Baseball, Statistics, and Arbitrage

13:23 Fri 23 Oct 2009
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Michael Lewis’ book Moneyball has something of a cult following, and helped its main subject, Oakland Athletics general manager Billy Beane. The essential idea is that by focusing on non-traditional (in baseball terms) statistical analysis (called Sabermetrics), Beane could identify arbitrage opportunities in baseball markets.

Buzz Bissinger critiques the idea that Beane was particularly successful, and that his system drove the years of success that the A’s had, in “Against Moneyball”. Bissinger claims that what really drove that success was the phenomenal pitching trio of Tim Hudson, Mark Mulder, and Barry Zito. He also points out that Beane hasn’t done too well of late, and that Beane disciples have done poorly.

It’s difficult to know. Certainly, amazing pitching helps baseball teams. But it’s quite possible that Beane did identify some things that others overlooked, and that his success did lead to an increased focus on statistics-driven baseball decisions—and now, with more teams using them, he has less of an edge, and hasn’t come up with a new edge, leaving him and the low-budget Athletics toiling against well-funded Goliaths. Furthermore, Bissinger doesn’t mention Theo Epstein, hired as Red Sox GM based on his being a Sabermetrics expert—but again, has Epstein done well because of that, or because he got lucky with his decisions and has the huge Red Sox payroll to play with?

I think the statistical analysis will only grow more intense and widespread, in part because the idea of relying on numbers is so much more compelling than the idea of relying on the impressions of scouts. But whether it actually works better all the time is probably, as Bissinger suggests, still an open question.

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