Moneyball and Strategy
Posted: October 16, 2011 Filed under: competitive advantage, economics, human capital, rents, teaching 3 Comments
The book Moneyball seemed to be all the talk at some academic strategy and orgs conferences around 2004-2005. It annoyed me: why all the buzz about some practitioner book about baseball? Please.
Some time later I was the faculty advisor for a small MBA readings group and one of the books we decided to read was Moneyball. I quickly discovered that the book indeed is a good introduction and case study of some central issues in strategy: human capital, appropriation and competitive advantage. Billy Beane and Paul DePodesta’s strategy was brilliant. As the students read the book, they immediately understood the power of a more scientific approach to managing human capital (e.g., selection) and the power of differentiation. It seems, though I’m no baseball fan (it’s hockey or soccer for me, since I grew up in Finland), that the game of baseball has changed as a result. (Though, of course sabermetrics had been around for quite some time).
I have also now seen the movie. I quite liked it. And the movie stayed relatively true to the book. I may use the movie in future classes, as some sort of extra assignment.
There are certainly some more academic-y strategy issues to discuss related to Moneyball – but perhaps I’ll highlight those in a later post. As Google Scholar shows, Moneyball seems to have influenced research in various disciplines (psychology, decision-making, human resources, economics).
Here are some academic blogs that have recently reviewed Moneyball, the movie:
- Christine Hurt at the Conglomerate.
- Fabio Rojas at orgtheory.net.
- Greg Mankiw only makes a remark about the Harvard-Yale issue.
StrategyProfs.net 
Moneyball is a terrific example of applying strategy based on scientific knowledge that ONE market participant has (Beane) and others market participants (every other major league team) DONT have. Or choose to ignore.
But what happens? Sooner or later other market participants will wise up and understand that the guy who has been winning (Beane) is onto something. They will then study it, emulate it, apply it. And, consequently, the advantage is negated. Everyone regresses to the mean.
The other key point is that the strategic advantage of one market participant (Beane) is time and circumstance specific. Beane’s strategy worked great over a sample size of 162 games, where randomness wins out. But over a a 5 or 7 game series in a playoff, the advantage is irrelevant, because other kinds of “luck” can prevail. The strategy, which is so effective to get you INTO the next phase of success (the playoffs), simply doesn’t help you when you are IN that NEXT phase (the playoffs). The competitive advantage is emasculated.
Bottom line? Strategy by competitive knowledge advantage has a small window. Other will find out eventually. And It is time and circumstance dependent.
“Bottom line? Strategy by competitive knowledge advantage has a small window. Other will find out eventually. And It is time and circumstance dependent.”
Karl – undoubtedly yes. Sources of advantage or “rules for riches/advantage” can diffuse quickly; though depending on how “complex” and “embedded” they are. (Sorry to use scare quotes, for now – more on these issues will undoubtedly show up later.)
I have a leadership question about the movie(money ball). What traits of leadership did brad bit use ? and did he succeed or fail a the end ? and why?