Consider this: The Oakland A’s, with a payroll of around 40 million, win as many or more games than the New York Yankees, whose payroll is over three times as large. Why did this happen? Billy Beane, the A’s general manager, has discovered three things: Bill James, arbitrage, and that the intuition of a Major Leauge scout is hokum.
During the 1980s Bill James reinvented analysis of baseball statistics. He developed summary statistics to predict the success of players and teams, which, if you play fantasy league baseball, are now standard tools for selecting rosters.
When Beane’s staff in Oakland applied James’ methods to the records of high school and college players: the pool of potential major league players, he found a number who were undervalued. His staff knew this because almost every high school and college team posts their statistics on the Web, where the front office could pull them down into spreadsheets and process them. Many players with high potential for success, based on stats such as the on-base percentage, were ignored by other teams until later draft rounds. Beane could pick up those players in early rounds, and not have to pay a five to ten million dollar premium for them.
Beane already knew, from his experience as a mediocre Major League player, that scouts overvalued many player’s skills. Beane was drafted in 1980 by the Mets and paid a large signing bonus. Ten years later, after several cycles through the Major and Minor leagues, he quit the game and went to work for the A’s front office.
Moneyball: The art of winning an unfair game explains Beane’s success. It’s a great story about Baseball, economics, and the joys of statistics.
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