## Alice and Bob own soccer teams…

Alice runs her team conservatively and finishes with 17 wins, 17 draws, and 4 losses.

Bob runs his team with more variance and finishes with 19 wins, 11, draws, and 8 losses.

Which is better?

Let’s reframe, like the ball bet. Is it better to exchange 2 wins for 6 draws and 4 fewer losses?

Haralabos ‘Bob’ Voulgaris bought a soccer team because he knows these answers because he’s seen these questions.

After Moneyball but before Morey-ball, Haralabos discovered and gambled on basketball inefficiencies. The best known now is the three-point shot. Voulgaris thinks that soccer is similar. Teams earn three points for a win, one for a draw, and zero for a loss. Rather than three or two points in basketball, it’s three or one points in soccer standings.

Soccer’s business model is like the music business model. Artists lose money recording an album, break even touring, and profit from the merchandise. This had to be Pixar’s business too. Division three soccer teams lose money, division two teams break even, and La Liga or Premier League teams “print money”.

Soccer teams can move up (promotion) or move down (relegation). Bob’s team, CD Castellón is in the third division and they need about sixty-eight points for a chance at promotion.

Both Alice (17/17/4) and Bob (19/11/8) earned sixty-eight points – but they don’t seem equal. This is Bob’s point – it’s worth risking more for wins than less for draws.

The big question is: What are the right metrics for this system?

• Hurricane wind speeds are probably the wrong metric. Though easy to measure they don’t convey the potential storm damage which comes from the rain, surge, and flooding. Moneyball and Morey-ball are both descriptions of systems where the important metrics shifted.
• ‘Draws’ is a wolf in sheep’s clothing. It seems fine – splitting the difference between a win and a loss – but the unique point system shifts the weight.
• Risking more – Bob’s approach – focuses on what matters. It’s the points stupid.

Humans are loss averse but the soccer standing scoring rewards bucking this trend. Alice and Bob own soccer teams, let’s see what happens.

## Zone Two cardio

When not listening to podcasts, I can often hold a conversation while running, and conversing is a proxy for Zone 2 cardio. It’s a Goldilocks exercise. Is this a better way to run?

Between Instagram stories, Andrew Huberman emails, and runner scuttlebutt, Zone 2 is in the zeitgeist. Without getting into physiology, can we figure out if it’s a fad or worth our focus?

Metrics. We count what’s easy. Miles and minutes are easier to count than training zone sessions. Hurricanes are graded by their wind speed but it’s the water volume that does the damage. Speed is easier to measure and report. Daily users were standard but it was people who used the product that gave Pinterest engineers a better signal. Easy to count, collect, and combine metrics are overrated.

+1 for Zone 2.

Incentives. ‘Why am I seeing this?’ is a good question. Who is selling me something? Vegetarianism is underrated because the people who sell it don’t have that much to gain. Status points, sure, but if something’s not being sold it’s more believable.

+1 for Zone 2.

Barbell approach. Sometimes average measures are worse. Exercise may be like that. Every workout at 145 beats per minute is not as good as some workouts at 170 bpm and others at 125bpm, though the average is the same. Zone 2 is easier than the 145 average which goes against the ‘more is better’ mindset.

+1 for Zone 2.

Swept up. It’s easier to get swept up in something. Housing bubbles. Crypto. Or just the feeling of a local sports team playing deep into the playoffs. The internet feed makes it even easier. Instagram knows my age, interests, and engagements. Oh, a forty-year-old running dude, the magic math concludes, here’s a bunch of running videos promoting zone two cardio. Is this an echo chamber?

-1 for Zone 2.

Conclusion: I’ll do more Zone 2 training. Happy New Year.

## It’s not the fall…

It’s not the fall that gets you, it’s the impact at the end.

The best metrics describe a state of the world. Hotness has three audiences. “Fahrenheit is basically asking humans how hot it feels. Celsius is basically asking water how hot it feels. Kelvin is basically asking atoms how hot it feels.” (Reddit

Another is the contrast between American and Canadian avalanches. In the states, a medium avalanche is “relative to the path”. In Canada a medium avalanche “could bury a car, destroy a small building, or break a small tree.” The southern system expects the audience to be familiar with the area

A third is calorie counts. Sure, bananas have calories but they can also be zero-point foods. Counting calories isn’t the point. Weight loss is the point, so what’s the best way to communicate information that leads to those actions?

