Keynote: The Art of Winning An Unfair Game – Soirée, San Francisco
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Paul DePodesta: Thank you. Thank you very much. Just before I begin, so I have a sense, how many of you have actually read the book or seen the movie Moneyball? Oh, wow. Okay. Uh, well, I apologize. Um, I’m not Jonah Hill. Um, we’re not exactly body doubles either. I can’t tell you how many people have come up to me in the last, you know, six or seven years and said.
“But, you, don’t look anything like Jonah.” And I’ve had to tell them that I think it’s the other way around. But anyway, to give you some perspective, long before I started working for the Browns or the Mets or the Oakland A’s, you’re 25 years ago, mid 1990s baseball was really in a time of crisis.
You know, fans were still holding a grudge from the strike player. Salaries had begun escalating at an alarming pace. And the small market teams like the Oakland A’s. Had basically disappeared from the competitive landscape. Now, I didn’t realize any of this at the time because I was the spring training minor league van driver for the Cleveland Indians.
Okay. I wasn’t even the major league van driver. I was the minor league van driver, but that didn’t stop me from thinking I knew a lot about the game after I had played the game. I had read about it. I’d studied the history of the game, but it really took me less than a week on that spring training campus down in winter Haven, Florida to realize that I knew nothing.
And what I really needed to do was just open up my ears, open up my eyes, and absorb as much as I possibly could. So the one real job they gave me during that first spring training was to chart the pitches of the major league games, which is to say, sit right behind home plate and write down every pitch in terms of pitch, type, location, and outcome.
Well, this afforded me the opportunity to sit in the scout section. So I began to listen to the language of the Scouts, and I tried to understand how they went about evaluating players. And what became clear was that they evaluated players based on what they called the five tools. And the five tools were simply this, can the player hit hit for power, run field and throw.
And if you could do all five of those things, he’d be a star. And I remember this one player in particular, the Scouts were Raven about because he had all five tools. And I got really excited feeling like I now knew something that not every other fan did and was really excited to fall as players progress through the course of the season.
And ultimately was disappointed when I saw this player really struggling and doing so while he was still in the minor leagues. Well, fast forward to that end of the first year in Cleveland, we had our organizational meetings. This is where we brought in all of our top baseball personnel and we discussed every player in the organization, your other strengths or limitations, how they fit into the longterm vision of the franchise.
And at one point we were discussing a player named Jeff Kent, and we had acquired actually from the New York match just a few months previous to that. Now I remember this conversation distinctly because I had graduated from. From van driver to minute taker. So it’s clearly on the fast track in Cleveland.
But even at one point, one of our senior most baseball people was describing Jeff Ken’s swing, and he said, and I quote, play Jeff Kent has the weakest freaking hack I’ve ever seen. So what do we do? We traded Jeff, Ken to San Francisco giants, and we watched, along with the rest of baseball as he became possibly the most prolific author sense of second basement of the next decade.
So the lesson to me at the end of that first year was it subjectivity really ruled the day when it came to evaluating players. Now, don’t get me wrong, the problem wasn’t with our Scouts, not then, not today. Our Scouts were actually some of our most knowledgeable, passionate, loyal employees. The problem was with the operating system, you’ll call it subjective 1.0 you’ll oftentimes, we’re asking Scouts the wrong question.
And we certainly weren’t giving them all the right tools that they needed, you know, to be successful in their roles. You know, it was right around this time that I ended up taking a weekend in Las Vegas, which, let’s be honest, since as good a place as ended to have a philosophical epiphany. But I was, I was sitting there Friday night, I was playing blackjack and the casino was absolutely packed.
I was sitting over on the third base side of the table and the players sitting on the first base side, he was just playing terribly. I mean losing money hand over fist, and it seemed like, you know, every 15 minutes he was dipping into his pocket for more cash. And one particular hand, the deal with Delta first two cards and Delta miss 17 she basically passed right over him as she dealt the next round until he stopped her in his hand, the dealer or on the table, and he said, no, no dealer, I want to hit.
She paused, I think almost feeling sorry for him. And she said, sir, are you sure? And he said, absolutely, I want to hit. She produced the car and sure enough. It’s a four, right? The place goes crazy. I mean high fives all around. Everyone hooting and hollering and the dealer with total sincerity looked at the player and said, well, a nice hit.
I thought to myself, nice hit. I mean, just because it worked, it didn’t justify the decision. I couldn’t get this out of my head. I basically spent the rest of the weekend wandering around the casino, largely because I lost all my money playing blackjack, sort of wandering around thinking about how the casino work.
And what struck me was that while the casino is certainly concerned with outcomes, I mean after all, they’re there to make money. The way they achieve those outcomes is with an absolute laser like focus on process. And it’s not just the rules on the table, games that stack the odds in their favor.
It’s things like, like the carpeting, the lighting, the way you have to navigate through the property, all the way down to that hoking pit boss standing over you at the table. It’s all about process. And they believe that they’re vigilant about sticking to their process, that in the long run they’re going to win.
And in case you haven’t noticed, you know, they normally do. I started thinking about how we might be able to take a similar mindset and bring it into baseball. So years later I was sharing this story with a friend of mine. He turned me onto a book called winning decisions. And then there was a very simple matrix of process and outcome, each one being either good or bad.
So in the upper left hand corner, it was good process, good outcome. Right? They called this deserved success. This is where we all want to be. It’s where most great companies are. It’s where most championship teams are. In fact, it’s where most great individual players are. You know, think Tom Brady, right?
He has an incredible work ethic. He watches, uh, an incredible amount of film. He has a relentless diet. He’s always prepared, right? He’s always prepared, and more often than not, he’s successful, right? Good process, good outcome will moving over a box. You have good process, bad outcome. Right.
