Moneyball Hits Home Run
Lessons on Value Creation
By Professor Shannon W. Anderson
Moneyball has become a metaphor for everything in business today: It touches heavily on concepts related to budgeting, data analytics and productivity. The movie is about how Oakland A’s General Manager Billy Beane revolutionized the process of scouting new baseball players on a budget by employing computer-generated analysis to sign new players and when best to put them in the line-up. National Public Radio recently interviewed Brad Pitt about making Moneyball and his role as Billy Beane. The interview provides snapshots of critical moments in the film that help put my points in perspective.
We typically think about budgets and constraints as the enemy of creativity. There is a sense that you need to think big thoughts, and not be constrained by an accountant looking over your shoulder. But Moneyball demonstrates that the A’s hard budget realities fostered creativity—they forced Beane and his managers to come up with new ways to get the most out of their dollars.
Analyze This: Data, Data, Data
Too often, people watch Moneyball and only come away with a sense of the power of data analysis. Data analytics are everywhere in business today. New technology makes sophisticated data analytics and data mining possible, and it’s being used by many industries: healthcare, crime prevention, the education sector, social media—you name it.
The subtitle of Moneyball (the book, by Michael Lewis) is The Art of Winning an Unfair Game, which illustrates a key point for business leaders. The “unfair game” is that major league baseball teams play with different budgets and constraints. However, take note that Lewis used “art” not “science,” which would be more expected given the heavy use of statistics and data analytics. There is an art of management that goes hand in hand with science and making data useful.
Innovative Productivity: Moving Beyond “The Way It’s Always Been Done”
Businesses are focused on driving productivity. We can use Moneyball to explore the concept of behavioral economics extensively. It also shows us how our behavioral biases, observational biases and decision-making limitations lead us to make systematically bad decisions.
Reviewing the history of baseball, scouts used a “five tools” system to judge potential players. Ultimately, we see that those criteria became cognitive blinders because they were more of a tradition rather than an accurate way to predict success. Billy Beane’s system generated data that made possible a more dispassionate look at what predicted success in the industry.
On one hand, experience can be a wonderful thing as far as learning and becoming more efficient. But experience can also condition you to look at things as always having being done a particular way. Managers need to question if “the way it’s always been done” is the best way, and if not, how to break that frame.
Moneyball shows how Beane got more for his money because he learned what it means to be productive in baseball, and then built models and tested them. The lesson learned: Given available resources, how do we redesign processes to be able to be more productive?
Professor Shannon W. Anderson is an expert on the design and implementation of performance-measurement and cost-control systems. Her research spans the fields of management accounting and operations research. In her MBA courses, she uses the case study of the Oakland A’s major league baseball team as chronicled in the book and film Moneyball to illustrate key business concepts. This is adapted from her recent blog.