About hurricanes: “The Saffir-Simpson Hurricane Wind Scale we use to rate hurricanes is based on only wind and doesn’t take into account the chief hazards which can be storm surge and flooding rains. It’s wholly inadequate. We need to go away from rating one through five based on winds. Hurricane Harvey stalled for days over Texas and caused a hundred billion dollar plus disaster (Harvey made landfall as a category four storm, but most of the rainfall and damages was as a tropical storm).” – Dr. Jeff Master

Hurricanes need to be rated more like Canadian avalanches. If measuring wind speed rather than rainfall wasn’t enough, there’s another problem: the hundred-year storm

Everywhere I’ve lived has a hundred-year storm. In Ohio (Southeast and Northwest) it was floods. In Florida it is hurricanes. Imagine a category five hurricane that hits Beach City once every hundred years. What chance is there for a storm of that level in the next thirty years?

Master walks through this math. A one-percent chance each year is a ninety-nine percent non-chance. Multiply a ninety-nine percent non-chance thirty times and the hundred-year storm has a 26% chance of occurring in a thirty-year window.

It’s not the hurricane winds that get you, it’s the flooding afterward. Yet we measure the winds.

## Travel budgets

Actions are the children of mindset and environment.

When running his document storage company, AJ Wasserstein created a travel budget. Budgets are good. Budgets are a design tool, and we are all designers.

Wasserstein’s budget wasn’t denominated in dollars, it was in days away from home

“One thing I did while working at Archives One was give myself a travel budget. I gave myself permission to travel a certain number of days a month. It wasn’t a financial budget, rather a nights-away-from-home budget. If I started to exceed that consistently, my role at the company needed to be cleaved and I had to hire someone to do part of what I was doing.” – AJ Wasserstein, Circle of Competence, June 2021

Wasserstein asked a different question. Rather than ask what was financially costly he asked what was socially costly and optimized for that. A lot of times we assume that the important is easily measured. Dollars? Yes. But other things too.

## ‘Good’ numbers

This summer my kids were not going to watch too much YouTube. But, things changed. My eleven-year-old got into Moriah Elizabeth, a YouTuber into decorating and painting. Her channel is good. It’s interesting and entertaining. It, for me, avoids the overreactions and clickbait present on YouTube. She’s super positive and if not teaching kids how to be creative at least she shows them that it’s okay to mess up, laugh it off, and try again.

She wrote a book, Create this Book where each page is a prompt to draw only with polka dots, or draw a structure, or draw something without lifting your pencil from the page. We bought it. It’s fun. We do a page a day and laugh at or admire our drawings after.

This is to say that not all screen time is equal. But it’s easy to count and present equally. Apple offers a Sunday notification that your screen time was higher/lower than last week. That’s not really helpful. It would be like if a refrigerator displayed the calories consumed but not what exactly someone ate.

It also happens, says Betsey Stevenson, at the macro level during each jobs report. There’s the unemployment number and the initial response is that more workers are better. However it kinda depends on the timescale.

“When we see the ‘quits’ numbers really high that seems bad. In the short run we’re going to see fewer jobs. But it’s actually an optimistic time.” – @BetseyStevenson The Ezra Klein Show

People tend to quit their jobs when times are good and the next job is immediate. As people move about in the economy it follows that wherever they land will probably be a better fit, a win-win for everyone. But that’s hard to quantify.

One way to flip this problem is to restructure the counts. Basketball coach Todd Golden will redraw the lines on a basketball court. If a player shoots from inside the arc it’s worth one point. Shots outside the arch are worth four. That’s clever counting. Restructuring the way a player perceives the points is a way to find the ‘good’ numbers.

## Not just OK OKRs

Sarah Tavel told Share Parrish:

“At Pinterest our growth team decided their OKR was monthly active users, a lowest common denominator thing. But if you choose the wrong metric you end up optimizing for the wrong thing, you’ll build the wrong features. Startups are incredibly resource constrained and you waste a lot when you focus on the wrong things. When the team realized this and changed the OKR to Weekly-Active-Pinners the entire roadmapped changed and we were able to serve the users much more successfully.” – @SarahTavel The Knowledge Project.