This can be a tough place to be. This is bad luck. This would happen to a casino when a player hits on 17 and manages to get her four, or what happens to Tom Brady when he throws the perfect pass, but it goes through the hands of his receiver and ends up as an interception. So the question is, when we, when we face those situations, what do we do?
You know, do we indict our process? You know, if Tom Brady throws an interception, should he go back and change his entire preparation routine. No. You know, he has a good process, but this can be a difficult place to be because if you’re not as sure about your process, you know, people will look at the outcome and say, well, geez, that didn’t work.
You know, you’ve got to change something up. So this can be a really tough place to be. The tougher place to be is down a level, which is bad process, good outcome, right? Player hits on 17 and manages to get a four. You know, cause oftentimes we do believe that the outcome justifies the process.
So if we get a good outcome, just one time, you know, we tend to repeat the process that got us there. You know, it’s why lottery winners continue to buy lottery tickets, you know, afterward. But what ends up happening is if we repeat that same bad process over and over and over again, we’ll just have basically a string of losses until maybe finally we get frustrated that we can’t get that same good outcome.
We got once upon a time. And then lastly, there was bad process, bad outcome, uh, which the authors called poetic justice, which seems appropriate. So it was right around this time actually, the Billy Bean and the Oakland A’s called and offered me the assistant GM job. Now, despite the fact that this was a multilevel promotion for me, it was actually a really difficult decision at the time because the two organizations, they were just in very different stages.
You know, the Cleveland Indians where I was working, we had, you know, had I think, seven straight winning seasons, five straight division titles. We had been to two world series. You know, the A’s hadn’t even had a winning season in six or seven years. But to make things worse, the Indians had a, had a brand new stadium.
It was sold out every single night. We had big revenues and consequently one of the top player payrolls in all of baseball, the ACE total opposite end of the spectrum, right? An old stadium, declining attendance, declining revenues, and one of the bottom player payrolls in all of baseball. But with the ACE did have, was they had a culture that had been created by a guy named Sandy Alderson, and they had this young general manager named Billy Bean who just seemed to have the will to do something different.
I remember I was standing in the lobby of the hotel with Billy, uh, after he had offered me the job and I was peppering him with questions, trying to figure out whether or not I should do this. And I knew there was something I needed to ask him. I just couldn’t figure out a polite way to ask it.
So finally I just blurted it out and I said, Billy, with your lack of resources, do you really think you can win? I mean, at that point, no small market team had ever even made the playoffs since the strike. And Billy Villa very calmly looked at me almost as if he were looking right through me.
And he simply said. I will never use payrolls and excuse, and it literally was at that moment, I made my decision to come out here to the Bay area and joined the ACE. Now, don’t get me wrong, Billy wasn’t Pollyanna. He didn’t think we could just go about building a championship team the way everyone else did it.
Certainly not the way the big market teams did it, you know, in New York or Los Angeles, what have you. We had to come up with a different way. Now, we used to talk about the fact that putting together a championship team is a lot like cooking a gourmet meal. Right? We have to bring together all these different ingredients in just the right way.
You only caveat, well, we’re only allowed to shop at seven 11 right? So we’d get a little creative with our recipe. All right, so how do we do that? Well, we took a page out of Peter Drucker’s book and we started asking what he referred to as the naive question. And the naive question is simply this, if we weren’t already doing it this way, is this the way we would start?
If we weren’t already doing it this way, is this the way we would start? It seems incredibly simple, you know? But once you start asking that question, you realize just how powerful it is. You realize just how many things we’re surrounded by on a daily basis that are as they are, just because that’s the way they’ve always been.
Let me think about why is the work day nine to five, you know, or the work week, Monday to Friday. Why do we still have an electoral college? Anyway, I digress.
The point is that, you know, processes are put in place at a particular time and under particular circumstances, right? But as time marches on and those circumstances change, you’ll oftentimes the processes don’t know. Thomas Paine who wrote common sense, the seminal work, you know, advocating for democracy as a better form of government.
Late 17 hundreds received a really mixed reception to the book when it first came out. So in the second edition, he wrote a forward, uh, and then he wrote the following, remember this, about democracy. He said, perhaps the sentiments contained in the following pages are not yet sufficiently fashionable to procure them general favor.
And then he went on to write a long habit of not thinking a thing wrong, gives it a superficial appearance of being right. Quite a long habit of not thinking a thing wrong, gives it a superficial appearance of being right. We found that not only all over our organization, but all over our industry, just things as they were, because that’s the way they’d always been, and once we started asking the naive question, we started uncovering a lot of these things.
Now, as you may imagine, we also started uncovering a lot of obstacles, right? That naive question that can be a little uncomfortable to ask. It can be really uncomfortable to answer. Yeah. We were worried about just what were people going to think, what wrong an employee’s going to think? Were they going to think that we were questioning, you know, their experiences, their expertise, maybe even the very way they thought about their jobs or what about our peers in the industry?
You know, for us, we had to regularly transact with our peers. Was that going to become a much more difficult process if suddenly we were doing things much differently than everyone else? Or lastly, maybe even most importantly, what about our stakeholders? Right? Our fans. Are they going to be able to buy into the idea that their team, the one they’re passionate about, right, passionate enough that they spend their own money on tickets and jerseys and concessions where they going to be able to buy into the idea that their team just saw the game differently than everyone else, maybe even differently than they did.
You know, it was a real issue for us. Another issue that we found was just information overkill. Now, this is the late 1990s so I’m talking about the rise of the internet. Right. ESPN sports radio. There was so much out there and yet so much of it was just noise and for us to be able to drill down through all that, try to figure out what truly mattered, where the real causal relationships were.
