January 2, 2004


How To Play Beane Ball: The Oakland A's Billy Beane has perfected the new rules for winning at baseball -- on the field and in the books. Some say that he's a genius who has mastered the future of the game. He says that doing more with less just means playing by the numbers. (Keith H. Hammonds, May 2003, Fast Company)

Billy Beane is a guy who knows how to do more with less. Winning with the A's is not just a matter of sticking to a budget, although he must do that. Beane thrives by relentlessly exploiting market mismatches -- by mining data that his rivals ignore and by scooping up assets that others have undervalued. His strategy is rooted not only in calculated opportunism, but also in a rock-hard "philosophy," as A's people like to call it, of how the game must be played today.

That philosophy is more than two decades in the making. It was born when a lawyer named Sandy Alderson took over the A's front office in 1982. Alderson never played baseball professionally, but he was a smart executive who grasped a few key truths. The first was this: In baseball, over the long run, statistics win out. And if you run your team by the numbers, you will win.

"The math works," Beane says. "Over the course of a season, there's some predictability to baseball. When you play 162 games, you eliminate a lot of random outcomes. There's so much data that you can predict individual players' performances and also the odds that certain strategies will pay off." The defining data for Alderson were on-base percentage -- how often a batter reaches base safely -- and total bases, which reflects that batter's ability to hit for power. The records clearly showed that, over time, those two statistics combined were the best predictor of the number of runs that a team would score.

This wasn't quite rocket science, nor was it truly original. "The teams that win are the ones that get on base and drive the ball real far," says Chris Kahrl, an editor of the annual stat-laden tome Baseball Prospectus . "That's the way baseball has always been." But by the early 1980s, general managers were overlooking on-base percentage in favor of a fascination with batting averages and home runs. Alderson's brilliance lay in remaking his entire organization around a critical statistic that had fallen out of fashion. He sought out players who knew how to get on base: patient hitters who could push an at bat to 10 pitches, tire out the opposing pitcher, and come away with a walk or a base hit.

The reverse was mathematically true for pitching: Keep the opposing team's runners off of the bases, and it will score fewer runs. So the A's philosophy favors hurlers who throw strikes on the first pitch of each at bat rather than those who get behind the batter and have to throw more pitches. It favors fastballs over curves, because statistically, fastballs more often yield strikes. The object is to get batters out in three pitches or less -- because batters who last longer get more hits and walks, and because high pitch counts exhaust pitchers.

The A's forged a baseball operation where all of this doctrine was taught and enforced with almost fervent consistency at all levels of the organization. Young players on the A's lowest-level minor-league teams get the same harangues on plate discipline and control pitching as do the players in the majors. (It is said that you can't win an A's Player of the Month award at any level unless you've averaged at least one walk per 10 at bats.) The team's college scouts apply the same metrics to the kids whom they recommend drafting.

This degree of organizational discipline, baseball people say, is one reason that the Athletics' formula has been hard for other teams to replicate. It's one thing to understand quantitatively what wins ball games; it's another to apply that understanding across an organization of dozens of coaches and instructors and hundreds of players. "In most organizations, you have a lot of renegades who want to do their own thing," explains Keith Lieppmann, who has worn an A's uniform for 30 years and is now director of player development. "We've gotten through that. If people don't believe in the philosophy, they don't stay."
Hit 'Em Where They Ain't

The other reason why Beane's success isn't easily copied is less obvious. The metrics are surely important -- and such statistics as on-base percentage remain at the heart of what the A's do on the field. But what defines Beane's success is the relationship between those performance metrics and players' corresponding economic value. Is the marketplace missing something? Is there a value gap? And what will happen to that gap over time, since performance and market value rarely obey the same rules?

The truth: Billy Beane is an arbitrageur. "Exactly!" Beane lights up at the word. "Arbitrage. We don't use that word too much in baseball, but that's what it is. In a market where people are competing for scarce assets -- for us, it's players or, really, the things that players can do -- there's always going to be some inefficiency. We're always going to have to find that dark corner, the stone that hasn't been turned over."

Beane operates within windows of opportunity. That's all he can afford. Because compensation trails performance in baseball (as in most endeavors), he must find players on the rise, guys who haven't caught fire yet but who could. He'll keep them until the market catches up, at which point he can no longer compete.

Posted by Orrin Judd at January 2, 2004 10:44 PM
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