The search for value is the key to strategy.
Michael Lewis’s Moneyball never did provide the answer to the question of where value is in our own lives, but it certainly inspired us to look.
It was a book by Michael Lewis… a guy who has made a career out of taking mundane subjects (like bond trading, high frequency stock trading, left tackles, and baseball scouting) and making them imminently interesting by melding fantastic stories around the topics. You may have recently seen one of his works come to the big screen in The Big Short.
Moneyball was Lewis’ take on the search for value and the need to avoid “conventional” wisdom…especially when one faces constraints that conventional thinkers do not. the story was simple: The Oakland A’s were an anomaly. They won more games than they were supposed to when their payroll was factored in. That’s right… dollars in, wins out was considered to be the metric. Why? Because all scouts were assumed to be looking at the same components of talent: a traditional view of the “tools” that ballplayers had been evaluated on for years.
Only something happened…someone, somewhere realized that the value of a ballplayers in terms of the game itself wasn’t necessarily correlated with the old school way of looking at things. Turns out that players who were unorthodox when measured by traditional metrics but really effective at doing things that got them on base more often were actually undervalued by those who scouted and paid ballplayers.
In other words, a key trait was undervalued in the market, and a team like the Oakland A’s that would focus on that trait could find valuable ballplayers with a lower pricetag. That translated to wins for fewer dollars.
This insight is brilliant for anyone in business: When everybody else is paying for traits, it’s good to try to pay for results.
This is true for my friends who pay up for educational pedigrees that don’t translate to results.
It’s also true for my friends who go after market trends because they are “hot.” Anytime there is a clear stampede to something, ask yourself why. Is there value left in the equation?
In a world of hype and conventional wisdom, have the patience to seek value.
What do you think?