That was hugely challenging, and if we thought it was challenging in 1999 right, we had no idea how challenging that might be. 20 years in the future. In 2019. Because the amount of data and information that’s available to all of us, regardless of industry, has absolutely exploded in the last 10 or 15 years.
And it’s only going to continue to explode going forward. You know, it’s now to the point that whatever opinion someone has, they can find a data point out there to support them. So it ends up happening is people create sort of these false narratives, you know, that really don’t have much to do with cause and effect.
So, you know, as an example, back in 2002 we had the American league most valuable player on the ACE. He was our shortstop name was Miguel to hada. Now, Miguel had one year left on his contract before he was allowed to become a free agent. So in spring training of two thousand three billion, I sat down with Miguel and his agents to see if we could work out some sort of contract extension.
Well, it was very clear after one very brief meeting, there was no way, no way to how it was going to sign an extension. He wanted to see how much he could make as a free agent. Which was his, right. So Billy and I sat around for a couple of days trying to figure out how we were going to handle this.
And finally Billy said, you know what? I don’t want to go through the next eight months of some public song and dance where I’m out there every week saying, boy, we’re really gonna try to sign to Honda when I know it’s not going to happen. It’s going to be a distraction all year long. And ultimately it will be a let down for everybody involved.
You know, his teammates, our organization, our fans, everybody. Let’s just come out right now in spring training and just announced this is going to be too hot as last year in Oakland. People will be upset, but at least it’ll give them time to process it. Maybe they’ll get over it. You know, it wasn’t a traditional approach, but that’s what we decided to do.
Well, sure enough, the media, they just killed us for weeks. You know, we were, uh, you know, we, we were kicking the MVP out of town. We were cheap. We were dumb, you know, et cetera. Well, by the time the season started, it wasn’t that big a story. Well, six weeks into the season, the middle of may, Miguel to hada, the reigning American league MVP.
Is hitting about one 50 is the least productive player in the entire league and the questions started coming every everyday. Why is the hottest struggling? Like why is he struggling? And Billy used to say, look, this is such a small sample size. We’re talking about six weeks. We’ll look up at the end of the year to how to we’ll have been as productive as he’s always been.
Well, that didn’t satisfy anybody. They kept asking the question, why is he struggling? Why is he struggling? And finally someone asks, do you think he’s struggling because he doesn’t have a contract. And that moment, it’s as if it became causal truth in the public discourse that tomato is struggling because, and only because he didn’t have a contract.
Now, Billy, until he was blue in the face, tried to convince people otherwise. But that’s all anybody would write for weeks. Well, sure enough to how to start playing better. And after the all star break in July, he just, he single handedly carried our team offensively for about six weeks. Well, this took us into early September.
The team was on the road in Baltimore. I was traveling with the team and I was sitting in my hotel room and I get a call from one of these same writers, and he says to me, well, how was looking at Tata stats today? And they’re almost identical to his career averages, but boy, he’s really been on fire lately.
Why do you think that is? You think it’s because he doesn’t have a contract? You know, I desperately want to say, Hey, it’s precisely why, but the point is, we didn’t know why. None of us really knew why. We didn’t know why he was struggling earlier, why he was playing so well. Then. But you know, nobody wanted to live without some sort of concrete answer.
So they picked one data point out of thin air and said, that must be why. Right? And that was something that we knew we had to guard against, you know, in, in our decision making. Another obstacle we found really a whole set of obstacles were just psychological biases, just innate to all of us as human beings and certainly is decision-makers.
You know, one was just a very simple desire for acceptance. Right? We want our friends to like us. We want our peers to respect us. Here we are asking our Scouts who’ve been in the game for decades to go sit in the same Scouts section next to the same Scouts guys. Maybe they’ve known for decades, maybe they played with them or coach for them, what have you.
So go sit in the exact same environment that you’re accustomed to. But now we want you to look at the game through completely different lenses. Even use different language to describe what you’re seeing on the field. Way things completely differently than you ever have before. I mean, imagine some of this probably sounds familiar to some of you in this room.
This is really hard for them. You know, it was really uncomfortable for them at the beginning. In fact, I think some of them were embarrassed, you know? But over time, and as we became, you know, really successful, that embarrassment turned to pride where our guys started walking into ballparks saying, yeah, we’re the Oakland A’s.
We do it differently than everybody else. But that was certainly a process. It didn’t happen overnight and was an obstacle we needed to overcome. You know, another one we found was just emotional decision making. Let me look. We’d like to think we’re all perfectly rational decision makers, especially when we have data.
Maybe that helps support a decision, but the fact of matter is emotions really do play a role, even in how we approach situations. Sometimes even in how we approach data. You know, there’s a significant tech company here in the Valley that. Shared a story with me that they were doing an analysis of their hiring practices and their interview practices, and this was shortly after they became a public company, and they found that the grading that was done on interviews was strongly correlated to the move of the stock price on that day.
So if the stock price was up, interview grades went way up, and if the stock price was down, interview grades were down, right? People that obviously weren’t doing this consciously, but it just tells you how much it can have an impact. Or another example. You know, when my wife and I first moved to San Diego, uh, we were very anxious to get settled into a new home.
Uh, we had two young children at the time, uh, and we were living with my inlaws, so I was maybe a little more anxious than my wife was, but the fact is, we were trying to find a place and on one Saturday we had scheduled to see four homes. We woke up that morning rearing to go and excited. My wife mentioned she really wasn’t feeling well, but was determined to go out and see these, these four properties.
