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Moneyball by Michael Lewis Rating: ••• (Recommended) |
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Facts Liar’s Poker author Michael Lewis examines major league
baseball in his new book, Moneyball.
There are lessons for leaders of any business in this story. Oakland A’s and
their general manager, Billy Beane make their hiring decisions using facts
that are ignored by most other teams. As a result, they are able to win more
games and spend less money than those competitors who pay no attention to
certain data elements that are predictive of performance. Here’s an excerpt
from Chapter 6, “The Science of Winning an Unfair Game”, (pp. 119-121) that
lays out the core of how the A’s differentiated themselves: There
was no simple way to approach the problem that Billy Beane was trying to
solve. It read like an extra credit question on an algebra quiz: You have $40
million to spend on twenty-five baseball players. Your opponent has already
spent $126 million on its own twenty-five players, and holds perhaps another
$100 million in reserve. What do you do with your forty million to avoid
humiliating defeat? "What you don't do," said Billy, "is what
the Yankees do. If we do what the Yankees do, we lose every time, because
they're doing it with three times more money than we are." A poor team
couldn't afford to go out shopping for big league stars in the prime of their
careers. It couldn't even afford to go out and buy averagely priced players.
The average big league salary was $2.3 million. The average A's opening day
salary was a bit less than $1.5 million. The poor team was forced to find
bargains: young players and whatever older guys the market had undervalued.
It would seem highly unlikely, given the wage inflation in pro baseball over
the past twenty-five years, that any established big league player was
underpriced. If the market was even close to rational, all the real talent
would have been bought up by the rich teams, and the Oakland A's wouldn't
have stood a chance. Yet they stood a chance. Why? Oddly enough, Major League Baseball had asked that
very question, in its own half-assed, incurious way. After the 1999 season,
the Major League Baseball Players Association had created something it called
the Commissioner's Blue Ribbon Panel on Baseball Economics, whose job it was
to produce a document called The Blue Ribbon Panel Report.
Its stated purpose was to examine "the question of whether baseball's
current economic system has created a problem of competitive imbalance in the
game." The baseball commissioner, Bud Selig, had invited four men of
sound reputation—former U.S. senator George Mitchell, Yale president Richard
Levin, the columnist George Will, and former chairman of the U.S. Federal
Reserve Paul Volcker—to write a report on the economic inequalities in
baseball. Selig owned maybe the most pathetic poor team in all of baseball,
the Milwaukee Brewers. He no doubt wanted to believe that the Brewers'
trouble was poverty, not stupidity. He had an obvious financial interest in
the commission reaching the conclusion that players' salaries needed to be
constrained and that rich teams should subsidize poor ones. He expressed this
interest by trying to pad the Blue Ribbon Panel Commission with other owners
of poor, pathetic baseball teams. But the four eminences objected to this
transparent attempt to undermine their authority, and Selig agreed that the
owners would merely sit in the room, observing the eminences deliberate. It didn't matter. In July 2000, the panel did
pretty much exactly what Bud Selig hoped it would do: conclude that poor
teams didn't stand a chance, that their hopelessness was Bad for Baseball,
and that a way must be found to minimize the distinction between rich and
poor teams. George Will, the conservative columnist, was, oddly enough, the
most outspoken proponent of baseball socialism. One dramatic fact Will often
used to incite alarm was that the ratio of the payrolls of the seven richest
and seven poorest teams in baseball was 4:1, while in pro basketball it was
1.75:1 and in pro football 1.5:1. Baseball was the major American sport in
which money bought success, he said, and that was a crime against the game.
When fans of the Brewers and the Royals and the Devil Rays figured out that
their teams existed only so that the New York Yankees might routinely pummel
them, they would abandon the sport altogether. At stake was nothing less than
the future of professional baseball. There was something to be said for these arguments
but there was also something to be said against them, and, according to two
people who watched the proceedings, only one commissioner was willing to say
it: Paul Volcker. Volcker was also the only commissioner with a financial
background. To the growing annoyance of the others, he kept asking two
provocative questions: 1.
If poor teams were in such dire financial condition, why did rich guys keep
paying higher prices to buy them? 2.
If poor teams had no hope, how did the Oakland A's, with the second lowest
payroll in all of baseball, win so many games? The
owners didn't have a good answer to the first question, but to answer the
second they dragged in Billy Beane to explain himself. The odd thing was that
the previous season, 1999, the A's had finished 87-75 and missed the
play-offs. Still, they had improved dramatically from 1998, Billy's first
year on the job, when they'd gone 74-88. And they were looking even stronger
in 2000. Voilcker smelled a rat. If results in pro baseball were so clearly
determined by financial resources, how could there be even a single
exception? How could a poor team improve so dramatically? If you loved reading Paul Volcker’s
questions, you’ll enjoy all the other pages of Moneyball,
including answers to those questions. Steve Hopkins, August 22, 2003 |
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ă 2003 Hopkins and Company, LLC The
recommendation rating for this book appeared in the September
2003 issue of Executive
Times URL
for this review: http://www.hopkinsandcompany.com/Books/Moneyball.htm For
Reprint Permission, Contact: Hopkins
& Company, LLC • 723 North Kenilworth Avenue • Oak Park, IL 60302 E-mail: books@hopkinsandcompany.com |
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