This book by Michael Lewis delves in to the reasons behind the mysterious success of Oakland Athletics, one of the poorest teams in US baseball league . In a game where players are bought at unbelievable prices , where winning / losing is a matter of who’s got the bigger financial muscle, Oakland A’s go on to make a baseball history with rejected players and rookie players .
“Is their winning streak a result of random luck OR Is there a secret behind their winning streak ? “ , is a question that Michael Lewis tries to answer. Like a sleuth, the author investigates the system and the person behind the system , Oakland A’s manager Billy Beane.
The author traces of life of Billy Beane from his college days to the time when he becomes the manager of Oakland A’s. Billy is one of the most promising guys in his hey days and every one believed that Billy was the superstar in the making. However Billy to everyone’s surprise doesn’t make it. He quits his job and takes up a desk job in the Oakland A’s team that is responsible to pick the talent and manage the team. Scouts, as they are called, are people who draft young and promising players in to the team. Billy in the course of time realizes that the methods followed by scouts are subjective, more gut feel based, touchy feely kind of criteria. Even some of the broad based metrics used to rate players appears vague to Billy. He sets on a mission to create metrics which truly reflect the value of the players. Billy relies on statistics, metrics to shortlist players and he does so in a manner that is similar to futures and options trader.
Much before Black-Scholes showed that the option can be replicated using a fractional unit of stock and bond, the option prices were way above the fair value. However once traders knew a rough picture of fair value, the difference was arbitraged away. In the same way, the players belonging to the financially rich teams are overvalued in one way. Billy systematically chips away the broad metrics and tries to find ways to replicate these overvalued players with the help of new undervalued players, rookies who fit his metric criteria. So, if you think about the book from a finance perspective, Billy Bean is a classic arbitrage trader who shorts overvalued players and longs undervalued players. Infact the way in which Billy operates by selling and buying players is similar to any trading desk operation. He starts off the season with really average players and as the season proceeds, he starts evaluating the various team players available to trade , develops aggressive buy sell strategies ( of players) and creates a team which has statistically a higher chance to win. I found the book very engrossing as it is an splendid account of Billy Bean’s method of diligently creating a process that is system dependent rather than people dependent.
This book is being adapted in to a movie starring Brad Pitt as Billy Beane. It is slated to be released this September. If the movie manages to replicate at least 30-40% of the pace and content in this book, I bet the movie will be a run-away hit.