Michael Lewis is here to tell the story of Billy Beane—the general manager of the Oakland A’s roughly a decade ago. Beane found himself in a situation up against some of the most attractive teams with the highest payroll in the MLB and was able to find the magic formula that allowed him to win more often than not. This story is called Moneyball, and here are some lessons we can all learn from it.
Lesson #1: Don’t generalize wildly from your own experience
Most major league scouts in Beane’s time had experience playing baseball, and most of them would generalize from their own experience to make decisions—thinking their experience with baseball was universal.
The lesson from this is that obviously, their experience with baseball wasn’t universal. What we can pull from this is that we shouldn't assume that our experience in business is the universal experience and start making large generalizations based on our views of the world. Instead, we should take an empirical approach to whatever we do, and make sure that we don’t get in our way.
Lesson #2: Don’t be overly influenced by the most recent performance
Most people are influenced greatly by the last thing they see. For example, if a major league scout went out and saw a game where a player hit 2 home runs and had 3 stolen bases, that player would probably jump up the rankings charts very quickly. This is easy to do in business as well. We can get a few quick wins and think the hard work is done. The lesson is to not get too confident, anybody can flip heads on a coin a few times in a row.
Lesson #3: You are in the risk minimization business
Because the Oakland A’s didn’t have large amounts of cash lying around to spend on players like some other teams, they had to figure out secrets to success in other places—namely, recruiting college players. Everyone knew that players right out of high school were a higher price than those in college. However, Beane knew that college players were much more likely to make it than those in high school. So he minimized risk and avoided drafting high school players. How can we minimize risk in our businesses?
Lesson #4: You need to know what skills can be acquired, and what can’t
Scouts in Beane’s time had certain ideas about which skills could be taught and which couldn’t. For example, they believed that you could make a few tweaks to a batter swing to help him hit for a higher average but you couldn’t teach someone to hit for power. However, the empirical evidence that Beane saw demonstrated quite the opposite. You could absolutely teach a batter to hit with more power, while some skills like being patient at the plate aren’t something teachable. So, typically tossed-up players were picked up by the Oakland A’s, and Beane was proved correct.
This should teach us when recruiting candidates for our teams, we should understand what skills we’ll be able to teach them, and which skills they need to have before we recruit. Lewis suggests that right now, one of the most important unteachable skills to have in the business world is a natural curiosity for learning.
Unless you are the CEO of a multi-billion dollar organization, it’s more likely that you look more like the Oakland A’s than the New York Yankees. These lessons are therefore some of the most important to learn if you want to close the gap between yourself and those giant enterprises.