On the Wharton Moneyball podcast the trio of Eric, Adi, and Cade talked about betting lines for the upcoming weekend in sports and they brought up a good point: Liebig’s Barrel.
The idea is that a barrel can only hold as much water as the shortest slat. In the context of Wharton Moneyball the trio discussed if Jimmy Garoppolo was an elite quarterback. Adi said he might be “mediocre,” to which Cade replied, “No, they’ve got a great coach and a great system, and a great defense. They’ve got enough quarterback.” Eric added, “If both teams play to their abilities I think the 49ers win the game.”
From the sounds of it, the ‘quarterback’ slat of the barrel is about as tall as the others, and tall enough to win the game.
‘What to do’ is an allocation challenge. Good capital allocators tend to succeed. It’s amazing how much the leaders in William Thorndike’s book overlap with leaders in any successful organization. He writes, “As a group they were, at their core, rational and pragmatic, agnostic and clear eyed.”
What do you do? Improve strengths or weaknesses. It depends, but not in football.
In football the impact of any one player is small, though the quarterback has increased in importance. The football ‘barrel’ has many narrow slats: offense, defense, coaching, training, analytics, and so on. So fix weaknesses first.
But wait, there’s more! Both randomness, situation, and skill mean that teams don’t know who great players are. Talent evaluation, commentators joke, is having a generational talent every three years. So if it’s difficult who’s the best, fix weaknesses first.
And if all that weren’t enough there’s the idea of diminishing returns. It costs more to make a seven an eight than a four a five. So fix weaknesses first.
In any capital allocation decision it often makes sense to avoid paralysis by analysis. One way to do that is find a weakness and make it better. Then, find another.