The Economics of Moneyball: Explained

The World of sports is heavily dependent on the theories that your opponents will make up or follow. The prejudices an audience or a recruiter harbors in their nature are also a part of it, but the most important part is always the traditions in the past. The world of sports has always abhorred changes in the way it’s played.

Billy Beane as played by actor Brad Pitt (left); Actual Billy Beane (right)

Moneyball introduces a different, more numbers-based approach using probability and percentages to measure a player’s worth rather than the intuition that conventional recruiters based their judgments on.

The minds behind this drastic change came from a once-Major League Baseball player and a Yale Graduate - Billy Beane and Paul DePodesta. A fictional character (Peter Brand) played Paul in the film as Paul did not want his name or his likeness being portrayed in the film.

Billy Beane, the general manager of the Oakland Athletics, is forced to re-evaluate his perspective in the way a baseball team is made and run due to a peculiar series of events.

With the team's defeat against the New York Yankees in the 2001 American League Division Series and with the possibility of departure of their most vital players Johnny DamonJason Giambi, and Jason Isringhausen to the market, Beane is required to assemble a team for the 2002 season with Oakland's limited budget.

Following this prologue, Beane goes about a scouting visit to the Cleveland Indians which turns out to be a dead end. In the movie, it is depicted that the General Manager of the Cleveland Indians trusts and values the opinion of a Yale Economics Graduate regarding the importance and usage of players in their line-up. This causes him to confront the graduate to understand the reason behind the importance that the General Manager places on him. This sets into motion the series of events that would eventually make Oakland Athletics win 19 games in a row.

After their meeting, Beane tests Depodesta's theory by asking whether he would have drafted Beane out of high school; when scouts had considered Beane promising his career in the major leagues but which eventually was a disappointing run. This is also shown in the movie as a reason for Beane to be motivated to change the rules that govern football. Beane hires Peter Brand, in reality, Paul DePodesta, as his assistant General Manager.

The crusade begins with Beane opting to not rely on the Oakland scouts' experience and intuition, but on Brand’s usage of sabermetrics, selecting players based on their on-base percentage. Brand and Beane (DePodesta) incorporate this methodology to hire undervalued players such as unorthodox submarine pitcher Chad Bradford, catcher Scott Hatteberg and an outfielder David Justice. This is received poorly by the other team members which lead Beane to fire head-scout Grady Fuson after he accuses Beane of destroying the team. Beane also faces opposition from Art Howe, the Athletics' manager with regards to the strategy used by Beane and also with the knowledge of uncertainty between the two individuals considering a one-year contract that Art Howe is doubtful to inspire trust amongst the players and on his techniques.

Athletics are 10 games behind in the early stages of the season, leading critics to dismiss the new method as a failure. Beane, to ensure that all move ahead according to the information and the quantitative approach is given to him through DePodesta’s methodology, he trades away the lone traditional first baseman, Carlos Peña, to force Howe to use Hatteberg, making similar deals so Howe had no choice but to play the team Beane and Brand (DePodesta) have designed. Three weeks following these changes, the Oakland Athletics are 4 games behind the first.

Two months later, the team starts an amazing winning streak. The match against the Kansas City Royals marks the point where Beane’s choice of restructuring his team finally pays off with Hatteberg scoring a walk-off home run allowing the Athletics to achieve a record-breaking 20th consecutive win. Beane on the other hand, confesses to DePodesta that he would not be satisfied until they win the Championship using this method.

The Athletics eventually played in the 2002 American League West title but lost to the Minnesota Twins in the 2002 American League Division Series.

Like Icarus whose wings made of wax melts as he approaches the sun, Beane similarly fails to take the last step. The movie shows Beane being contacted by the owner of the Boston Red SoxJohn W. Henry, who realizes and wants to see sabermetrics become the future of baseball.

John W. Henry wants Beane to become the new general manager of the Boston Red Sox, which he declines. It is also a fact that Beane was being offered a check of 12.5 Million dollars, which would have made him the highest-paid general manager in the history of sports. He returns to Oakland, to his home without a heavy heart, and two years later the Red Sox win the 2004 World Series using the same model that the Athletics pioneered and faced the challenges that came with it, to change the way this game is played.

Now that we understand what events took place to create such a historic event spanning over 2 championships lets understand the game of baseball.

Baseball is played between two teams with nine players in the field at any given point. There are three bases. Numbered counter-clockwise, first, second, and third bases with the final base; home plate, the fourth "base". The playing field is divided into three sections:

  • The Infield: Which contains the four bases. It is for general defensive purposes and is bounded by the foul lines and a grass line.

