Management by Baseball

Baseball's draft has a ton of lessons for non-baseball organizations in competitive endeavors, especially businesses. The big annual professional draft unwound this week, and in the last few years it's captured a lot of discussion and analysis. The discussions have been about individual draftees, but more interesting for us, individual teams' strategies.

I think the reason the team draft approach has gotten such a flood of ink lately is the success of Moneyball, a main thought line of which discussed the shift in Oakland's strategy. Author Michael Lewis' intelligent, readable writing opened up the topic not only to baseball writers who generally didn't understand any draft strategy more focused than the old Dallas Cowboys' "Best Available Athlete (BAA)" model.

Moneyball set up many readers to cook up a straw man -- a fake monolithic enemy of the sophisticated stats and multivariate analysis model Paul DePodesta powered for the A's when he was still with that team. The straw man was "scouting", a chattering of tobacco-chewing males who barnstorm the country looking at talent and compressing what they see into symbols and numbers. The numbers are not the actual accomplishments of the prospective draftees -- accomplishments are hard to normalize between high school, college and professional, between games at different altitudes and in wildly divergent stadia. And the humans who tend to serve as scouts (many, not all) are not highly numerate symbolic logic experts -- they are sensitive eyes and ears that try to recognize human patterns, not inanimate statistical ones.

The enemy was a straw man not because most every other team did the pre-draft talent analysis differently from the way the As did (because that was true, they all differed from the As). The enemy was a straw man because the 29 teams that were not the As took no monolithic approach. Almost every team has its own theory or theories on which it drafts, and, yes, they are primarily scouting-driven. But there are as many different approaches to scouting as there are to statistical analysis.

SCOUTING CAN BE GOOFY

Scouting comes in good and bad models, just like statistical analysis does. A charlatan or a lazy or foolish analyst producing work following a statistical/performance paradigm doesn't mean the resulting study has any more merit than entrail-reading by a blind quadruple amputee. A mediocre scout will produce output of the same quality or worse.

Angus' Law states In any open category, no matter how you cut it, 85% of the individuals are crap or mediocrity, 10% are utilitarian/AOK, and 5% are excellent/high achievers.

So it's highly probable that 85% of scouts are unlikely to produce success at a rate higher than randomness. As unlikely as Babe Ruth getting thrown out trying to steal to lose a World Series...unlikely, but not impossible. And the 10% who are fine and the 5% who are brilliant are right more often than randomness would dictate.

In baseball, though, like in business, there a lot of empty plaque passing itself off as wisdom. Thanks to this week's draft, Rob Neyer wrote about some of baseball's useless thinking. Looks like phrenology. But it's based on the individual's pattern recognition skills. All intuitive processes involve some form of pattern recognition. Like the scout in the Neyer piece who thinks the team should or shouldn't be interested in the prospect because he fits this description:

BABY-FACED. MEDIUM-WIDE, SLOPED SHOULDERS. ESPECIALLY LONG ARMS. LONG TORSO. HIGH REAR

She's seen some collection of these traits before & he mentioned these aspects because it either has given him hope or undermined it. Because most observers are mediocrity or crap, most of their observations will be, too.

This stuff looks exactly parallel to things I've read on reports submitted by interviewers in businesses who are writing up their notes on prospective job recruits. It looks like it has some observation and thought behind it, but really, its a form of shorthand that has meaning only to the writer (if even to her). And baseball has its "bloodlines" pap...some young man who is the son or grandson of a perfectly mediocre utility man gets drafted because some scout or front-office resident recognizes the last name and it's after the key first few rounds and why not take a flyer? And baseball has the random factor of geography, too. Teams will favor local prospects, youngsters whose families have ties to the big club's home region, which makes some sense if the region is a hotbed of baseball activity (Southern California, Florida, etc.).

Business is just as wacky as baseball. In a job market flush with choices, you'll see companies taking a flyer on an MBA whose claim to fame is his daddy's or grand-daddy's acumen, especially in the more tribal social groupings of the extractive industries (mining and energy), though it exists in every industry to some degree. And when debriefing clients on why they chose a candidate who had ultimately failed (in an effort to get an idea of what not to do this round), it's surprising how often I have heard about personal grooming habits, scuffed shoes (or really nice shoes), and once (from a British client) a tie knotted single-Windsor instead of double-Windsored, which must be the "high rear" of that industry.

BASEBALL'S RECRUITING STRATEGIES

Most baseball teams seem to be mixing the kind of scouting Neyer speaks of with some statistical analysis. The blends are all different. I don't know of a team that does all of one while doing none of the other (feel free to point one out if you have a little documentation). Every organization has an overarching strategy with a few twists that get bent to accommodate the market, their current depth charts, and the drifts on their current scouting and front-office heavies.

Peter Gammons wrote about this topic last weekend. There's a lot of grist and promotion in there, but what's most electrifying is how pragmatically bright G.M.s are. Here are some quotes from the piece, quotes you should chew on as grist for thinking through your own strategies. These are all about recruiting, really, but the little soundbites on approach work for most other kinds of decisions, too.

