10th Annual iQmetrix Summit Keynote: Evaluating, Measuring and Assigning Value to Talent with Paul DePodesta

Our second keynote speaker of the 10th annual iQmetrix Retail Summit is none other than Paul DePodesta, whose story became famous with the book and film Moneyball.

The Moneyball story became a hit with both baseball fans and business leaders because it challenged the status quo for managing personnel. At the time of Paul’s hiring, Oakland was one of the worst teams in the league, coming off six losing seasons while posting one of the lowest payrolls in baseball. In an industry entrenched in ingrained thinking and outdated systems, the A’s needed the unique management and creative approach that GM Billy Beane and Paul brought to the table.

Conventional wisdom in MLB is that wealthy teams – who spend three times as much on talent as poor teams – will win out. But in Paul’s final four seasons in Oakland, the A’s won more regular season games than the New York Yankees, who during the same period spent $350 million more on player payroll than the A’s. In this session, Paul will discuss the innovative strategies he used to create a winning team, as well as the application of these strategies in the corporate world. 

Paul started as the van driver for the Cleveland Indians and worked at climbing through the ranks. When it came to evaluating players, subjectivity ruled the day. After a particularly grueling week, Paul took off to Vegas for a bit of a break. Sitting at the blackjack table on Friday night Paul noticed a guy was losing hand over fist. He wanted a hit when the dealer almost skipped him - she felt sorry for him, but he landed a 4 and won! Paul walked around thinking how the casino works. They achieve outcomes by a laser focus on process. If they stick to their process, in the long run, they are going to win. Paul thought, "How can I bring a similar mindset into baseball?"
Around this time the Oakland A's called and offered Paul the Assistant GM job. The Cleveland Indians were successful at the time... the A's were not. What the A's did have was a unique culture and the will to do something different. There was one question Paul had to ask Billy before taking the job. "Billy, with your resources, do you really think you can win?" Billy responded, "I will never use payroll as an excuse." Billy knew they had to come up with a different way to win.

It's like cooking a gourmet meal when you can only afford to shop at 7-Eleven. Paul DePodesta

They started to ask the naive question: If we weren't already doing it this way, is this the way we would start? Once you start asking that question, you realize how powerful it is. Processes are put in place in a particular time, in a particular circumstance but when time marches on and the circumstances change, often the processes don't.

A long habit of not thinking a thing wrong gives it a superficial appearance of being right.

Once Paul and the organization started asking these questions they started coming up with different answers. But management was worried. What were their own employees going to think? Their peers? What about stakeholders? Fans? Were they going to be able to buy into the notion that their own team just saw the game differently than everyone else, even differently than they did?
In 1992, baseball was experiencing information overkill with the rise of the internet, ESPN, sports radio etc. The amount of info available to Paul and the team has absolutely exploded over the last 15 years.
Billy and the management team also explored the theory of affirmation bias or confirmation bias. Once you've decided to believe something, you only look for information that supports that belief. Paul explains, "let's say someone isn't going to make the team - he's got way too much pre-pitch movement. So we'll say yeah you're right he should go back to minor leagues. Then we see someone who is going to make the team and has the exact same movement all of a sudden that's okay - even a good thing!" 

We started to ask the naive question: If we weren't already doing it this way, is this the way we would start?

Paul also found there was a real focus on the most recent outcomes. The league would get consumed with what a player had done over the last 6 weeks rather than look at an entire career. 
So with these realizations and biases in mind, the A's organization kept asking the naive question and learning a lot about themselves. So what was the solution? According to Paul, the solution was to be humble in the face of all this uncertainty. They were trying to predict the future performance of human beings.. they were making an explicit prediction on how players will perform in years to come - in a new city, in front of millions. What they admitted to themselves is they weren't very good at this. In fact, Billy didn't believe anyone could predict star athletes this way.

We took everything we thought we knew about the game and we threw it out the window. We started over and studied everything.

So they used data. They knew it wouldn't be a crystal ball but it would offer guidance. Paul and Billy took everything they thought they knew about the game and threw it out the window. They started over and studied everything. They came up with a completely new set of metrics. 
From these new metrics, the management team learnt they had to have a team of diverse skills both on and off the field. Other members made up for another's deficiencies. They also realized they had a huge amount of expertise throughout the organization. On top of that, they knew there was a much broader world even beyond their organization to learn from. They had to be the ones creating new best practices so they looked outside of baseball for inspiration. They looked at other companies to see how they dealt with uncertainities, managing human capital etc. This forced the A's to be really open minded. Even when they were successful. 
Paul was particularly drawn to a quote by Thomas Kuhn which read, "the proliferation of competing articulations, the willingness to try anything, the expression of explicit discontent, the recourse to philosophy and to debate over fundamentals, all these are symptoms of a transition from normal to extraordinary research." 
When the organization knew it was time for a change they had been in a state of discontent - they had a willingness to try anything. They debated over fundamentals and came up with a lot of different ideas, and now, 15 years later, they can laugh but they tried and they tried again and again and again. With each small failure they got closer to a better model. The team got better with each step along the way.

Data with our process was a way that we could do that - to stack the odds in our favor.

Paul and the team became aware of all these physiological biases. They wanted to really focus on process. Paul wanted to know "how could we be the house? Be a little bit more right than we were wrong? Data with our process was a way that we could do that - to stack the odds in our favor." The naive question became a part of their culture.

"Most importantly", Paul said, "if you remember this one thing - root for the Mets!" (Paul is currently the Vice President of Player Development and Scouting for the New York Mets.)


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