So we go to the first one, we go to the second one, we go to the third one. Just nothing fit us at all. And I got frustrated. I said, you know what? You’re not feeling well. We’re not finding anything. Let’s just call it a day. We’ll try again next weekend. She said, no, I really want to go see this last house.
So we go into the last house. We walked through the front door and immediately my wife throws up her arms and says, Oh my God, I love this house. I love this house, and we start running around to all the different rooms to see whether or not the house was going to fit our family as it was then, and what we thought it might become.
And she just kept saying, I love this house. Finally, we got to the last bedroom again. She mentioned she really wasn’t feeling well, and I said, okay, that’s it. You know, we got a feel for this house, but now it’s laid on a Saturday. I want to get you checked out. So I ended up taking her to a hospital, which fortunately was right down the street.
Um, they checked her out, they ran some tests. Doctor came back in after a little while and he said, listen, this isn’t terribly serious, but it is something you need to take care of sooner rather than later. My suggestion, you’re here, you should just have surgery tonight. So unexpected, you know, to say the least.
And my wife is sitting there getting prepped for surgery and she says, and this is direct quote, I know this is the most important thing, my health, yada, yada, yada, but I really want that house. I said, yeah, I think we’ll worry about that a little later. So she ends up going into surgery a little after midnight.
She’s in there for about 90 minutes. Fortunately, everything goes great. Um, they wheel are out. They take her to the recovery room, and after a while they allow me to be in there with her. So I’m sitting there, it’s probably three o’clock in the morning, you know, I’m reflecting on just what a crazy day this has been.
And suddenly out of the darkness, all I hear is. I want that house. So sometimes we don’t even know why. Right. But something grabs us and it makes an impression on us. You know, for us in baseball, when we sign an amateur player, he might be 16 1820 years old, you know, over the course of the next four, six years, we see that person mature, you know, physically, emotionally, literally see him grow into a man during those years.
You know, they face incredible obstacles in the minor leagues. Competition unlike they’ve ever faced before. You know, every year they try to, you know, move up a level and get that much closer to the major leagues. And unfortunately as time goes by, more and more of them can’t make it, you know, and end up dropping out.
But if we’re lucky, maybe after four or five years, you know, just a few of them, I mean, just a few of them get to realize their lifelong dream of being a major league player. And somehow through all that we were, we were supposed to be completely unemotional about them as people or their careers.
It was impossible. You know, we had to admit to ourselves that it was impossible that emotions really were playing a role, you know, and how we were making our decisions. Another one that we found has been called either affirmation bias or confirmation bias, which say, once we’ve made up our minds about something, we tend to only seek out information that reinforces what we’ve already decided to believe.
And we’ll tend to disregard any information that comes to light that runs contrary to what we’ve decided to believe. Well, this was never more evident in baseball than when we were a major league spring training, and we were in cut meetings, meaning we have to send players back down to the minor leagues.
Now understand if players have been invited to major league spring training, they do something pretty well, right? I mean, the baseball industry, look, it’s a pretty rigorous screening process right. Tee ball, right? Little league, junior high, high school, junior college, college, rookie ball, the lower minor leagues, the upper minor leagues.
All these players had done something well enough across all these levels to be invited to major league spring training. And yet, if they’re not going to make our team, all we would do is talk about what they can’t do. And we’d make it sound like these guys shouldn’t have made their high school team.
You know, if someone’s gonna make our team, all we do is talk about what they can do. Trust me, none of them are flawless. This isn’t something we did consciously or purposefully, it’s just, it’s the mode we fell into and it didn’t matter if we were Scouts, coaches, front office people, we all sort of fell into the same trap, right?
It got even worse though of if we were talking about two different players that shared an attribute, but we described it very differently depending on the fate of the player. For instance, let’s say someone’s not going to make our team and he happened to move his bat around a lot. Right before the pitch comes.
Some of the rooms said, you know what? That’s way too much pre-pitch movement that’ll never play in the major leagues. We’d say, Hey, you know what? You’re right. He needs to go back down in the minor leagues. Work on that. 15 minutes later, we’ll be talking about someone else who’s going to make our team, who does virtually the exact same thing with his bat.
And if someone was bold enough, they asked the question, well, geez, what about, what about that pre-pitch movement? And the same guy says, are you kidding me? He likes to stir it up and let it eat. I don’t even know what that means, but that didn’t stop any one of them said, Oh, you better believe it.
I mean, this guy’s aggressive. He’s a hitter. He’s going to help us win some games. The fact is, you know, we see what we want to see and we describe it the way we want to describe it, and as I said earlier, with the amount of data and information that’s now available to all of us, this is actually really easy to do and a really easy trap to fall into.
Another one we knew we had to avoid. Another one was just a real focus on the most recent outcome. Yeah. The Takata story was certainly an example of this. I mean, here’s a player who had had five years in the major leagues. He’d had five years in the minor leagues before that. We had a 10 year performance track record on this player, and yet we were consumed with what he did over the course of six weeks, you know, or going back to the casino, I don’t know how many of you have spent time at the roulette wheels, you know, but oftentimes they’ll post, you’re the last 10 numbers that this might be the most useful information on the face of the planet.
Right. But it’s there for a reason. It’s, it’s there because they know that just because something happened more recently, it really does figure more prominently in our minds and can really impact our decision making. And lastly, we found, I guess you would just call it just a physical appearance bias.
Now this is professional sports, right? We’re talking about professional athletes. So this might make some sense. I mean, these guys are all supposed to be, you know, big and strong and agile. But here we are making multimillion dollar decisions on players, and we’re saying things like, Hey, he looks good in a uniform.
I mean, this guy looks like a big leaguer. I think about this for a second, right? Imagine, imagine if you were pitching an investment to someone and you said, boy, I tell you what, I really liked this company. I mean, I like the CEO. I mean, this guy’s smart. He’s a good leader. He’s got a great body on him.
