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Best Business Books 2003: Human Capital

Traditionally, the selection of promising amateurs had been based on the subjective impressions of the scouts and on their views of what physique and talents made great players. Unsurprisingly, their views of what mattered were similar to those of the scouts of other teams, which meant that everyone ended up going for the same recruits — and inevitably failing to get all they wanted. To Billy, the draft was a crapshoot — “We take 50 guys and we celebrate if two of them make it. In what other business is two for 50 a success?” (Reading this, one has to wonder how many other businesses could even make the calculation.)

The fact was that no one had ever bothered to check whether college performance translated into a successful professional career. Intuitive assessments of potential ruled supreme. In baseball as elsewhere, Paul believed, there was a tendency for everyone who had actually played the game to generalize wildly from their own experience. Most important was the way the human mind played tricks on itself when it relied exclusively on what it saw. There was a lot that you couldn’t or didn’t see when you watched a baseball game. This provided nice opportunities to spot talent in a different way for anyone who could see through the illusion to the reality.

Measures That Matter
What Paul DePodesta discovered was a mine of numbers; numbers that had been around for years, collected by a strange brotherhood of amateur baseball enthusiasts. Numbers that nobody in major league baseball had paid any attention to. These sabermetrics, as they are called, demonstrated that the traditional clues to success for players and teams are fatally flawed.

The better clues, Paul reckoned, lay not in outward appearances or in style but in the statistics of the past performances of the amateurs, even if, as sometimes happened, the statistics suggested that the player would do better in a different role. That’s true, however, only if the numbers measure the right things. Too often they don’t. In baseball, as in many other businesses, many of the statistics and ratios were designed in an earlier age and no longer count what really matters.

Fortunately for Billy and Paul, a maverick baseball enthusiast who was working as a night watchman in a pork and beans factory had spent his nights calculating what ratios and numbers did reflect reality. His name was Bill James, and he is just one of the unusual characters who emerge in Moneyball. “You have to realize,” Bill James once said, “as soon as you acquire a taste for independent thought, that a great part of the sport’s traditional knowledge is ridiculous hokum.”

Mining the numbers allowed Billy Beane to pick players that nobody else bothered with, and to pay them far less than the more fancied players could command. It also, not incidentally, cut back the power of the scouts who, previously, had the only useful information on the new recruits. The Moneyball chapter describing the day of the 2002 draft is an absorbing picture of a power shift in process, the discomfort and, often, disbelief of the older scouts as the Oakland group decides to make an early offer to Jeremy Brown, who barely makes the bottom of the scouting lists. He is too fat and too slow, the scouts all say, and, at best, one of the rabble destined for minor league clubs.

That’s when Paul looks up from his computer and says: “He’s the only player in the history of the SEC with 300 hits and 200 walks.” It occurs to Billy at that moment that he could dispense with scouts altogether. Paul’s computer, stuffed with detailed records of all the games played at colleges across the country, can give him all the information he needs.

 
 
 
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