Tuesday, April 20, 2004

For the inaugural Baseball column, I will begin with a reference to one of the best books I have read in recent memory, Moneyball by Michael Lewis.

It is a paean to the genius of Oakland A’s general manager (GM), Billy Beane. In it, we learn how he mines the statistics of various draft-eligible players to identify those diamonds in the rough that will allow him to stay at the top of the heap of major league baseball while operating on a, relatively-speaking, shoe-string budget.

In it, we learn that the A’s GM, and by extension the organization, focuses on not making outs as opposed to traditionalist measures of “speed”, “power”, “defense” “projectability” when evaluating players. On-base percentage (OBP) is used as a proxy for the number of times a player does not make an out. Since there are only two places a player can be following an at-bat, on the bench or on base, the percent of time he is on base is a good proxy. (I know a homerun would place the player on the bench but not after successfully being on-base, no matter how brief the interval, as he touches each base in procession on his way back to home plate and from there to the bench.)

As a result of this focus, the A’s will focus on players with high OBP such as Moneyball lottery ticket, Nick Swisher, or CF Steve Stanley or C Jeremy Brown. While Swisher was a consensus 1st round pick, the other two were reaches where the A’s drafted them. It is this emphasis on hidden value, and the possibility of exorbitant returns that hidden value can unleash, that has made this book such a hit on Wall Street.

And it is from Wall Street that I get into a column on fantasy baseball. On Wall St., there is the theory of market efficiency. It posits that the value of a security reflects all the information available about such security and, if there is new information, it is quickly, if not instantaneously, incorporated into the security’s price.

If this holds true, then there is no need for security analyses, and this threatens the lucrative positions of those employed on Wall Street. Hence, Moneyball serves to reinforce Wall Street’s belief that it is valuable for the analysis it provides. (“See there are always new ways to discover inefficiency. If Billy Beane has found a new way after 150 years of baseball doing things one way, then we can, too. Now pay us the big bucks!”)

So what does this have to do with fantasy baseball? Everything. See if I talk about strategies that have led to a modicum of success in fantasy baseball, then I will have put them out into the “fantasy market” where they will quickly be incorporated into the strategies of my competitors (If you accept that a theory in finance can be correctly applied to that of an unrelated discipline.) And if my competitors use the same strategies that I do, then we will be at a stalemate in our inability to take advantage of asymmetrical knowledge since we would both possess the same frameworks for player evaluation.

As much as my ego relishes the thought of being coronated as an expert, my competitiveness restrains me from disgorging every piece of ego-enhancing wisdom. It is this battle between ego glorification and winning that will be fought with each installment of this column. So stay tuned and on your toes, you never know which side will come out victorious. (For this column, Winning has won. By warning you that I am conflicted, I will have given my competitors a seed of doubt as to whether I am disseminating false information. Even this has the flavor of Wall Street. See Martha Stewart’s proclamations of innocence to MSO shareholders and the government accusation that she did so to protect his stakes in MSO.)

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