Supported by Greenhaven Road Capital, finding value off the beaten path.
We’ve had two posts that highlighted ideas from the SSAC. The first was general ideas about running organizations, the second was about pushing competitive advantages. Today’s notes will be from a Ringer Basketball podcast where Bill Simmons, Haralabos Voulgaris, and Jason Concepcion talked about SSAC and the NBA. Ready?
Specialization. Agreeing with Steve Nash and Daryl More, Simmons said that specialization is becoming a bug, not a feature. “I’ve always been an if you have one elite skill there’s a place for you in the NBA guy and now I’m wavering on that.”
Instead of thinking about actors, think about actions. The NBA, like any system, evolves over time. The pace and space era that exists today coincides with the smartphone era. Each paradigm has new rules, new winners (and losers) and new ways to play the game. The phone now does many jobs; it takes photos, sends emails, and allows payments. The modern NBA player now does many jobs too; shooting, defending and understanding the game.
Competitive advantages. In Sam Hinkie’s words, “when I worked at Bane Capital, everyone talked about the two or three (key) levers, and to pull like hell on those.” Teams succeed when they maximize their advantages.
“Why would you want your center Marc Gasol to be marginalized at the three-point line?” Haralabos Voulgaris
“That’s why Kevin Love, the way the Cavs used him, seems like one of the great wastes of anyone this decade. You have this guy who is unbelievable around the rim, great instincts around rebounding, and you have him twenty-five feet from the basket.” Bill Simmons
“I remember when Alvin Gentry become the (New Orleans) head coach, and he said ‘one of the first things we need to do is have Anthony Davis learn how to shoot threes.’ It’s like, no, it’s kind of silly.” Haralabos Voulgaris
Ben Thompson writes over and over again why Apple can’t become like Amazon or Google. They have different strengths. In our podcast on Moats and Allocators, we noted that good capital allocators know to double down on their strengths.
Anson Dorrance is the winningest soccer coach and he said, “My job is to find out a way to let her know she’s unique, acerbate her unique qualities and hide her weaknesses.”
“(Some) is still gimmicky stuff. I don’t think teams are judging players by them…It’s fine. It’s interesting. But I don’t take it seriously.” Bill Simmons
“The problem with the eye test is it’s not always on. The computer is watching everything. It’s watching every minute of every play. It keeps track of *something*. You miss a lot.” Haralabos Voulgaris
Later Simmons proves the point. “The worst case is Doc Rivers. Who for three years only signed guys who had played a good game against him.” Rivers suffered from the availability bias. There’s also recency bias, survival bias, and confirmation bias, which Shane Battier called, “the mortal enemy” of everyone at SSAC.
Human beings make mistakes and computer models aren’t perfect.
“What you want,” said Jason Concepcion “is for the eye test and the numbers to align on some sort of rule. When the two are in conflict is when you should dig in further.” Mike Zarren agrees:
“This is when things might be most valuable. If you’re watching something and it disagrees with some other process you have that told you something about what you’re watching, one of them is probably wrong. So you gotta go look into the black box and ask questions or ask, is the way you’re watching not capturing something.”
In his book Average is Over, Tyler Cowen suggests we use freestyle chess as the model for human and computer interactions. The advantage to this is that machines will find things (play moves) humans would never consider and there’s less domain expertise required. The most important things wrote Cowen, is to understand the limits of humans and the limits of models.
“Brad Stevens is the Geppetto coach, pulling all the little strings and making everyone look good, look better than they are.” Haralabos Voulgaris
“How about all the guys that left Boston. It’s a long list of people that miss Brad Stevens.” Bill Simmons
Conditions matter. Brad Stevens in Boston in 2018 is like Milton Hershey in Pennsylvania in 1900.
“Young Milton Hershey could not have chosen a better time and place to put what he had learned from Joe Royer into a business of his own…In 1870 America had begun an immigration boom that would last fifty years and triple both the country’s population and the number of potential customers for products like Hershey’s caramels…People were looking for consistent quality at a low price.”
Good organizations understand this. One New England Patriots scout said that if he graded a player highly, but that player was a bust on another team he wasn’t admonished. “Because that player in the Patriots’ system might have been successful.”
Managing stakeholders. About Sam Hinkie.
“The problem was, he alienated the media, which is what you don’t want to do. It was kind of smart because, as a gambler, if you know something you don’t want to tell everyone what you know. So, he was really quiet about what his theories were. But, having that type of job is such a … smarmy, handshake, wink-wink kind of business. You need to have relationships and do all these other things. You can’t just be the guy in the back with a bunch of spreadsheets.” Haralabos Voulgaris
Let’s end with the question we started with, what job are you hiring for? Why are people supporting your business? Daryl Morey said that managers can understand the fans when they listen to the owner. It’s only those two groups, the fans, and the owners, that have a long-term stake in the team.
Astros GM Jeff Luhnow said baseball has a build in advantage. “I think fans are never patient but in baseball, the typical fan is aware of your farm system…and there’s a certain amount of patience baked-in.” Fans want to be entertained, to feel like teams are doing their best, to see progress. Those are the jobs a sports team, or any business is hired to solve. And it’s up to the management to communicate that.
Thanks for reading.