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Baseball and business
essay [ ]
Thoughts on "Moneyball" by Michael Lewis

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by [Cormoranul ]

2010-03-17  |     | 



The Michael Lewis’ Moneyball is a nice story about an incredible team that succeeded to turn up-side-down all known theories about baseball. Reading it with the eye of a manager, I could not refrain myself from comparing business with sport competition and I found so many lessons hidden in this story.
Billy Beane is an example of a good manager, a leader that had the courage to set himself free from stereotypes. He was able to understand the game like nobody else and he realized that the most relevant statistics are not the ones usually accepted and used by the Baseball’s World. He knew to find the people with the most useful skills not in general, but specifically for his team’s needs and he chose people with high inner motivation. More than that, he knew to stimulate and increase each one’s motivation and helped many of them to get rid of their inferiority complexes. He leads by example and care about people’s feelings. He always has a vision that members of his staff may not see it from the very beginning, but he is able to justify his choices in a way that everybody can understand. He knows to ask exactly what he needs and how to use the best expertise of his specialized staff. The Oakland A’s management had always the decency to leave decisions in the best hands and every individual in that organization is aware of his role, his contribution to the collective effort and everybody there feels the responsibility of being a part of the whole.
The most important lesson that Oakland A’s and his trainer gave to us is that all the means for success are there, around us and more accessible than we believe. We only need to accurately understand our business, to use at the highest efficiency our assets and look deep in the essence of things to be able to find the opportunities.
As the metrics used are almost the same across industries, I strongly believe that principles and methods make the difference between companies therefore, I will try to structure the meaning of the book’s messages in a schematic of rules, principles, lessons and questions we have to ask ourselves that I think are relevant for a successful business conduct as I learnt from the Oakland A’s story:

What the game is it about? Is it about money, fame, public recognition, overachievement, individual or team records? What our life is it about? Do we fit in our frame? Are we sure that what we think is really what we feel or we are just exposing the illusions of outsiders in the ring? The competition does not stand only in the match game, but in everything related to it: strategy, tactics, team, training, culture so that we need to make sure that we are really understanding the game, the rules, the synergy, and its scope.

What is the team? Is it a team only the guys in the field? Is it only their interest to be there? Definitely, not. When we think about team we should consider the full amount of people that have a common interest, that are involved and carry a responsibility of achieving the common goal: players, management, trainer, analysts, medical staff, scouts, etc. Every team must have a leader, someone with vision, someone we trust his mind, someone is an example and a motivator. The most competent must be in charge and the visionary must have the power to convince the team. The “what to do” list is something proposed and explained by the leader, understood and assumed by the team, the best decisions are the ones that involves the best brains and expertise of the team members. Each individual must be self motivated to be a part of the collective effort.

What is relevant and how to measure the potential and the performance of an individual or of a team? Everything in nature is determined by a cause and an effect. We need to keep an out-of the box thinking free of patterns and biases and find the right causalities. We can not change people, but we have to be able to find their real motivation, to use and stimulate the best of their abilities to creating the best aggregate. The qualities needed are not necessary the most expensive. Discipline can not be thought. The outcome is mainly a function of how an individual approaches an action or a decision.

How to design a team? We can make an analogy with reversed engineering where we start from an output and determine the input and find the parts that can form the whole, but here it is a puzzle with parts of different shapes because people are different. People are different as consistency so that the human parts must to overlap each other. The more combinations of people that can fit in others’ place, the more possibilities we have to draft the best team we can have for every game.

Inspiration or transpiration? Most of high performers in arts, sports or sciences expressed their formula of success as more or less: 5% inspiration (talent) and 95% transpiration (effort). This is the recipe of success where the ingredients are less talent but more sustained work to achieve a goal. The driver for a sustained consistent work is always that high motivation that comes from an inner faith and strong believes. Was not Billy Beane as many others we have known in our life a talented person as a player? He really was. He had the full-package, but he never considered himself a top player, he actually never wanted to become one. He always dreamt to be something else. Most of us, we go with the flow sometimes and we loose our scope. We want or we believe we are something else so that our mind and body would never be stimulated to give the best they can for the work we do and this is why we should always try, as much as we can, to do what we like the most, to find joy and satisfaction and not pain and sacrifice in our every day work.

Avoid the bad practices! Before starting to look for what is good we should start to stop doing the wrong things. What are the most common mistakes?

