Author: Michael Lewis
This is a story about Oakland A’s–an American baseball team, who performed immensely well in the late 90s and early 00s, despite having an incredibly small total paycheck. The story’s protagonist in Billy Beane, who brought a statistical approach to hiring and firing its players. I personally don’t follow baseball, and thus have likely missed some of the finer insights, but the following stood out for me.
- Process not outcomes: It is human to base decisions on outcomes, but it is better to develop a winning process and stick to it. In the book, when some of the Oakland’s players failed, the failure was not considered a failure of the selection process. Rather, it was considered a natural outcome of the probability and history-based process. Of course, on needs to assume that past is sufficiently repeatable. If not, an axiomatic pattern needs to be detected.
- The simple rule above is very hard to follow: Billy Beane, knowing and believing the process-based decision process, found it hard to stomach when the process was in play. He found it hard to watch games, and used to work out in a gym when his team was on the field. For an investor, this is like watching the ticker–very hard to do when the investment strategy is blowing up.