Right? That’s crazy. Well, Malcolm Gladwell pointed out that just about 3% of all adult males are six foot two or taller, just around 3% and yet 30% of fortune 500 CEOs, six foot two or tall, right? So maybe it’s not just baseball, football, professional sports where we have this bias. So any event, we’re asking the naive question.
We’re learning a lot about ourselves as people and as decision makers. You know, we’re coming across all these different obstacles. What was the solution. Well for us, the solution was really just to be humble in the face of all this uncertainty. I mean, after all, uncertainty was really the fundamental principle of our industry, right?
We’re trying to predict the future performance of human beings, oftentimes in situations that those people themselves have never even encountered. Yeah. We go down to Venezuela, we scout 15 year old kids. 15 years old decide whether or not we’re going to sign them, how much we’re going to pay them, hundreds of thousands even into the millions of dollars.
At that point, we’re making what amounts to an explicit prediction, right? Of how that player’s going to perform, not the next summer, but how he’s going to perform 10 or 12 years later when he’s a completely different human being, right? And not how he’s going to perform in Mira KIBO Venezuela.
But how he’s going to perform in New York city or Chicago or San Francisco or Los Angeles in front of 40,000 fans and against the greatest competition in the world, competition that at 15 years old, he can’t even fathom an exact science, right. To say the least. And when we finally admitted to ourselves was, well, we’re not very good at this.
Like at all. You know, bill used to tell our Scouts all the time, he’d say, guys, I was a first round draft pick. I was a minor league player. I was a major league player, won a world series as a major league player. I’ve been in an advanced scout and assistant GM, a GM. I’ve been in the game for over 20 years.
I’ve seen it from all these different angles, and yet I still can’t walk into a high school game point to some kid and say he’s going to be a star. I can’t do it. And if I can’t do it, given my set of experiences, I don’t think any of us can do it, at least not very well. So we have to come up with a different way.
So for us, you know, the foundation at a different way was data, right? We said, how can data help us make consistently better decisions? And don’t get me wrong, we didn’t think the data was suddenly going to be a crystal ball. You know, that would, that would tell us the future that would give us the outcome of every game or even every season.
But what it could be is maybe a very bright torch through an otherwise very dark cave. Right? Give us a general sense of direction. Keep us from knocking into too many walls along the way. So what we decided to do was we took everything we thought we knew about the game, everything we thought made a great player.
Everything we thought made a championship team and we threw it out the window. We started over, we said we are going to study everything and unless we can prove a concepts relevance to today’s game, under today’s circumstances, then we’re just not going to believe it anymore. So we went back through every major league game played going back a number of years and looked at every situation and every one of those games and tried to value those situations.
And then with all that data, we started asking all these different questions like, you know, who are the players that puts you in the most advantageous situations as often as possible. What was the market for those players? Was it efficient? Did it shift over time? And when it was all said and done, we had a completely new set of metrics that bore no resemblance whatsoever to anything you’d see.
You know, in the USA today, you’re on espn.com. And out of those new metrics are really two key takeaways. The first was that although these were the greatest players in the world, a large percentage of them were completely fungible. Meaning we could take experienced players who were making a lot of money and we could replace them with inexperienced players making the league minimum salary now for a team with no money.
Right? This was a key insight. The second was that although baseball statistics had been around for more than a hundred years. Literally a hundred years. Those traditional statistics, they didn’t always tell the whole truth, right? In fact, sometimes they were downright misleading. And now with our new metrics and our new methodology, we actually expose a lot of these situations and created huge arbitrage opportunities for us, especially when we were dealing with people that, Oh, we’re only using sort of the traditional metrics.
So how do we implement these systems? How do we manage them? Those are probably two separate talks entirely, but I think there are a few salient points that are worth mentioning. The first is that we knew we had to have a team of diverse skills, right? Both on the field and off the field. You know, on the field.
We couldn’t afford those five tool players, those individual guys who could just do it all. There were too few of them on the planet, and the ones who did exist were way too expensive for us. But what we did have is we had a team of 25 players. We had a larger roster of 40 players and we could try to make sure that every one of those players did something above average, something above average that might help us win a game.
And then if we put together all the pieces in just the right way, we collectively as a team might do everything above average. And maybe more importantly, we could cover for each individual’s weakness cause they all had them. We took the same tact off the field. Brought it into the office, you know, between me and Billy, just the two of us, we didn’t have all the answers to all of our problems.
In fact, between just the two of us, we probably didn’t have any of the answers to any of our problems. But within our organization, we had a tremendous amount of experience and expertise and we tapped into that as much as we possibly could. And whether people realize it or not, a lot of our conversations with them, you know, ended up back in our models or in our algorithms.
Now, one of the things we realized and going through this in a different times in my career, I’ve been a part of a baseball organization where there are people working there that have worked in every organization in baseball, right? There’s someone in our organization that worked at every other organization.
So if we wanted to just follow best practices, there was someone within our organization that had firsthand knowledge of that best practice somewhere else. But what we realized was that following best practices. Ultimately that was a losing strategy for us because we didn’t have the resources to keep up.
You know, if the Yankees were doing something and the Braves were doing something, we couldn’t just try to copy them. We had to be the ones creating best practices, you know, chasing that next horizon, hopefully being the first ones to get there. So the way we did that was we started looking outside of baseball for inspiration.
In fact, we started looking into all these different industries that we thought shared similar characteristic stars. And then we asked the same questions to them that we asked of ourselves. You know, how do they, how do they use data to help in their decision making? You know, how do they deal with human capital as a primary asset?
