IW500: 7 Lessons For Developing Real MetricsPaul DePodesta helped build the Oakland Athletics baseball team into contenders by developing new metrics that better determined a player's true value. His advice can help business managers.
"Moneyball," named after a book by Michael Lewis of the same name, describes how the Oakland Athletics competed in the mid-1990s with a team that had a smaller payroll than other major league teams. Oakland was a smaller market with a limited ability to buy expensive talent. Manager Billy Beane (played by Brad Pitt), a former player, set about evaluating prospects by new methods, sometimes referred to as Sabremetrics, based on a player's real value in the game rather than his batting average and other traditional statistics.
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A few other knowledgeable observers of baseball were trying to collect Sabremetrics, or stats that showed the value of players' actions to the outcome of the game. They can be used to established the true value of a player, not the one time when he came through with a clutch hit, but his consistent contribution over the length of a season.
"If a batter hits a hard line drive into the center and the center fielder gets the out with a diving catch, the pitcher gets credited with preventing a runner from reaching base. The hitter and the center fielder get no credit at all," when in fact their actions represent real value to their teams, said DePodesta.
Depodesta said the best way to establish real metrics for a business is to ask the naive question, and then he laid out seven lessons he learned about developing useful metrics.
1. The first question to ask, he said, is, "If we weren't already doing it this way, would this be the way we'd start doing this?" For further business wisdom he offered a quote from Thomas Paine, author of "Common Sense", issued on the eve of the American revolution: "A long habit of not thinking a thing wrong gives it a superficial appearance of being right."
2. Be prepared for push back when you challenge your organization's conventional thinking. When the Athletics started putting together a team of undervalued players, Manager Beane and DePodesta worried what members of the press, writing the equivalent of 200 stories on the team during an average season, would say if early decisions looked suspect. "Would the other stakeholders in the team, the fans, think of their team as off the reservation and doing things differently from every other team?" he recalled the pair worrying. Nevertheless, to beat the odds against Oakland's low pay scale, they had to do things differently.
3. By making an early pick of an unproven quantity, such as pitcher Barry Zito, they were taking a chance on a player, who developed rapidly as expected, won the Cy Young award, and moved on as a pitcher. Bean and DePodesta created other stars that other teams bid for as they reached free agent status. Given its budget, Oakland usually lost a bidding war. That turnover of talent had to be lived with and incorporated into how the team was now doing business, DePodesta said.