A temporary digression…

A little known fact: despite my range of geeky interests, my deepest area of knowledge is actually baseball. Always has been, always will be. In another life I would have been a General Manager (GM) of an major league baseball (MLB) team in the United States.

I grew up reading and re-reading box scores, digging into baseball box scores to pick out interesting lines, figuring out the impact of each day’s lines on overall season statistics, looking for signals in the daily randomness. I used to love the USA Today’s expanded box scores (as opposed to the streamlined lines published by other papers in the 80s and 90s); give me a USA Today Sports section during baseball season back then and I could spend an entire day just digging into box scores. I used to pick out individual lines and re-write starting lineups, bullpens, rotations and 25-man rosters using various sets of days’ box scores.

Bill James changed my life.
The first time I read one of Bill James‘ Bill James Baseball Abstracts it opened my eyes to an entirely new way to look at baseball. Bill James was an outsider who meshed his love for baseball, a critical eye towards baseball “truisms’ and statistical genius to create the real study of baseball statistics; Bill James appealed to my naturally contratrian, fact-based mind and I read and re-read every bit of analysis of his I could find.

Bill James is why I played baseball in high school (and given that I played baseball like a statistician, it showed).

Despite their forward thinking Bill James and SABR (Society for American Baseball Research) used to be fairly unrecognized voices, but the Internet changed that; an explosion new voices and content opened baseball fans and analysts to a deeper world and gave hard-core Sabermetrics enthusiasts access to broader sets of data and the ability to publish their own research and engage far broader audiences (early examples: sites like the Baseball Prospectus, the Hardball Times and many other Sabermetrics-inspired websites).

Baseball is a dream for statisticians; each action on the field has a variety of potential results and an innumerable number of concurrent states, creating an enormous mix of situational data to be mined by careful eyes.

Yet few observers were open to new ways to analyze the game; traditional print and TV baseball “analysts” remained stuck in their traditional ways, hidebound to baseball “truths”, dismissive of new metrics and methods to analyze performance.

Structured data changed sports management.
Up until the 1990s teams were run exclusively by consummate insiders, guys who had grown up in and played the game. Sandy Alderson of the Oakland Athletics was one of the few progressive minds; Billy Beane, his successor as GM of the Oakland Athletics, was the first upper-level baseball executive to really blend new analysis tools with traditional scouting methods. Beane’s creative and non-traditional methods for player analysis and team construction were the subject of Michael Lewis’s book Moneyball. Moneyball was divisive and controversial within baseball because it was grossly misunderstood by traditional analysts; as I wrote last year, “Moneyball was about strategy, not tactics: constantly measuring and re-evaluating tactics and alternatives, not about determining and defining the “winning tactic”. But few understood that at the time.

It’s a vastly different world today.

Teams across sports leagues have realized the potential of creating and analyzing structured data to find an edge, to find better ways to structure teams, measure the “marginal revenue product” of players, predict future player performance, analyze trades and decide on salaries, compensation structures and contracts. Baseball teams were the first; along with Beane, Mark Shapiro and their hires of non-traditional Assistant GMs (and future GMs) like Paul DePodesta, J. P. Ricciardi, Dan O’Dowd, Josh Byrnes and Jon Daniels, progressive thinkers have continued to propagate through the baseball executive ranks. For example, following his work at Baseball Prospectus Keith Law worked as Assistant GM for the Toronto Blue Jays for a couple of years (still the only MBA * that has worked in an upper-level management role in a MLB front-office); Theo Epstein of the Boston Red Sox later hired Bill James as a consultant; former investment banker and private equity analyst Andrew Friedman now runs the Tampa Bay Rays (and was name Baseball Executive of the Year last year as the Rays made it to the World Series).

But NFL and NBA teams have started to catch up; examples include the Houston Rockets’ Daryl Morey (the only MBA running a major-league professional sports franchise in the US), entrepreneur and Dallas Mavericks’ owner Mark Cuban and the magnificent baseketball statistics site 82games.

The future is in creating strategies, not copying tactics.
This past baseball off-season was fascinating; the economic recession brought new constraints to teams and forced all participants (teams, players, agents) to adapt to the shifting environment and create new strategies for constructing teams. Free agents faced a limited number of teams willing to sign players, and beyond the marquee free agents signing for well-capitalized teams, players were faced with vastly fewer options, lower salaries and contracts with fewer guaranteed years.

Granted, some teams vastly misjudged the market, but the constraints of the market forced many teams to search for new ways to gain an edge. For example, defense has traditionally been one of the hardest aspects of player and team performance to measure and translate into impact on wins and losses, but in this past off-season defense became one of the focuses for many baseball scouts and executives searching for new ways to construct teams.

But teams have started to copy tactics much faster than since the days when Moneyball was first released; much like the broader web and business arena, creating enduring strategies by structuring data and capitalizing on fundamental trends is becoming even more important. Playing the game by copying the newest tactics is waste of time, a recipe for activity without accomplishments.

There’s a big difference between copying and creating. Which do you want to do?

It’s a fun world we live in…

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* And not just any MBA, but from my alma mater…