Archives for July 2008

Conventional wisdom can be a good guide, but why elevate it to canon and law?  How often do we go with the prevailing thought instead of challenging it?

This came to mind in the 11th inning of Tuesday night’s All-Star game.  Baseball is a sport that is steeped in tradition, and it’s hard — even when you have the statistical evidence in front of you — to challenge a base assumption.  Here’s the situation:

With two outs in the bottom of the 11th, Carlos Quentin is at the plate.  Dioner Navarro is on third base, Michael Young is on second.  Conventional wisdom tells us that with two outs, the runners should always be running.  Sure enough, Young charged forth the moment the pitch was delivered — and as the ball bounced to the shortstop, Young almost waltzed right into a tag for the third out!  I’m here to say that conventional baseball wisdom is stupid, and here’s why:

1. Young was no longer a factor in the game.
2. With two outs in extra innings, either Navarro scores or he doesn’t.
3. Young cannot be forced out at third base.

Michael Young should have parked his butt on second, and started drawing stick figures in the dirt just like my son did on his tee-ball adventures!  The only thing that could have happened that would have mattered is if he had been tagged out!  But hey – after 30 years of being yelled at to run with two outs, who can blame a guy.  Unless that guy is making $6,174,974 this season alone!  Think for yourself, Michael!  Don’t cost your team a game by blindly following rote!

Sports Smarts

Baseball used to be filled with examples of managerial decisions that were based on hunch instead of science.  That’s not as true anymore, as the geeks and nerds have compiled massive quantities of data that indicate a different strategy than gut instinct offer.  Earl Weaver, the late manager of the Baltimore Orioles was obsessive about his charts, and would choose his lineups and pinch hitters based on leveraging the smallest of advantages.  Then he’d ditch the charts entirely and follow the old safe rules, because no one faults you for playing it safe.

Now a whole generation of stats-minded people are running major league teams.  I highly recommend the book Moneyball, which looks at how the Oakland A’s used statistics and smarts to outwin and underspend everyone else.  You don’t have to be a sports fan to find it fascinating.  There are many examples of how the value of stolen bases is over-inflated, how defense is under appreciated, and how the scouts really have no idea what they are looking for!

Extra Points

Baseball isn’t the only sport that confuses tradition with reality.  Gregg Easterbrook has taken football coaches to task for clinging to the punt when the numbers clearly indicate that punting is a losing bargain.  It’s a thoroughly-researched piece of athlethic academia, as is his ongoing explanation of how teams kill themselves by blitzing too often.  The former is a case of coaches playing it safe, and avoiding criticism in case they don’t convert.  The latter is an issue of playing to the fans, or placing too much credence on “momentum” instead of just following your averages.

You’ll find a lot of this sort of non-analytical thinking in places other than dugouts and sidelines.  It happens anywhere there is a management structure that is “inbred.”  Baseball managers are former players, and as such learn the subtlties of the game from other managers.  Football coaches typically come from within the offensive line, the position that rates the highest on intelligence tests.  Offensive linemen are certainly in a position to appreciate the battles in the trenches, but it’s hard for innovation to take root when everyone in the coaching fraternity pledged the same script.

Game Theory

In a truly free market, innovation is rewarded with success.  Adam Smith’s so-called “invisible hand” was merely the recognition that when a bunch of people act in their own self interests, they optimize their activity to follow the rules in place.  In economic terms, this means higher efficiency, lower prices, and better service.  Those who can’t compete lose out.  Monopolies are dangerous to free markets because if there is no reward for innovation, there is no investment in innovation.  That’s why they are either regulated or disintegrated.

However, what about those occasions where the game (and those playing) has stabilized at a level that is NOT really the optimum?  We’ve highlighted several examples in sports, but what about other industries and professions?  Do we not see newspapers and broadcasters clinging to their business models even though the game has changed around them?  Are we not living in a political age where it’s now entirely imaginable that a candidate can raise a previously unimaginable sum?  Not to mention the generational flip-flops that occur with regards to health and nutrition.

Hold ‘Em

How easy would it be to win at Poker if you had the luxury of looking at your own cards and your opponents’?  Information is king, and traditionally those who had access to the information had the advantage.  Much of the speculation markets are built on the concept (or rather the wager) that one person knows something the other doesn’t.  In this present age, the prevalence of information and the ability to quickly find it has shaved away most of that imbalance.  Someone on the other side of the world has access to much of the same data you do — and maybe more.  (And being on the other side of the internet is the perfect poker face – you never see the cards either.)

This isn’t a disintegration of markets – it is just a more rapid approach to equilibrium. (Equilibrium is never truly reached, but we get closer much faster.)  Want to know exactly how much a Wii Fit is worth?  Click on eBay and look at the sales about to close out.  Want to know how much your life is worth?  Compare insurance quotes, instantly.  The closer we get to real-time information in a universal format, the more the rough edges disappear.

Swing for the Fences

The above would be sobering news, but human nature always affords us opportunities to find an imbalance to create a new market.  The trick is to not get sucked down the rabbit hole, chasing a never-ending stream of decimal points in search of an advantage.  There are still many instances where the collective wisdom of a particular group has calcified and become stagnant.  They compete with each other using a set of assumptions and measurements that no longer reflect reality, if they ever truly did.  Don’t quibble about inches when there are yards to be gained.  The key is to question the assumptions that lock everyone else into patterns of behavior.  Challenge enough of those, and you’ll find an answer no one else would have expected.

There are more than enough base assumptions waiting to be called out, if you only have the guts to sit your butt on second.

Postscript: Michael Young, who nearly made a foolish out in the 11th inning, won the game with an out in the 15th.  He hit a sacrifice fly to bring home the winning run.

[tags]Ike Pigott, Occam’s RazR, baseball, football, economics, statistics, moneyball, TMQ, Gregg Easterbrook[/tags]