How do they deal with portfolios of assets that have very different time horizons, et cetera. And what we hope to do, and what we ultimately did was gain insights right? From all these different industries. And then from those insights create novel processes in our own industry processes that would give us a real competitive advantage over everybody else.
Now, one of the things this made us do was it really forced us to remain open minded. I mean, especially when we were already successful, and this is hard to do, right? Things are going well. You’re already winning a lot of games. You think you’ve got it licked. But we realized that there was still more that we had to do.
We had to keep pushing forward, right? You know, bill parcels, a famous NFL coach once had a real quarterback controversy on his hands were for three or four weeks in a row. He kept asserting, you know, this guy’s my quarterback, he’s my quarterback. And then at one particular game, his team was losing the second half.
They change quarterbacks, they come back, they win the game, and the post game press conference, the press, they were all over about it. Yeah. They kept asking him, well, who’s going to be your quarterback? Yo, who’s going to be next week? Because for three or four weeks in a row, you’ve been saying it’s this guy.
And finally parcels had enough and he leaned into like probably his only parcels could, and he looked around the room. He said, I changed my mind. The fact is, it’s really hard to change your mind. Right. Especially in the face of such a public stance or a significant investment, you know? But that’s what we were determined to do, and we knew we had to do it.
Now the question really for us was, when do we change our mind, right? If we were really going to be focused on process and not get bogged down necessarily by the outcomes, how are we going to do that? I mean, in baseball, you’ll 162 times a year in the NFL. Now, 16 times a year we get charged with a win or a loss.
Right, very black and white. And if we were going to put blinders on to that and say, no, we’re really gonna focus on our process before we make any changes, how do we evaluate our process? Right? So what we started doing was we started keeping what we referred to as a decision diary, meaning we started writing down all the circumstances that surrounded our decisions in the moment we had to make that decision.
And it could be simple things like what were the pros, what were the cons? What were other options at the time? What were the different levels or levers that could make this either a success or a failure? And what we found was that once the outcome had been realized from a particular decision, which for us oftentimes was three, four or five years in the future.
And at that point, all the uncertainty is removed. We were terrible at recalling all of those specific circumstances back when we made the decision. Especially our confidence level when we made the decision, just as an example, in 1999 we had the number nine pick in the amateur baseball draft. We took a young left handed pitcher at university of Southern California named Barry Zito.
Now, at the time in the baseball industry, this was seen as a massive overdraft, right? Barry Zito, according to the publications, wasn’t a top 10 talent, maybe not even a top 20 talent. But according to our analysis at the time in Oakland, we thought that Barry Zito, of all the pictures available to us, was the closest to pitching in the major leagues.
Now his ceiling, you know, his upside may have been that of a middle of the rotation starter, a good pitcher, not a great pitcher, but he’d be that fast. And in 1999 in Oakland, after all those losing seasons, we needed someone fast. So we drafted Barry Zito. Well, lo and behold, three or four years later, Barry Zito wins the American league.
Cy young award, best pitcher in the league. Right? And if you had asked any one of us who had been in that original draft room, me included, I guarantee you, we all would have said, yeah, see, see, I told ya, you know, I told you. Remember when I said he’d be an ACE? The fact is not one of us ever believed that Barry would do the things he did in his career, and he had an amazing career, was way better than we ever said he was going to be much better than a middle of the rotation starter.
But the only way we could check ourselves on that was by having this decision diary. You know, bill used to say, listen, at the end of the year, even a good year, I want to be able to look in the mirror and say, where are we lucky? Or where are we good? Cause it’s okay to be lucky. It’s just not okay to pass it off as skill, you know, cause you won’t be able to repeat it again and again.
And ultimately what we were after was some sort of predictable, repeatable success in an uncertain world. Right. And that’s a tough combination. But ultimately that’s what we’re after. So at the end of the day, what happened? Well, we didn’t win every game. We didn’t win every world series. But what we did do is we really got our arms around all this, you know, all this uncertainty in our decision making.
And over the course of the next four years in Oakland, we won more games than any other team in baseball. But maybe most importantly is we did it for about 30 cents on the dollar as compared to the number two team. And really fundamentally changed the way our industry went about evaluating players.
And trying to build teams and the Oakland A’s continued to be successful, you know, all the way through to this day. So in conclusion, there’s one more thing I want to cite to you. It’s from Thomas Kuhn, who wrote the structure of scientific revolutions. Um, anybody ever read it? Yeah. Okay. It’s a bit of a dry read.
Uh, no, it’s actually, it’s a great book with some terrific insights. But at one point, he writes the proliferation of competing articulations, the willingness to try anything, the expression of explicit discontent. And the recourse to philosophy and to debate over fundamentals. All four of these are symptoms of a transition from normal to extraordinary research.
Now, as it turns out, and not by design, mind you, we had all four of these elements in Oakland. We have all four of them in Cleveland today. Right? And expression of explicit discontent. Yeah. Believe me, a lot of losing seasons in a row do that to you, yo. A willingness to try anything. That came straight from Billy Bean.
You’re the ultimate leader of our franchise. And without that strength of will, there was no way we would have tried half of the things that we did, the recourse to philosophy and to debate over fundamentals. We threw out everything we thought we knew about the game. And we started over and last through the proliferation of competing articulations.
We came up with a lot of ideas. I mean, a lot of ideas, and I can tell you now, you know that it’s almost 20 years, you know, in the future, Billy and I look back and we laugh. We laugh at how simplistic some of them were, how extreme some of them were, but the fact is, we tried. We tried again and again and again because Billy knew that with each failure, each small failure, it really wasn’t a failure at all.