  • The Outfield: The grassed area beyond the infield grass line between the foul lines, and surrounded by a wall or fence.

  • Foul territory is the entire area after the foul lines.

The chances taken by each side to bat, or pitch are called an Inning. It is broken up into two halves in which the away team bats in the first half, and the home team bats in the second half. The winner is the team with the most runs after nine innings of playtime. If the home team takes the lead anytime during the latter half of the ninth or of any inning after that, play stops, and the home team is declared the winner. This is known as a walk-off, which was done by Hatteberg to grasp the 20th consecutive win for the Athletics.

The basic contest is always between the pitcher of the defending team and a batter of the attacking team.

The goal of the team attacking (batting) is to score more runs than the opposition; a player may do so by batting, then becoming a baserunner, touching all the bases in order, and finally reaching the home plate; and therefore scoring a home run.

A baserunner who has successfully touched home plate without being called out (when the ball reaches any catcher before the runner touches the base). After touching all previous bases, he scores a run. In an enclosed field, a ball hit over the fence awards the batting team an automatic home run, which entitles the batter and all runners to touch all the bases and score. The team in the field is the defensive team that attempt to prevent the baserunners from scoring.

Each position is weighted in terms of difficulty. Pitchers, while part of the active defense, are specialists in their role that they usually make only routine plays. The battery is composed of the pitcher and the catcher. These are two fielders who always deal directly with the batter on every pitch, hence the term "battery", coined by Henry Chadwick and later reinforced due to its similarity to artillery fire.

With that being said, we have covered the basic know-how of the game of Baseball. Now we move into the empirical analytical approach used and pioneered by the Oakland A’s: Sabermetrics.

Sabermetrics is a form of experimental analysis of baseball which measures in-game activity. Sabermetricians are individuals who collect and summarize the relevant data from the in-game activity to answer specific questions relevant to the management of a team and its success. The term is derived from the  Society for American Baseball Research which was founded in 1971.

The Oakland Athletics began to use a more quantitative approach to baseball using sabermetric principles in the 1990s. The idea started with Sandy Alderson as the former general manager of the team used the same principles towards obtaining relatively undervalued players which allowed the team to cut drastically on costs. His ideas were continued when Billy Beane took over as general manager in 1997 who found himself in a similar predicament.

  • In the Image: The left box indicates the data gathered from a pitcher against a left-handed batsman. The right box indicates the data from a right from a right-handed batsman.

Its creation is attributed to the attempt made for baseball fans to learn about the sport through an objective lens. Such analysis is performed by determining the value of players in every aspect of the game such as batting, pitching, and fielding. The evaluated results are put in terms of either runs or team wins.

The traditional measure of batting performance is considered to be hits divided by the total number of at-bats which is termed as On-Base Percentage. To calculate the On-Base percentage:

The total number of hits + bases on balls + hit by pitch are divided by at bats + bases on balls + hit by pitch

Moving to the traditional measure of pitching performance is considered to be the average earned run. It is calculated: (Nine innings in a game)

  • (Number of Earned runs / Number of innings pitched) * 9

Baseball Prospectus pioneered another statistical approach called the peripheral ERA. This measure of a pitcher's performance takes hits, walks, home runs allowed, and strikeouts while adjusting for ballpark factors such as its dimensions.

The various forms of analysis are termed as the following:

  1. Batting average on balls in play (BABIP) is a measurement for determining the pitcher's performance. When a pitcher has a high BABIP, they will often show improvements in the following season, while a pitcher with low BABIP will generally show a decline in the following season.

  2. Value over replacement player (VORP) is a popular sabermetric statistic. The results clarify the extent of contribution done by a player with respect to an average performing replacement.

  3. Wins above replacement (WAR) is a sabermetric statistic that will evaluate a player's contributions to his team

Baseball, the game has changed a lot over the last decade. It can be entirely credited to the choices made by Billy Beane; from choosing to use Peter Brand’s (Depodesta) method for overcoming traditional and biased approaches to eventually giving the world audience all that any sports fan has ever asked for; a story to tell. The twenty-game consecutive win streak accomplished by the Oakland A’s is such a story.

And finally, we all can agree, that when players, managers, and the spectators enjoy a good game, the importance of Sports becomes even more prominent and all the more worth gripping the edges of our seats supporting the color we love. After all, it’s just a game.

Written by Nilabha Mukherjea

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