Judgement
In baseball, people tend to judge how a new player’s talent would fare in his career. They make predictions based on his potential.
When there’s a new possible recruit, Oakland A’s were looking at the player’s potential to be a great hitter. Beane was more focused on whether the player can hit now. If he allegedly has the potential, why isn’t there any hits now?
Same with business, work with people who knows what to do than those you expect to do well in the project. How did they perform previously? Don’t rely much on what they can potentially bring to the project.
However, by doing this – you might actually miss the chance of bringing in people who actually have real potential. Yes, that can happen but bringing in people with proven performance increases the chances of your success.
In baseball, Jeremy Brown was thought not to have the ideal body for playing – he was overweight. At least that was what the other scouts thought and focused on.
However, his statistics says differently with two hundred walks and 300 hits – he was the only one with that record.
Despite his value, he is not considered a priority in drafting because the scouts didn’t focus in his numbers. However, Beane and DePodesta found out that your walks indicate how you can control the strike zone.
Being able to control a strike zone is indicative of success. Without understanding empirical proof, there’s the danger of getting overvalued players.
So we should look beyond what we see as we may not be seeing its true worth. Reserve your judgement until you have understood and seen completely the situation.
Drafting season came, Jeremy Brown wasn’t expecting to be first pick or even to be drafted right away. He knew that if he would be picked, it would be after several rounds and in a position deep in to the minor league. He was also aware that his salary won’t be that much either.
This is where Oakland A’s changed their strategy. They knew Jeremy Brown’s situation and value, they are aware that he isn’t going to be picked right away. What Oakland A’s did, they have negotiated with Brown before the drafting even started.
They have offered him a position – Oakland A’s would draft him on the first round and they have agreed to his salary already. It’s lower than what those who are picked at first draft usually gets, but Brown is already assured that he is going to be drafted.
This way Oakland A’s avoided overvalued players chosen on the first pick. This is a win-win situation for both Brown and the team. Oakland A’s did this strategy as well for future drafts.
What we can learn from this, you can study what’s undervalued in your business and turn it around to your advantage.
Your business now may be in a position where Oakland A’s have been. They got through it and so can you. Live by these lessons and see what changes you can bring into your organization. You have the ability to change the game.