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Speaking at the
InformationWeek 500 conference being held in California this week, Paul DePodesta made seven points about using hitherto hidden metrics to discover business value. DePodesta is currently VP of player development and scouting at the New York Mets and is portrayed in the movie, "Moneyball," to be released this month, in a former position as the assistant general manager of the Oakland Athletics who becomes adept in the use of baseball metrics.
"Moneyball," named after a book by Michael Lewis of the same name, describes how the Oakland Athletics competed in the mid-1990s with a team that had a smaller payroll than other major league teams. Oakland was a smaller market with a limited ability to buy expensive talent. Manager Billy Beane (played by Brad Pitt), a former player, set about evaluating prospects by new methods, sometimes referred to as Sabremetrics, based on a player's real value in the game rather than his batting average and other traditional statistics.
A few other knowledgeable observers of baseball were trying to collect Sabremetrics, or stats that showed the value of players' actions to the outcome of the game. They can be used to established the true value of a player, not the one time when he came through with a clutch hit, but his consistent contribution over the length of a season.
"If a batter hits a hard line drive into the center and the center fielder gets the out with a diving catch, the pitcher gets credited with preventing a runner from reaching base. The hitter and the center fielder get no credit at all," when in fact their actions represent real value to their teams, said DePodesta.
Depodesta said the best way to establish real metrics for a business is to ask the naive question, and then he laid out seven lessons he learned about developing useful metrics.
1. The first question to ask, he said, is, "If we weren't already doing it this way, would this be the way we'd start doing this?" For further business wisdom he offered a quote from Thomas Paine, author of "Common Sense", issued on the eve of the American revolution: "A long habit of not thinking a thing wrong gives it a superficial appearance of being right."
2. Be prepared for push back when you challenge your organization's conventional thinking. When the Athletics started putting together a team of undervalued players, Manager Beane and DePodesta worried what members of the press, writing the equivalent of 200 stories on the team during an average season, would say if early decisions looked suspect. "Would the other stakeholders in the team, the fans, think of their team as off the reservation and doing things differently from every other team?" he recalled the pair worrying. Nevertheless, to beat the odds against Oakland's low pay scale, they had to do things differently.
3. By making an early pick of an unproven quantity, such as pitcher Barry Zito, they were taking a chance on a player, who developed rapidly as expected, won the Cy Young award, and moved on as a pitcher. Bean and DePodesta created other stars that other teams bid for as they reached free agent status. Given its budget, Oakland usually lost a bidding war. That turnover of talent had to be lived with and incorporated into how the team was now doing business, DePodesta said.
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4. As an assistant general manager discussing players' merits, he realized how much of baseball management's thinking was biased and based on likes and dislikes. "If we like a player, we tend to talk about what he does well. If we don't like a player, we talk about what he can't do," he recalled. Neither was a good way to assess the true value of a player to the team. When assessing Jerry Kemp, a coach commented "he has the weakest freakin' hack [at bat] I've ever seen," and that was the end of the discussion about his future. He eventually became an outstanding second baseman--for another team.
5. Instead of bias, construct objective measures, such as how many runs a player would contribute over the course of a season compared to readily available talent in the minor leagues. The value over replacement player or VORP measure is classic Sabremetrics.
6. Get the best tools for building metrics as possible. At the Athletics, the team owners were fond of saying the money goes to talent. DePodesta ran into that stance when he tried to get a statistical analysis package that might have helped the team save millions of dollars. Teams sometimes "won't spend $50,000 on software that would prevent a $20 million mistake," he said. He often contacted an old college roommate, good at math, to help him build a mathematical formula that captured the metric he was seeking.
7. "Keep an open mind. Stay humble in the face of uncertainty," he advised. Baseball players, managers, and fans don't understand the game as well as they think they do. No one can know for sure whether a resident of the Dominican Republic, showing great talent on the field at age 16, will turn into a star when playing in New York in front of 40,000 people. Yet teams have to make decisions like that based on their best information and intuition. Likewise, when Barry Zito turned into a Cy Young award pitcher, DePodesta acknowledges that management hadn't really considered that a possibility when he was drafted. The team had wanted someone who would develop rapidly to plug a hole in the pitching line-up. When Zito did more than that, Depodesta, for one, refused to claim he'd seen it all coming. He quoted Billy Beane as saying, "It's OK to be lucky. It's not OK to pass that off as skill."
Footnote: In the movie, "Moneyball," DePodesta's role on the team is changed and he is not identified by name because he declined to sign over movie rights for his portrayal. The actor Jonah Hill plays a character called Peter Brand, loosely based on DePodesta. When DePodesta read the script, he says he was glad he withheld his rights for the film. Peter Brand "doesn't resemble my third cousin," he told the IW500 audience. The movie maker "gained artistic freedom. He gained the ability to sleep well at night," he said of the decision.
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