How science & data beat intuition and how you can use it to your benefit | Moneyball

February 3rd, 2020 Posted by accounting, alastair, blog 0 comments on “How science & data beat intuition and how you can use it to your benefit | Moneyball”

written by alastair barlow [blog]

Moneyball is a 2011 American sports film based on Michael Lewis’s 2003 non-fiction book of the same name. It’s based on the true story of the Oakland Athletics baseball team’s 2002 season and their general manager Billy Beane’s attempts to assemble a competitive team using data!

The film was nominated for six Academy Awards, including Best Picture, Best Adapted Screenplay, Best Actor for Pitt and Best Supporting Actor for Hill.

What does this have to do with data and science?

Well, in the film, Oakland Athletics general manager Billy Beane is hurt by his team’s loss to the New York Yankees in the 2001 American League Division Series. With the impending departure of three star players, Beane needs to assemble a competitive team for 2002 but on Oakland’s very limited budget.

To put it into perspective, the New York Yankees had almost 3 times the budget at $114.5m compared to Oakland’s $39.7m. Oakland really needed to think outside the box to get their value!

During a scouting visit, Beane meets Peter Brand, a young Yale economics graduate with radical ideas about how to assess player value and subsequently hires Brand as his assistant General Manager. Brand very much is of the view that “baseball thinking is medieval…and they’re asking all the wrong questions.”

Rather than relying on scouts’ experience and intuition, much to the Oakland scouts dismay and annoyance, Brand uses sabermetrics (data and science), selecting players based on their on-base percentage (OBP) while ignoring their perceived weaknesses. The duo focus heavily on the data and statistics applying this methodology to hire undervalued players.

“We’re building in all the intelligence we have to project players…using stats the way we read them we’ll see value in players that nobody else can see…”

Like any great Hollywood movie, this doesn’t go to plan. Oakland lose their first 10 matches applying this approach. Brand argues their sample size is too small to conclude the method does not work, and Beane convinces the team owner to stick to the approach.

In fact, Beane makes more changes including trading the traditional first baseman, Carlos Peña, to force to make way for one of the data signings. Three weeks later, the Athletics are only 4 games behind first.

And just two months later, the team starts an incredible winning streak and tie the all-time American League record of 19 consecutive wins.

Again, like any great Hollywood movie, there is a nail-biting game in the movie where they almost lose but eventually take their 20th consecutive win and break the all-time record!

It’s almost a fairytale ending…Oakland eventually clinch the 2002 American League West title, but lose to Minnesota in the Division Series.

Beane is contacted by the owner of the Boston Red Sox, who realizes that sabermetrics is the future of baseball. Despite being offered a record-breaking $12.5m salary, which would have made him the highest-paid general manager in history, he declines and returns to Oakland. Beane won’t be satisfied until he’s “changed the game” by winning the World Series using their system.

Two years later the Red Sox won their first World Series since 1918 embracing the philosophy championed in Oakland.

The moral of the story?

Embrace data in any and every way possible that will give you an advantage; use it to make smarter decisions and see things others don’t. Data will be your advantage and your secret weapon, even if you have a smaller budget.

And in the words of John Henry, principal owner of Boston Red Sox (and Liverpool Football Club), “anybody who’s not tearing their team down right now and rebuilding it using your model, they’re dinosaurs.”

Think about that; others are working much harder to leverage data and they’re making you look like a dinosaur!

Value is in the eyes of value-holder and depends from person to person. I ski and snowboard a lot. If I was a beginner, I probably wouldn’t have valued the experience as much, and could well have become annoyed that it took so long. Equally, if I went once a year or once every couple of years, I probably wouldn’t have valued the experience as much either. However, I know exactly how rentals feel and how important it is to have your own boots that fit like a glove. I know the importance of how putting in this effort and cost upfront will give me so much more pleasure, less pain, cost less in the long run, give me time back in resort not having to fit boots each trip and overall give me a much better experience.

For me, this is huge value and the experience was fantastic. At flinder, we may cost more than other accountants, but we deliver a huge amount of value…to those that value it. Those that have the experience to look further ahead and see what time or cost they will save in the future for getting it right up front will see that value, those that don’t have that foresight won’t. We only work with those businesses that see the value.