First set of mistakes: “Our measurement of performance is infallible. The measurement of performance does not make any difference between the individual’s and the team’s performance. The team is the players in the field.”
If we start from the definition of success, at individual level a fair formula of performance could be:
(Talent + Effort) = Performance, where:
Effort = (Physical effort + Mental effort + Emotional effort ) and this is a function of motivation.
Motivation = Self Motivation + External Motivation
We define the self motivation as everything that is intrinsic and related to feelings, perception and sentiments and the external motivation as everything material that could be simply quantified in money. Therefore:
Talent + Physical effort +Mental Effort + Emotional Effort = Performance or:
Talent + F(self motivation + Money) + F(self motivation +Money) + F(self motivation +Money) = Performance,
where we define the Mental Effort as focusing, clear and organized thinking, logic, understanding and following tactics, schemes, combinations, partners and counterparts actions and behavior, etc. The Emotional Effort refers at emotions, feelings, self-confidence, attitude, behavior and ambition.
Physical and Mental Effort can be improved through better training and medical support. How much could be the difference between the training and medical support between a rich and a poor team related to the total budget? The difference is made by the cost of equipment, the cost of medical assistance and the salaries of the technical and medical team. Could that be more than 2%, let’s say 3% of the budget?
The emotions, behavior and attitude of a person are almost like talent. This is someone’s baggage, it is a given that can be however slightly changed or improved by training and education and these are the only expenses.
Therefore, we can finally say that only the ambition can be fed by money as salary, prizes, bonuses and benefits.
At the team level the equation may be written as follows:
(P1 + P2 + ….. + Pn) x E = Team Performance
where P1,…,Pn are the performance of the individuals and
E = Efficiency (Synergy)
In most of the reach teams the synergy is very low so that despite of a sum of high individual performances the team performance is not that high or even poor.
What I am trying to say is that the world of sports and society pay so much for talent when the secret of success stands in effort. While the most part of the effort is sustained by more or less the same money from a team to another, the difference between teams is what each team pays for talent and ambition. Usually, the big talent goes hand in hand with a big ambition, but that is not necessary a natural determination, but rather what the society imposed as a practice. In this respect, people with less talent, do not have big expectation in terms of salary and as time as a trainer is able to gather the people with the biggest self motivation, but not necessarily of high talent, a good performance can be achieved. The performance can be even greater at the level of the team as time as the puzzle is well composed and the synergy exists at the level of the extended team: players, management and technical staff.

The second set of mistakes: “Tolerating vanity and keeping disproportionate retribution. The trainer that puts big pressure on players achieves the best results.”
Now, let us come back at the formula of the performance. What happens most of the time in a team of big talents? We have to deal with big ambitions and people’s vanity. A big ambition may suppress all the other feelings of an individual, his behavior and that can negatively affect others’ feelings and behaviors and a team in emotionally distress cannot rich the synergy it does not matter the emotional effort spent by each individual. Is the emotional distress an inhibitor of the mental effort? Of course, it is. In an explosive environment, people cannot focus and the same effect has the pressure that a trainer put on the players just to transfer his discomfort. That places the manager in a distinct position from the team and makes him look as an outsider or as a different entity. The synergy disintegrates and the performance of the team will be the sum of less individual performances multiplied by a lower efficiency.

The third set of mistakes: “The requirements and demands in terms of performance are not adjusted to the individuals. The biggest is the money investment the biggest is the profit.”
Let us think again at the team design where we have an output that we are looking for and that output is the performance. Let us assume we can measure this performance in figures during a period of time and we want to reach a performance of 16. Is it fair to consider that the right formula for a team A should be (4+4+4+4+4)x0.8 = 16 ? That means that we need to have a team of individuals of the same value that are always performing at their full capacity and we only try to improve the efficiency and the individual performance. Is that possible? Yes, it is, but definitely less probable. People are so different. What if we have a team B of which performance is given by the following numbers: (3.6+3.5+3.8+3.7+3.9)x0.95 = 18.5 ?
Each individual of the team B is less performing that any of the first team members, but the output is 15.6% higher. For the next period of time we may have again the rare case of “androids” improving their performance: (4.2+4.2+4.2+4.2+4.2)x0.85 = 17.85
Each individual of the team A improved himself by 5% and the team by 11.6%
Team B: (4.1+3.8+3.9+4+4.3)x0.96= 19.29.
The members of team B improved their individual performance respectively by: 13.9%; 8.6%; 2.6%; 8.1%; 10.3% and the team improved by 4.3%
The questions are: How to set the objectives for individuals and for the team and what is the fair compensation for individuals within a team?
What is the difference of effort spend between the two members of the team B that increased each in absolute value by 0.3 but the personal improvement is 8.6% for one and only 8.1% for the other? Should we compensate them equally because their absolute improvement was 0.3, differently because at the personal level the effort spent was different or equally by 4.3% which is the team improvement? What about team A? Should we compensate each member proportionally to 5% or to 11.6%?
I do not want to develop more and find here the solution. I only wanted to illustrate that in the real world we have most likely only teams of type B and in the world of business as in the sport games, the competition is of the teams. I also wanted to emphasize that the synergy within a team creates more value than the individual performance and the high performance of a team can be achieved even with mediocre players if they realize that good synergy. In the real life as in sports, not all the people improve at the same rate, not all of them keep a consistent level of performance so the most important goal of a manager is to set the right targets for the team and individuals. If you pay big money just for the talent, that talent may not necessarily bring you the best profit, but a player that can improve with 8% and it is valued on the market less than the one that improved just with 5%, is a good asset and more valuable for his team.

Like me, there are many other managers and the more will be the ones that in a way or another will learn the secrets of the Oakland team, the easier will be to build the performance. Moneyball is not just a baseball story, but a life story. What literally should and are we ready to do in our day-to-day life starting from this learning, this is another story, one of each and every of us.

April 10th, 2006

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