Daryl Morey 2

Supported by Greenhaven Road Capital, finding value off the beaten path.

Daryl Morey talked with Bill Simmons about the 2017 NBA offseason and managing a team. We’ve written about Daryl Morey in a post around his appearance in Michael Lewis’s book The Undoing Project.

https://soundcloud.com/the-bill-simmons-podcast/rockets-gm-daryl-morey-and-music-legend-jimmy-iovine-ep-233

Ready?

1/ Options options options. Morey credited his success with not being locked-in to any situation. Future draft picks and favorable contracts are key trading pieces. Teams with more good assets have more options.

Not long after this podcast, Kyrie Irving requested a trade from the Cavs. It makes sense why.

The only problem is that the Cavs don’t have good options – or – the teams Irving wants to go to don’t. This is what Morey told Simmons he tries to avoid, getting stuck. The opposite example of this? Kevin Arnovitz said it’s the Boston Celtics.

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2/ Edge erosion. One of the most valuable assets an NBA team can have is a great player on a good player’s contract. Drafting players is one way to do that. The 2017 Sports Illustrated article on great contracts notes “Note: For obvious reasons, rookie-scale deals are not included here.” Why? Because they’re so good!

Morey understood this and lamented that the Rockets draft edge has been eroded.

“It’s a real problem with the draft…and this year again it was straight down our board…the draft is more efficient.”

Where there used to be an edge for a team there is no longer one.

Ed Throp talked to Barry Ritholtz and said: “The surest way to get rich is to only play those gambling games where I have an edge.” Thorp found an edge in blackjack. Morey had an edge in scouting players for favorable (rookie contracts). Joe Peta had an edge betting on baseball. Sam Hinkie combined basketball and investing:

“You need to put a staff and system and way you make decisions in place that gives you an edge. Otherwise, you’re indexing, taking whoever is next on the board in the eyes of the public. You need to have some edge that you’re applying to these set of decisions.”

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3/ Favorite foods. Joe Peta‘s first restaurant failed. His second succeeded. The difference? In the first he thought mostly about what he wanted to eat, in the second he thought about what his customers wanted to eat. Morey has his own version of this:

“Every GM has a soft spot for players and I have a soft spot for big guys who can play tough..it’s been tough for me to realize that role is fading.”

It takes a certain self-knowledge to understand where you make mistakes, but Morey is self-aware.

“I’d be the worst coach ever, screaming on the sidelines, no one would like me.”

Jeremy Liew said that he’s a VC and not an Operator because there are a lot of people who are better operators than he is. Andy Weissman said that people who get VC capital need to know if they can scale 25X.

Our perceived reality overlaps actual reality in some ways. The more accurate someone maps this the better decisions they can make.

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4/ Chesterton fences.

“As with everything it’s an accident of history, it’s why we have 82 games…if they had randomly decided 64 games we’d still be playing 64.”

Other such fences? Danny Meyer says tipping. Greg Popovich says pre-game shootarounds. Aziz Ansari says twenty-two episodes in a season.

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5/ Small bets. Simmons has proposed an “entertaining as hell tournament” and changing the home/away split of the first round to 4/1. Morey said some of these ideas have been talked about at the league level and for NBA fans that’s good to hear.

Though hard to do. Despite an if it isn’t broke don’t fix it mindset small bets are still good bets.

Aziz Ansari and Judd Apatow and Joe Rogan all talked about making TV shows by using small bets. Try this instead of that. Improvise this scene. Now try it again with a different mood. Apatow said that it’s really hard to know what’s going to resonate with people and it’s trying things as a stand up that keeps his movie chops funny.

Small bets are micro-experiments that give feedback on how the world really is.

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Thanks for reading, I’m mikedariano.