Tavel’s quote could be about 2000s baseball as well. The early days of baseball Moneyball were an era of what Tavel calls vanity metrics. At one point in the Michael Lewis bestseller, protagonist Billy Beane yells: We aren’t selling jeans! His point was that classic metrics like hits, home runs, or even body-type weren’t the optimizations he was looking for.

The problem that Tavel’s and Beane’s teams faced was a data collection problem. These metrics were mostly right and easy to collect.

“I have an allergy for vanity metrics. I can see a vanity metric a mile away. It comes down to intellectual rigor and being honest with yourself: what are you measuring and is it the right long term thing?” Sarah Tavel

Really wrong metrics push behavior in absurd directions. For instance, records used to earn certifications (Platinum, Gold, etc.) based on shipments not sales. Sgt. Pepper’s Lonely Hearts Club Band soundtrack (1978) was a Platinum album but was a sales bust. That’s what happens with an OKR based on shipments, not sales.

To their credit, the RIAA changed the rules for certifications in 1979. That’s what Beane did too. Tavel too. It’s a good reminder to ask: am I using this information because it is helpful or easy?

Moneyball might be the best way to win in sports but sports is a story and stories need narrative. I loved the Tim Duncan Spurs but the media didn’t. It’s why there’s only one honest sport.

Weekly active pinners? Hold my beer.

## Danny Meyer is an Alchemist (and you can be too)

“A question that stymied me for years and years, a question I got almost anywhere I went, it seemed like every organization asked, ‘How do you manage to hire so many awesome people?’.

“I said to look for fifty-one percenters, people who are emotionally wired to be happier themselves when they delivery happiness to you.”

Danny Meyer, ILTB

The central idea to Alchemy is to optimize important but overlooked things, with especially large returns from inexpensive yet important finds. How to find these things? Numbers provide a good clue.

When things are easy to measure, they are numerate. These numerate items are easy to discuss, to compare, to enter into spreadsheets then sum, average, and compare again.

Danny Meyer has succeeded (in part) because he competes in new areas. In the beginning of the podcast he tells O’Shaughnessy about competing on food and wine and ambiance and all that, but that’s what everyone does. It’s hard to have THE BEST food when everyone is trying to have that.

THE BEST food has convention. It has history. There are norms. There is price. Having THE BEST food in New York City is like being the best investor in New York. Good luck.

However, being the best at something slightly different is quite a bit easier. There’s a lot more area and a lot less competition if you do things off the beaten path.

Meyer found this in hospitality. Listening, we don’t get the impression that the tag wags the dog, but it’s got to be part of the reason Meyer is around, and talking on the Invest Like the Best Podcast.

Often Alchemy is using (free) psychology rather than (costly) structure. Better service rather than better linens.

One story Meyer tells in the book is about ‘the medicine cabinet’. One establishment was having the normal rumble of friction getting its legs under it and when patrons had a bad time, Meyer and staff offered a glass of dessert wine to soothe their pain.

Not only was the wine complementary, but it was special. At the time, dessert wines were novel so it was a special treat. The kicker was that they were the cheapest wines Meyer stocked.

Alchemy is like improving weaknesses, there is a lot of return for the initial effort, often much-more than optimizing factor f for the tenth time.

Danny Meyer is an alchemist. From the people he hires to the businesses he starts.

You are an alchemist. Find something that’s important but not measured, and deliver that.

## Mister…Horse Racing

“The incentives are different depending on if you plan to sell or race a horse. If breeders raced their own horses instead of selling them, they might pair two different mares and stallions to breed. Selling well takes having the right pedigree and characteristics of a sprinter, both of which encourage in-breeding, but maximizing the odds of producing a good horse is more complicated. Ideally, breeders would match the male and female characteristics, balancing out weaknesses.”

Allison Schrager

What’s remarkable about Schrager’s description is the homogeneity of breeding. If outperforming in investing is about being different and being right there’s not a lot of being different at the track.

And this kind of makes sense. There’s better ways to “WIN BIG” than racing horses, where the returns probably aren’t financial but social.

To sell well, a horse shouldn’t just be (lineage) fast but it should look fast too. Like Munger’s fisherman, sales is a question of incentives, metrics, and framing.

Tracking Tom Update.