We were just getting more information that was leading us to a better algorithm, a better model, or a better answer. So at the end of the day, really the most important things for us. We became, you know, acutely aware of all these psychological, psychological biases inherent in our decision making.
And just by becoming aware of them, we’re able to catch ourselves when we felt like they were, they were impacting us, you know, negatively. Um, in this game of uncertainty, right? We always asked ourselves, how can we be the house? How can we stack the odds in our favor so that we’re right? Maybe just a little bit more often than we’re wrong, or maybe just write a little bit more often than our competitors.
And then with the naive question, we just became relentless about asking that naive question. You know, it wasn’t something we did as part of a two day management retreat, one off season where we said, okay, now let’s ask the naive question as it relates to, you know, major league contracts. Now this just became part of our DNA, or sort of every day we were questioning what we were doing.
We were pushing on our fundamental beliefs. Yeah. We couldn’t wait for the rules in our industry to change because we always wanted to be the first ones to adapt to the new rules and get ahead of everybody else. We were constantly, constantly asking that, and I have questioned. And lastly, really most importantly, if there’s nothing else you remember from what I said this afternoon, just please remember this one thing.
Root for the Browns. All right. Thank you very much. Go Browns.
Emcee: Right. All right, folks. So we have about 15 minutes for Q. And. A. And I know that doesn’t sound like a lot of time, and I’m sure there are a number of questions, but just so you know, Paul will be available after this session ends and there’s a 30 minute dessert break. So that means you can get sugar and caffeine and your question answered by a Paul or a photo opportunity.
He’s certainly more handsome. The Jonah Hill, no shots at Jonah Hill who played him in the movie. So you can get your photos as well. We have some Mike runners who can handle questions. Does someone want to get us going? Yep. We got one over here. Oh, okay. There we go. In the back. All right, well, the Browns are my third favorite team, but I was born in Cleveland.
Audience Question: But anyway, I want him to do well, but why don’t I remember, it was kind of a, a lot of noise when you went to the Browns from, from baseball to football, and it was like, Oh, you’re trying to bring money to pro football now and all this. Why did you go to the Browns instead of like another small market baseball team, like the Royals or something.
Like what, what attracted you to the Browns and football and how is that different than maybe using these tactics in baseball?
PD: Sure. I won’t bore you with my personal history in terms of sort of passion for, for both sports. And I had some history, you know, in football, but, I think the bigger thing was I just thought it was a massive opportunity, you know, to do something special. I mean, football definitely seemed like it was, it was far behind baseball at the time, just in terms of, you know, how they went about making their decisions both on the field and off the field.
And look, Cleveland, you know, really ever since they sort of moved to Baltimore and then, you know, got their expansion franchise back. They hadn’t been successful. Um, and I will tell you that. When I was originally in Cleveland with the Indians in the mid nineties the three years I was there with the three years that there were no Browns.
Right. So, and it was an Indians town. I mean, like I said, we were going to the world series multiple times and at a great team. The night we clinched the world series in 1997 or to go to the world series, I had to get back into the office. I was the major league advanced scout, and I had to print out the advanced report for the world series.
So I was trying to get back into downtown Cleveland and it was chaos, right? People on top of cars, honking horns, traffic was stopped. I finally got back into my office and there was someone in there who was a native Clevelander, and I made a comment to him that, boy, this is nuts outside, you know?
And he said, yeah, this is, this is crazy, but you have no idea what this would be like if this were the Browns. And it really stuck with me because at that point there were no Brown. It’s like the Browns didn’t even exist and I thought, wow, you know, to do something like that. It would be, yeah, we’d be pretty special.
So when this opportunity came up and to help a franchise that had struggled for a long time, and maybe just try to try to help them think differently about what was in front of them, uh, just was too attractive to, to turn down. Yeah. We had one over here. Yeah. Um, go Steelers. Um, yeah. You’re not even gonna want to answer.
Audience Question: So you were fortunate when you got started to go to an organization that was ready to think differently at a leader that thought differently. What is the best way to help people in your organization? Start thinking differently and try to turn turnaround the way people think of what matters and how you address what you’re trying to accomplish.
PD: Right. Yeah, no, it’s a great question. In fact, you know, most of the times in sports when these sort of senior leadership jobs are open, it’s because things have gone poorly. Right? So, you know, you’re, it seems like you have an opportunity at that point to really turn things around. You would be amazed though, at the lack of willingness to change, despite the fact that things have been going poorly.
Um, and, uh, and I don’t want to say that was exactly the case in Cleveland, but it’s not like they welcomed it with open arms and said, yes, let’s try anything. You know, at this point. Um, I think one of the biggest things for us was to really try to bring people along and make them understand, uh, that.
We weren’t just throwing out, again, all of their experiences or all their expertise, all of their knowledge. What we were actually trying to do was, was build on all of that and maybe just look at it differently, um, and maybe employ it a little differently. Um, I think people’s concern is that, you know, Oh, geez, so now what I, what I either know or what I believe no longer matters.
It’s like, no, that, that’s actually not it at all. We really need what, you know, um, we’re just gonna look at it sort of through a different lens and we need your help in creating a new solution, you know, for us to be competitive. Um, and that’s really the way we’ve gone about it. I think, at least I’ve gone about and each of the different organizations I’ve gone to, it’s really sort of a collaborative effort and bringing everybody along.
And getting them excited about what the possibilities are, um, with what they already know, you know, and what they’ve already experienced and how they can add to the add to the solution. Yep.
It’s running, he’s running.
Audience Question: I was just going to ask what’s for dessert? I’m joking. So around this, almost thought of some of the stories you’re sharing where it’s like longterm thinking and then simultaneously you have a game coming up, right? And so how do you pair this ambidexterity of we’re paying attention to longterm patterns and trends and kind of principles as you laid them out.