Much of the discussion these days centers around the dreaded "Moneyball," which most people who shred the Oakland philosophy don't completely understand.

"Some people think we draft only college players using laptops," says Billy Beane. "We've taken high school players in the first round, like Eric Chavez, and there have been years (like 2002, in the case of Georgia high school outfielder Jeremy Hermedia) that there was a high school bat we would have selected if someone hadn't banged him in front of us. But we have to have some cost predictability."

The 2002 draft featured in "Moneyball" (and an upcoming Michael Lewis followup book), in which Oakland had seven of the first 39 picks, was controversial because the A's had to spread out their allotted money and did it with college players, some of whom were drafted because of their signability. Two years later, center fielder Nick Swisher is described by one veteran Pacific Coast League manager as "the best prospect in our league, with the possible exception of (right-handed pitcher) Joe Blanton," who was Oakland's second first-round pick that year. The 39th pick, third baseman Mark Teahan, is in Triple-A and playing so well he may be called up imminently to fill in for Chavez. The third-round pick, left-handed pitcher Bill Murphy, was traded for Mark Redman. The fourth-rounder, catcher John Baker, is hitting .340 in Double-A.

There is considerable fear and loathing over what many see as "The Moneyball Group," which now has spread to Toronto with J.P. Ricciardi, Los Angeles with Paul DePodesta and Boston with Theo Epstein.

"When we took over, we needed to restock the organization quickly and do it with college players," says Ricciardi, whose first-round picks, infielders Russ Adams from North Carolina and Aaron Hill from LSU, are in Triple-A and Double-A, respectively, and unquestioned major league prospects. "People forget I am a scout, first and foremost. I look forward to the day when we've come far enough as an organization that we draft a high school player in the first round."

For the record, DePodesta's Dodgers drafted a high school pitcher in the first round -- left-hander Scott Elbert of Seneca, Mo., followed by Virginia Commonwealth right-hander Justin Orenduff with the sandwich pick.

"Like everything else in baseball, the draft is gray," says DePodesta, who has taken over an organization whose scouting director Logan White has predominantly selected high school players. "We're essentially on the same page, looking for the same kind of players."

"There is no one way of doing anything," says Epstein, who is also trying to re-stock what was a thin Red Sox organization. "We are looking for pitchers who control and pound the strike zone. We look for hitters with a certain kind of approach. We took a high school outfielder (Mickey Hall, who hit for the cycle in the Sally League Thursday) in the second round last year. (Director of amateur scouting) David Chadd did a great job drafting two years ago."

[snip]When Twins GM Terry Ryan was the club's scouting director, they were predominantly college-oriented; in 1989, they took Chuck Knoblauch, Denny Neagle and Scott Erickson with three of their first four selections. The Marlins have what is a very talented rotation of high school pitchers, each taken somewhere between the second overall pick to the 13th round; this year, they are looking to select a college pitcher with the 29th pick. [snip] Cleveland has taken college and high school players in its rebuilding, as Indians GM Mark Shapiro says, "there is no one way to do anything."

The emphases were mine. Now it may be that Gammons got his notes mixed up and accidentally ascribed either Epstein's or Shaprio's quote to both, but it seems more likely to me that both said the same thing. Industries have their mantras, some persistent, some ephemeral. Some mantras are moronic (such as "more with less"), some are merely pointless ("shoes for industry, shoes for the dead"), but some contain a grain of essential truth that reminds the intoner/listener of what prize to keep their eye on.

THERE IS NO ONE WAY TO DO ANYTHING

The baseball mantra, "There is no way to do anything", is an essential truth for developing a strategy for any competitive system, especially a closed, zero-sum system like most industries.

Strategies get "hot". In business, a few years of MBAs get the same text-book, or a consulting firm or author with a particular sharp vision gets as popular as Britney Spears in pink spandex (and frequently with a little talent behind it). Executives who belong to Junior Presidents associations or Kiwanis or a Moose Lodge idle their engines together and breathe each others' fumes, as my esteemed colleague Cathy Cook would say. They come to believe that to stay bonded with ther fellows, they need to pursue The One True Path.

For a few years, sometimes three decades, "The One True Path" (exporting jobs to Red Chinese prison factories, currency hedging, Grand Cayman banking for tax evasion, selling into ex-Soviet satellite markets, layoffs, ISO 9000), businesses reduce their competitiveness by imitating each others' single strategies with only minor variations.

Baseball is much smart, a better model to follow.

DePodesta said, "Like everything else in baseball, the draft is grey".

Make DePodesta's declaration a Business Mad Libs: "Like everything else in [your line of work], [aspect] is grey".

It's not true 100% of the time (just about nothing is). But it's right most of the time, and the perfect starting point from which to develop a kick-butt competitive strategy. And while your competitors are huddled together in a rugby scrum eating each others' mud, you can be following baseball's essential strategic truth, carving out a niche and varying your tactical twists for the market, your available talent, and current events.