Tom Brady passed for a paltry 196 yards this weekend and is now only ahead of pace by 36 yards. However, the combined record of the remaining teams on the scheduled is 13-24 (Lions and Falcons).

Bad teams plus a rigid playoff picture means that our framework seems to be holding: more unknowns will inhibit rather than enhance Tom Brady’s passing yards for the season.

## The Philosophy of Fish

Internet Archive, mentioned here.

"Let us suppose that an ichthyologist is exploring the life of the ocean. He casts a net into the water and brings up a fishy assortment. Surveying his catch, he proceeds in the usual manner of a scientist to systematise what it reveals. He arrives at two generalisations:

(1) No sea-creature is less than two inches long.

(2) All sea-creatures have gills.

These are both true of his catch, and he assumes tentatively that they will remain true however often he repeats it.

In applying this analogy, the catch stands for the body of knowledge which constitutes physical science, and the net for the sensory and intellectual equipment which we use in obtaining it. The casting of the net corresponds to observation; for knowledge which has not been or could not be obtained by observation is not admitted into physical science."

The ichthyologist goes on to explain, "In short, what my net can’t catch isn’t fish."

## Zach Lowe and Kevin Arnovitz

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

There are few basketball commenters more thoughtful than Zach Lowe and Kevin Arnovitz and they paired up for an episode of ‘most interesting’ NBA teams. We’ve looked at one of their conversations from 2017 that asked, ‘What if Jeff Bezos were a GM?

Making predictions is difficult when we extrapolate linearly. Lowe said, “With (Celtics’s) Brown and Tatum we do this thing where we expect linear development and it doesn’t happen and then we get down on them and one of those guys is going to pop this year.”

The same reason people get down on athletes for bad years is the same reason Jason Blum is in business. Blum says that he likes directors with good past movies despite their last. This is Blum’s version of Moneyball, he explained:

“My Moneyball approach is that this guy writes and directs Saw for \$800,000. He does two movies for fifteen and twenty million dollars that aren’t good. He can’t get hired. He birthed Saw, a cultural phenom and he can’t get a job. My Moneyball approach is instead of looking at the sexy statistics to look at the work.”

People over-index on recent and optimistic data instead of the more accurate base rates. In his conversations with Lowe, Sam Hinkie explained this idea.

Metrics only matter if we measure the right stuff. Why, for example, Arnovitz wonders, do the Portland Trailblazers exceed their projected win total each year? Why is some data down on them this year? “What is it that these metrics are seeing about the Portland Trailblazers that I’m not seeing?… I still see a hyper-competent team that understands how to orchestrate a hundred possessions a game of offensive basketball.”

What the metrics might be missing is the culture.

The Patriots don’t measure sacks as much as they measure pocket size. Kawhi Leonard didn’t interview well before the draft, should that matter? Only the first four-thousand of your ten-thousand daily steps make big strides.

In much the same way we make predictions using the first (and easy) things that come to mind we tend to measure the first (and easy) things. Baseball’s Moneyball began with walks but teams don’t rely on those numbers anymore.

Numbers are ‘cut and dry’ but the world they describe is anything but.

Market mechanisms set prices, and evaporate good deals. Lowe said, “Someone asked me what I’d pay for DeMar DeRozan’s contract extension and that’s not a fair question for me because he will immediately reach a market value that I would never pay.”

Investors like to ‘fish’ by themselves and venture capitalists love to visit college campuses to talk to students. Fewer people means less bidding.

‘Peak Uber’ was in 2012, before they had to compete with Lyft. Moneyball was published in 2003 and now those same advantages don’t work.

Lowe and Arnovitz are thoughtful and these first three points demonstrate the holistic mindset required. It’s never just one thing. The Celtics had to make wise predictions, measure the right things, and avoid the market to trade down to draft Tatum.

Alpha erosion is the cousin to market mechanisms. Once a rival is familiar with your advantage they’ll work to reduce it. Lowe said, “Last year the sheer speed of how they (the Sacramento Kings) caught a lot of teams off-guard. Everybody knows that’s coming this year.”

Both Annie Duke and Nate Silver rode the poker wave before it got too competitive. Daryl Morey annually complains to Bill Simmons that their draft board looks more similar to the draft order. Venture capitalists pile into companies once they see something that works. It’s just the name of the game.