When Michael Lewis wrote Moneyball – one of our featured Value books – in 2004, he presumably never imagined he would be creating a whole new sub-genre of literature.
Indeed, if we now tried to read all the books chronicling how an unconventional yet forensic analysis of statistics helped turn around the fortunes of various baseball and other sports teams, we would have no time to run money here on The Value Perspective.
Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak – billed, predictably enough, as ‘Moneyball for a new generation’ – caught our eye, however, and we were rewarded with some gratifying parallels between value investing and how the long run of failure experienced by the Pittsburgh Pirates was turned around by, that’s right, an unconventional yet forensic analysis of statistics.
Longest losing streak in history
As the book’s subtitle suggests, by the end of 2012, the Pirates had gone two decades without ever making the play-offs – considered the longest losing streak in the history of North American professional sport.
To make matters worse, their American football-playing neighbours the Steelers had won the Super Bowls of 2005 and 2008 while the Pittsburgh Penguins had won the National Hockey League’s Stanley Cup in 2009.
As Sawchik puts it, “time was a scarce resource” for the Pirates’ management team and so, with little left to lose and a budget fully in keeping with their lowly status, they decided to adopt a hugely contrarian approach to building their team ahead of the 2013 season.
Taking full advantage of the performance statistics with which baseball is awash, they decided to focus on areas all their competitors ignored.
Much as with football clubs in Europe, US baseball teams tend to pay the highest prices for offensive players.
With no budget to attract batters who could consistently hit runs, the Pirates’ management team chose to focus on buying pitchers and fielders who could help prevent the opposition from scoring – in effect emphasising defence and so going against a century or so of received wisdom on how the game should be played.
To paraphrase Yale´s endowment fund manager legend David Swensen, offence may win games but defence wins championships.
To be clear, the Pirates did not exactly win the World Series in 2013.
Having come second in the Central Division of the National League, they won their post-season ‘Wild Card Game’ before losing the best-of-five Division Series 3-2 to the St Louis Cardinals, who themselves eventually lost the World Series to the Boston Red Sox.
Still, after 20 years of finishing nowhere, post-season is post-season and the Pirates’ success was built on this highly contrarian approach of setting out to ensure the opposing team scored fewer runs than they had managed.
We will highlight some fascinating individual examples of this strategy – with its echoes of the George Graham-era terrace chant of “One-nil to the Arsenal” – next time.