Tag: moneyball

Alice and Bob own soccer teams…

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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.

Sampling wine

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“Let’s say you want to learn about trade in the ancient world. If you’re using archeology I have good news. We know a lot about trade in olive oil and wine in the Roman world. Olive oil and wine both moved in clay (Amphora) vesicles. They were disposable. When a giant pot of wine reached its endpoint, you poured it into bottles and chucked the big transport pot. Pottery survives, you can shatter it but the pieces are still there.” – Bret Devereaux, EconTalk, August 2021


By Ricardo André Frantz

Grain meanwhile was transported in sacks. “Imagine what parts of your life,” Devereaux asks, “are archeologically visible.”

This example highlights a bigger question: how do I know something is true? Big right? We can’t know everything, so we use samples. And Amphora highlights two caveats.

First, is that easier-to-find data may overstate the case. Covid19 in 2020 had a lot of early data that was easy to collect but not necessarily a good sample. During the first six months we talked a lot about the number of cases, maybe we still do depending on when you read this. Cases are okay, but the best predictors in the early days looked at hospitalizations and deaths. Not to stop there, Covid19 also affected ages quite differently, a fifty year old was fifty times more likely to die than a fifteen year old.

Second, easy data is usually ‘expensive’ because many people use it. If they use it in the same way then, like an auction for a Beanie Baby, prices rise. If the information turns out to be wrong, then prices fall. The heart of moneyball was to find data that was also good, but ‘cheap’ because fewer people used it.

Archeological visibility is a neat analogy to use for thinking about sampling. Though an ancient effect, we can use it still today. The next time we see data, we can ask, is this data more like a clay pot or a cotton sack?

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The fifty/fifty/fifteen ratio was an estimate based on CDC data. Also, “Today’s persuaders don’t want you to stop and think,” writes Tim Harford in The Data Detective, “They want you to hurry up and feel. Don’t be rushed.”

Subtraction’s Value

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One way to think of a decision is to think of the ‘right’ answer. This has limits. ‘Right’ answers exist within conditional assumptions, and mostly in the mathematics and moral fields. Should I be honest with my partner? has a ‘right’ answer. What’s the optimal distance my 2017 Subaru Outback should follow this other vehicle given these LIDAR, radar, sonar, sonic readings? has a ‘right’ answer. Note, I have no idea how adaptive cruise control works but it is the best automotive technology of the last decade.

‘Right’ answers are limited because of all the conditionals. Self-driving cars are one example. It’s a math heavy domain, the cost and availability of technology (read: number collecting and computing) has fallen, and we’ve never had as many smart-focused-people or as many save-our-collective-butt-companies, and yet it feels slow. Why is self-driving so slow? The conditions! Snow, rain, city, country, semis, motorcycles, bright lights, night lights, desserts, animals, forests, and not least of all: other drivers.

To get the ‘right’ answer to a question like: should the car warn the driver and begin automatic braking? the system needs a pretty tight window of conditions. So if the ‘right’ answer is difficult to come by is there a better option? There might be.

Rory Sutherland’s work comes up a lot here because Rory Sutherland’s work brings up an important idea. Sutherland loves marketing because marketing deals with psychology which is a lot easier to change than the objective thing. Package delivery is an example. Tracking numbers, emails that note your package is on its way, and estimated delivery dates all deliver psychological value. Contrast this with getting a package faster: logistical value, which has a very real cost. It’s not that better package tracking is better than faster package delivery but that it delivers more value than it costs. It’s the same idea of Michael Lewis’ Moneyball: what’s highly (or somewhat) valuable yet costs very little? Sutherland’s tool is psychology. Lewis highlights math. Let’s add another: subtraction.

“It’s an easy problem for a dad to fix, I grabbed a block to add to the shorter column but Ezra had removed a block from the shorter problem. Ezra is normally a horrible subtractor but he plays a lot of Legos and this was an instance where he stumbled upon subtraction.” – Leidy Klotz

Leidy knew how to fix his son’s Lego bridge. Add a block here —>. But Ezra had an idea too. Take a block away here —>.

Whether a situation’s ‘right’ answer is to add or remove is irrelevant – for now. What’s a better car: a Toyota or a Lexus? The question is which costs more?
It’s easy to add. We have a tendency to add. But adding probably costs more and when it’s a costlier implementation but only a marginally better outcome then the better choice might be to subtract.

March 2, 2022 update:

https://twitter.com/DudespostingWs/status/1499065846588657667?s=20&t=Xq3AqM7fl6OkweZh4CnFdg

Not just OK OKRs

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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?

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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.

The room or use Zoom?

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We noted in the Quarantine Education post that things will need to change in how teachers teach. The classroom model, with breaks for stations, specials, and snacks works fine only in the classroom. Teachers will need to adapt.

Rory Sutherland spoke on Great Minds and Jason Blum spoke on Bill Simmons and both addressed how being in-person was especially helpful in creative endeavors.

“When you’re talking to a creative person, there is so much insecurity and doubt if this is going to be a good idea. Part of what my job is making whoever I’m talking to feel early on that there is no bad idea.

“Of course there’s bad ideas, but right now, talking early on or how something fits, we can think of any idea.

“And that’s very hard to do on video.”

Jason Blum

Blum makes horror movies in a Moneyball way so he even kinda wants things that look or sound a little hairy. He wants something to be ugly on the first draft and beautiful on screen.

Sutherland’s angle is only slightly different and it’s in the field of marketing.

Take comedy, for example. It’s a field very similar to marketing because it reframes an idea. People are relative thinkers (more than that, different from those, etc.) and comedy changes the that and those we compare against.

In his book, Shtick to Business, Peter McGraw prints an Anthony Jeselnik joke: “My parents were strict. My mom and dad once made me smoke an entire pack of cigarettes. An entire pack of cigarettes in one sitting..just to teach me a valuable lesson..about brand loyalty.”

That’s good reframing. That’s a good laugh.

But it probably didn’t start out that way. It probably started in a place, as Blum put it, of “insecurity and doubt.”

At Ogilvy’s behavioral unit, Sutherland said they have a rule to “dare to be trivial and don’t be afraid of looking stupid.” That’s easier in the room than on the Zoom.

Coming out of social distancing it’s likely that the individuals and collectives that do best are the ones who can communicate the best. If Jason Blum has a series of great meeting he’ll have a great movie. If Sutherland finds a ‘Python-esque’ framing, he’ll have a great ad and behavior change. Alchemy, is powerful but will take more work when using Zoom rather than in the room.

Want more? Check out this pay-what-you-want placebo prescription pdf.

Always Fix Your Weaknesses

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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.