Tuesday, April 22, 2008

Is Moneyball Passé?

Dan Drezner suggests that the Moneyball phenomenon may be a victim of its own success -- Winning Strategy Loses Its Edge (Marketplace):

Some baseball traditionalists are delighted by the A's woes. To them, this represents a clear rebuke to Michael Lewis' 2003 book, "Moneyball." That book chronicled how Billy Beane allegedly out-drafted, out-traded, and out-thought other baseball GMs by relying on sophisticated baseball statistics known as sabermetrics.

This innovative strategy helped the A's outperform their payroll, because Beane signed and drafted players that performed better than baseball scouts expected. He applied a simple economic principle to the practice of building a baseball team: When a business sector is run by an insular old-boy network, an outsider can exploit market inefficiencies and reap significant arbitrage opportunities. For some of those traditionalists, the apparent decline and fall of the A's symbolizes the failures of the "Moneyball" philosophy.

But as sabermetric methods have become more accepted in the boardrooms of baseball, Beane and other innovators have fewer inefficiencies to exploit. Since the publication of “Moneyball,” almost every team in the major leagues has incorporated sabremetric thinking into their organization.

The Boston Red Sox won two World Series in the past four years while employing Bill James, the godfather of the sabermetrics community. Other franchises around the league have also hired young sabermetrics devotees to run their front offices. The result: The popularization of sabermetrics has left Beane with less of an advantage — it’s harder to find diamonds in the rough when everyone else is mining the same territory. The A’s are not struggling because of “Moneyball”’s failure — they are struggling because of its success.

Hat Tip: Is "Moneyball" Out of Gas? (Voir Dire). For more, see TaxProf Blog.

5 Comments:

Blogger Ani Onomous said...

This aspect of MoneyBall has always baffled me, and I can't remember if it's addressed in the book. If the conceit of MoneyBall is not only the properly rigorous evaluation of talent, but exploiting the market's misestimation/mispricing of talent, why on earth would Beane reveal his strategy? One theory is that it was in his interest to do so -- adulation and the like -- but not in his team's. To my perception, it is this kind of principal-agent problem that is the focus of your blog, much more so than anything having to do with (apparent) thesis of MoneyBall itself.

Of course, it's also possible that Beane was simply suckering everyone.

4/22/2008 10:51 AM  
Blogger Alfred Brophy said...

Not in the legal academy, yet. The reason moneyball isn't so helpful in baseball is everyone's doing it, apparently. ("But as sabermetric methods have become more accepted in the boardrooms of baseball, Beane and other innovators have fewer inefficiencies to exploit. Since the publication of “Moneyball,” almost every team in the major leagues has incorporated sabremetric thinking into their organization.") We're not yet at that stage in the legal academy. In fact, I'm not sure that we're yet at the stage where we know what statistics to be looking at.

4/22/2008 12:08 PM  
Blogger Jason Wojciechowski said...

This feels like yet another gross misunderstanding of what Beane was doing. Statistics are not the method. Exploiting the inefficiencies of the old-boy network was not the method. It was much more general than that: the method is exploiting inefficiencies, period. Inefficiencies will always exist. The point is to not follow the crowd (the Blue Jays, the Rangers), but to be at the forefront, always seeing who is undervalued and picking up the wins on the cheap by grabbing those players.

Most importantly, the entire premise is flawed: the A's aren't "struggling". They had a bad year in 2007, but they won 93 games in 2006! This year, they're probably not good (despite their record so far) because they're in full-on rebuilding mode.

4/22/2008 12:21 PM  
Blogger Ani Onomous said...

Jason, not sure what the gross misunderstanding is. I think we would agree that there's a broader objective here -- whether we call it exploiting inefficiencies, going for underpriced inputs, whatever. But it seems to me that finding someone who is undervalued by others is always key, and one wouldn't want to needlessly correct their valuation processes. It's all well and good to say that Sabermetrics, or small ball, or what have you, are merely illustrations of the general objective of keeping ahead of everyone else, but suffice it to say that no one team is likely to have a monopoly on coming up with such techniques -- and that it's stupid to needlessly reduce the period in which one could enjoy any temporary advantage.

I don't think one can fairly cite the A's record as proof one way or the other, in part because it's easy to come up with just-so stories on either side.

Alfred,

Your point about the lack of stats in the legal academy is one of the many misgivings I have about this analogy. Plus the different understanding of competition hereabouts.

4/22/2008 2:22 PM  
Blogger Jason Wojciechowski said...

I'll note that I wasn't really addressing my "gross misunderstanding" to ani's comment -- I was, rather, addressing what seems to be Dan Drezner's view that Moneyball was about statistical evaluation and old-boy networks.

To address the question of why Beane revealed his strategy directly, though: I think this overstates the case. People already knew before the book what was going on with the A's. They'd noticed that Beane signed players like Matt Stairs who brought high OBP's despite low athleticism, that he had built through the draft with college pitchers, and so forth.

I'm just not sure the book actually reduced the advantage, in terms of how much longer the A's would have held it. The Yankees, for instance, already had a GM who understood all the things Beane did -- he just hadn't wrested power from George Steinbrenner yet.

I don't think I understand the point about why the A's record is irrelevant to whether Moneyball is dead. Let me address this issue from a different perspective. Moneyball came out in the spring of 2003. From 2004 through 2006, before the A's "struggled" last year, Oakland won 91, 88, and 93 games, fewer than they won at their 01-03 peak, to be sure, but a good team nonetheless. If Moneyball is dead, why were the A's so good in those three years after the book came out and the ideas permeated the league? Is the contention that the ideas were slowly making their way through, and last year was the tipping point when the A's came back to the pack?

Again, the entire premise of the idea that Moneyball is dead is that the A's are struggling. But if they're not struggling, then I'm not sure what other support there is for the contention.

4/22/2008 3:21 PM  

Post a Comment

Links to this post:

Create a Link

<< Home