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May 21, 2014

Billy Beane on the business of baseball

He's "an athlete who wants to be an academic." He's "the dumbest guy in the office." And his own professional baseball career was characterized by "bad numbers," making him the "classic case of an overvalued asset."

That's Billy Beane in his own words. Beane is general manager (and minority owner) of the Oakland A's and a major figure in both the book and movie Moneyball-- and he came to SAS world headquarters today to speak to financial services executives. Beane is known for his savvy in using quantitative analysis to gain a competitive advantage with a small budget, primarily by acquiring undervalued (and therefore relatively inexpensive) players

Highlights of his speech, which struck parallels between business and baseball, included the following observations:

  • On applying math to baseball data: "Trust the mathematics. Eliminate the noise and emotion. Be disciplined in applying the math, and it will work. There's enough information," he said.
  • On sabermetrics, the analysis of baseball through objective evidence: "It made sense. It put order into the universe." There is so much that can be measured in  baseball, and the analysis of those measurements is applicable to making decisions.
  • On statistics that mean nothing:  A player with a high on-base percentage is valuable, because getting on base is important to winning games. However, it's not worth investing in players who are good at stealing bases or sacrifice bunts, because those skills don't really help win games.
  • On building "team chemistry": "I can't measure it. I can't invest in it. It's built up by virtue of having success." The same goes for finding leaders for his team: You can't quantify or invest in that, either.
  • On baseball management: "It has now become a meritocracy. The doors have been opened to all kinds of people" -- including women. The talent pool for executives has improved and expanded beyond baseball insiders, he said, and the business has become more efficient.
  • On the next frontier in sports analytics: It will have a medical focus: predicting injuries and time on the disabled list. "The healthiest teams make the playoffs."
  • On avoiding media coverage and sports talk shows: Writers and fans call Beane either smart or idiotic depending on whether the team wins or loses. He tries to avoid getting caught up in the media chatter: "Emotion affects your decision making."
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