More Moneybawl

• Posted by Adam Warner
• on October 24th, 2009

Remember back in the early part of this millenium when we had Greenspan’s Productivity Miracle? Well, we had an even greater miracle, the wonder of how the A’s could overcome their low payroll and emerge from a 4-team division to make the playoffs (and promptly lose in the first round each time).

Well, most of a decade later, Moneyball (the strategy) has not held up terribly well. The A’s are now generally lousy and in hindsight, there wasn’t as much there as met the eye. Buzz Bissinger gives yet another takedown here (hat tip Abnormal Returns).

The Lewis book was vintage Lewis–smooth, glib, smart, and unfailing in never letting anything get in the way of his argument. The protagonist of the book, Oakland A’s general manager Billy Beane, was hailed as a genius in a land of cave-dwelling front office men, managers, and scouts too stupid and stubborn to understand the statistical nuances of the game and what they truly reflected. The basic thesis of the book–the finding of inefficiencies in the marketplace through expert computer analysis–no doubt resonated. As Lewis told it, what Beane and his minions did was usher in the baseball equivalent of a new period of painting, the Age of On-Base Percentage.

The sabermetricians, unloved and unwanted for so long, scorned by the baseball men brotherhood for their nerdy obsessions, fell to their knees like attendees at a revival: Finally someone understood them. Looking largely at the narrow time frame of 2000 through 2002, Lewis attempted to explain the phenomenon of how the A’s had done so well (they made the playoffs all three of those years) with such little dough. The explanation was dazzling, although Lewis barely mentioned the three reasons the A’s had been so successful–pitchers Barry Zito, Mark Mulder, and Tim Hudson. The three won an astounding 149 games during that span. Each of them were 20-game winners in at least one of those seasons. The odds of three young pitchers coming together like that on one team was basically a matter of baseball luck, in the same vein at least of Beane saying success in the postseason was a matter of luck because of the limited number of games played (his teams during the 2000-02 period never got past the first round).

Well, the book was a great read, but I kind of agree with the gist of what ole Buzz is saying here.

The great misconception was that Moneyball=On Base Percentage, while Beane was (and is) about value investing. Beane says if the Red Sox/Yankees are “zigging”, he’s “zagging”.  The undervalue back then was OBP, or guys whose only discernable talent was to take lots of pitches (patient hitters who were also actually good hitters were never undervalued). The A’s later moved onto defense, and now their big “value” is in younger pitching prospects. But they have not come close to recreating their early decade success. And looking back on it, it really had way more to do with the 3 pitchers he mentions, as well as Giambi, Tejada and Chavez.

And again, all they did was emerge a few times from a small division.

As Buzz says

Without the money necessary to compete, all Beane can really do now is churn. It is a terrible position to be in no matter how astute you are. Market inefficiences are harder and harder to find, one of the ironies of Beane’s brief but successful reliance on on-base percentage from 2000 to 2002 is that it has made players with such skill far too expensive for his pocketbook. The real moneyball of baseball also makes it impossible for Beane to hold on to the quality players that he does discover. As a result, he ends up trading a superb pitcher such as Dan Haren and a potential superstar such as Matt Holliday for questionable players and prospects. If one of them pans out, the high-price of free agency forces Beane to trade again and the cycle simply repeats itself.

And that’s exactly the problem. Big money teams not named “Mets” can stay permanently good. All a small market team can do is line up a group of young players for one very brief run. That’s all the A’s really did at the time. It’s also what the Brewers and Rays did more recently. But before you know it, the service time adds up and you can’t afford everyone any more  and you have to trade your best players for a bunch of prospects and start all over again.

The only small market team that somehow seems immune to this cycle is the Twins, so maybe we should write a book about them. Or the Indians in the 90′s, who unlike most of the others actually won some playoff series. But until then, take it away, Buzz.

Billy Beane is a forward-thinker. He takes risks. In an environment where most players and front office personnel only read the sports section and then only read the stories within it that mention them, Beane’s literary tastes are far more erudite. But he is not the man who changed baseball, and Lewis’s Moneyball did not chronicle the revolution.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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