And then short term decision making with the best of what you have. Cause you gotta make a move now and I, and then I, as I was thinking of the question I’ve given, a lot of the work is built on like Daniel Kahneman’s work of like by season thinking fast and slow. Does that tie it all into how you overall take on, say your new position now and coming in with a framework even though there’s a lot of work to do?
PD: Yeah. No, it’s, it’s a constant challenge and baseball, it’s sort of front and center. Right, longterm and short term, because you draft a player in baseball with the hope that in four or five years, he’s good enough to make your major league team. So inherently you’re thinking longterm, you know, when you’re thinking about the draft or the minor leagues, and there’s a degree of patience, you know, uh, within the organization.
At the same time, the major league manager is concerned about winning that night, you know, and whatever they can do that night. So in baseball, you’re sort of constantly, you know, balancing those two. In the NFL, you know, there’s not as much of the longterm culture. In fact, they say NFL stands for not for long.
So you know there are no minor leagues. Yo, you draft players in April, they’re on your team in September, and they’re expected to contribute right away. So the whole notion of sort of development and patience is somewhat foreign, you know, in the NFL and the careers are so short, right?
For, for a lot of the players. So there is this sense of immediacy. But to run a great organization, you know, you really do need to incorporate that, that longer term thinking in addition to the, the short term. I mean, it’s one of the things I admire so much about the Patriots. You know, they’re, they’re incredibly disciplined with their longterm thinking and you know, they’ll, they’ll trade away good players probably a year before maybe other people would, um, in order to sort of restock that asset.
Even though they have short term expectations to win the Superbowl that year. Right? Um, and that’s a, that’s a hard mix to get, right. Uh, but they’ve done an extraordinarily good job of it, but I do think it’s, it can be even more challenging in the NFL than it is in baseball, just because of the, you know, the culture of it.
Audience Question: With everything that’s happened recently with the Ash Rose and with where you were looking at data. And trying to manage the integrity of the game and what something like baseball is. How did you kind of go about like looking at what data sets and what was kind of walking that line of keeping the game and managing that integrity and what was like too much?
PD: Sure. Yeah. You know, I’ll be honest there. There were times in my career where I felt incredibly naive. About, you know, some of the things going on around me, you know, just as an example. So back in the early two thousands, you know, there was all the speculation around, uh, performance enhancing drugs, you know, in baseball.
And I think it was either in 2004, 2005, they did the first randomized and anonymous testing and it came out that, you know, a large percentage of the players were using, which was shocking to me. At the same time, we, we had all this data that showed that. You know, sort of, uh, and then the cliches that were built around the data were people saying things like, Hey, well, good, good hitters.
You know, they develop power. You know, when they get older, it’s like, well, maybe there was a reason why, you know, and that we weren’t really identifying. Um, but they were players that had sort of fundamental shifts in their performance, either positively or negatively. That were in the dataset writing it.
And we just sort of took it as, Hey, this is, this is just part of reality. Now we have this additional piece of information. And we thought, well, gee, do we just have to throw out all the data from the previous 10 or 15 years? Cause it’s all tainted, right? And, um, it’s not necessarily predictive of what another player might look like or another profile going forward.
But we’ve had a handful of instances like that where it’s. Yeah. Where it’s, it’s really challenging. I mean, beyond the moral and ethical issues, it’s, it’s challenging for us to do our jobs, which is, you know, ultimately predicting, you know, predicting the future. Um, but I think there’s a, there’s sort of a constant tension there.
The other thing I would say is that, look, even though we use a lot of data, um, and we have an analytical framework to make our decisions, I mean, ultimately, you know, my job and I was the general manager, um. I was a glorified HR manager, right? I mean, our job is all about people. Our entire product is people, and these are real people, you know, and there are real relationships that go on within our building, and there are real aspects to teamwork and culture and everything else that are hugely important that we can always capture, right?
With data. Um, you’re just to, not to run too long, but there was one example when I became the GM of the Dodgers. One of the things that struck me was that we didn’t really have any starting position players that had ever been to the playoffs. And there was kind of this palpable, you know, difference when I was around spring training then.
Then when I was with the ACE, you know, with the A’s, we expected to win every game. You know, by the time I was leaving there, you know, the Dodgers, it just felt different. Well. That year, we ended up making a lot of trades. We ended up winning the winning the division when our first playoff game, and in 15 years.
And, uh, and all the players we brought in via trade were guys who had playoff experience. You know, my thinking being, we need some people here who’ve sort of finished the job before and can help everybody, you know, uh, uh, make that run. So when it was ultimately successful and we won, I thought, huh, genius.
Right? So this, this off season, everyone I sign is going to be, you know, have tons of playoff experience. So that’s what we did. Every player from our backup catcher, the starting third base, and everyone we brought in had significant playoff experience. And that spring training, I sort of made a point of it and I went around the room, said, you know, Jeff, how many times have you been to the playoffs?
JD, how about you? And it was, you know, seven times, eight times, nine times. It’s all these guys ever knew. Well as it turns out, we had a rash of injuries too. You know, very important players. And the team started really struggling and now we had a clubhouse full of guys who had never done anything but make the playoffs.
And it became a disaster. Right? An absolute disaster. So our data was telling us, Oh, this is a great path. But ultimately, you know, I did not do a good job of sort of considering all the, all the human elements that were involved. So it’s, it’s something that we’re always trying to try and to balance.
Awesome. Paul has a little time. We got to make our way out of this room as we reset it for the afternoon sessions, so if you want to continue the conversation just outside, please feel free. Let’s give Paul a big round of, thank you.