The legacy of ‘Moneyball’: objective metrics and statistical analyses

The foundational research of Kahneman and Tversky demonstrated how the human mind consistently made mistakes when it was required to make decisions in unpredictable circumstances. Their research gave rise to the subject of behavioural economics

A scene from Moneyball. ichael Lewis’s groundbreaking 2003 book Moneyball, which was later adapted into a Brad Pittstarrer movie in Hollywood, is one of the significant publications that defined the first quarter of the twentyfirst century. Billy Beane, the book’s primary protagonist and manager of the Oakland Athletics (Oakland A’s) in U.S.’s wealthy Major League Baseball (MLB), was a former MLB player who went into the personnel side of the business and had remarkable success there in spite of a tight budget. For recruiting players, he utilised better “metrics,” such as “onbase percentage,” which gauges how often a batter reaches base and is now regarded as being superior to more conventional metrics, such as batting average, to assess offensive skill. He did this by using historical data and analytics. Under Billy Beane, Oakland A’s discovered value in players who had been passed over or ignored, and folly in much of what passed for baseball wisdom. Furthermore, the influential 2003 book Moneyball caused its perceived significance to soar.

And ever since, it has also started to propel civilisation forward.

MThe lapse in analysing data

From a wider angle, the book sets up the rationale behind the (seemingly irrational) craziness around data in today’s world. Well, if a novel analytical method had produced new insights in baseball, could it not produce similar results in any other area of human endeavour? To make judgements in every area of their lives, people today strive to churn massive amounts of data. “Moneyballisation” is everywhere, in various areas of government, business, education, sports, farming, election campaign, banking, the investigation of criminal activity, and so on.

However, in August 2003, a review of the book appeared in The New Republic, written by Richard Thaler, an economist, and Cass Sunstein, a law professor, then both at the University of Chicago. They thought it was intriguing that a poor team like the Oakland A’s could beat most teams by taking advantage of the inefficiencies in any market for professional sports. They continued, however, by claiming that the author of Moneyball appeared to be unaware of the deeper cause of the inadequacies in the baseball player market, which originated from the fundamental principles of human nature. Israeli psychologists Daniel Kahneman and Amos Tversky had long ago detailed the ways in which certain baseball specialists might misunderstand baseball players — that is, the ways in which any expert’s judgements might be distorted by their own thoughts. Therefore, the book Moneyball was only an example of concepts that had been discussed for many years. “It didn’t take me long to figure out that, in a not so roundabout way, Kahneman and Tversky had made my baseball story possible,” Lewis subsequently wrote in Vanity Fair.

“Why do professional baseball executives, many of whom have spent their lives in the game, make so many colossal mistakes?” wrote Thaler and Sunstein in their review. Lewis’s book simply made the observation that when baseball experts evaluated players, their judgement could be clouded by their prejudices and preconceptions. However, why?

Why our minds act unpredictably

Actually, Kahneman and Tversky had written a number of oddball papers between 1971 and 1984 exploring the ways in which human judgement could be distorted when we are making decisions in the face of uncertainty. In a 1982 study titled “Judgement under Uncertainty: Heuristics and Biases,” they found that when evaluating the likelihood of a particular outcome, people frequently depend on readily recalled information rather than actual data — a concept known as the “availability heuristic.”

Subsequently, in a 2004 paper published in the Michigan Law Review, Thaler and Sunstein argued that Lewis’s clues can be explained by several studies in cognitive psychology. “Yet reliable statistical evidence will outperform the availability heuristic every time. In using data rather than professional intuitions, Beane confirmed this point.” As it happens, Beane’s preference for performance scouting over prototypebased scouting aligns well with a 1999 work by Kahneman and S. Frederick on the representativeness heuristic, which highlighted the applicability of dualprocess theories of cognition. The cognitive operations are divided into two families. System I operates quickly, automatically, and with ease; it’s intuitive. System II is reflective, slower, selfaware, calculative, and deductive in comparison. According to Kahneman and Frederick, System I provides rapid solutions to problems of judgement, whereas System II acts as a monitor, validating or overriding those judgements. Traditional scouts employ System I and emphasise the “mind’s eye.” Based on data analytics, Beane insisted on a System II override.

‘A cognitive minefield’

Overall, the foundational research of Kahneman and Tversky demonstrated how the human mind consistently made mistakes when it was required to make decisions in unpredictable circumstances.

Their research transformed even Big Data studies and gave rise to the subject of behavioural economics, which is the synthesis of psychology and economics. Beane’s endeavour just constituted an early exercise in this regard.

“Recognise the signs that you are a cognitive minefield.” This is how Kahneman described his research for lay audiences in his 2011 book Thinking, Fast and Slow. Kahneman was awarded the Nobel Prize in economics in 2002, which many feel Tversky would have shared if he hadn’t died in 1996. Nassim Taleb, the author of The Black Swan, reportedly remarked that Kahneman might be the only Nobel laureate in economics whose results can be replicated!

“No area of baseball is more susceptible to bias than scouting, in which organisations aggregate information from disparate sources: statistical models, subjective evaluations, characterisations of mental makeup and more,” Joe Lemire wrote in a 2021 article for The New York Times. “Kahneman emphasised the importance of maintaining independence of judgments to decorrelate errors — that is, to separate inputs so that one doesn’t influence another,” Lemire added. Kahneman’s theory may very well be applicable in similar situations, such as recruiting players for the lucrative Indian Premier League.

Daniel Kahneman, the economics unicorn who altered the field forever, died on March 27 at the age of 90. The intriguing partnership between Tversky and Kahneman was discussed in detail by Michael Lewis in his 2016 book The Undoing Project – A Friendship That Changed Our Minds. It’s possible that these two avantgarde psychologists altered humanity’s perception of its own mind in the process.

The writer is Professor of Statistics, Indian Statistical Institute, Kolkata.