I have become much more of an A's fan since reading Moneyball because I learned about Beane's approach and found it fascinating. I am a stockbroker and my philopsophy works similarly to Beane's. There is an article this week in Barron's describing how Beane and DePodesta have always loved Wall Street and pay very close attention to quotes from Warren Buffett (of course DePodesta came from trading derivatives on Wall Street). Here are some quotes:
"Among the parallels between baseball and investing, by Beane's lights, is the common mistake in both fields of attributing the wrong cause to a result. "Take the [2004 American League championship] series, in which the Red Sox beat the Yankees. There was a critical play when Dave Roberts stole a base [late in game four]. If you look back, history will now say that's why they won -- why they won that game, the next three and then the World Series against St. Louis." This, however, was just one factor that led to the ultimate result.
Beane cites this as exactly the sort of fallacy discussed at length in Nassim Taleb's 2001 book, Fooled by Randomness: The Hidden Role of Chance in Markets and in Life. "You know," he adds, "when the market goes up three points, and they attribute it to some fluctuation of bonds in Asia. It's just three points; it's noise. And noise actually creates opportunity, particularly in sports." As it does, of course, in investing."
This quote is great! I deal with this everday as CNBC reports some reason why the market went up or down when who knows if that is why it really did. Of course the majority of people take it as fact.
This quote was interesting: "Beane emphasizes that "inefficiencies are created on a daily basis." He thinks, for example, that on-base percentage -- perhaps the stat most closely associated with his name -- has become too trendy, and so hitters with a lot of walks are being paid too handsomely. Meanwhile, players who can steal bases -- a talent that Moneyball says (in what Beane says was an overstatement) he doesn't rate highly -- might now be undervalued."
And finally, the quote that I think is most important and a reason why he will contiunue to be successful comes from Ronald Kahn an equity trader who Beane has given speaches for: "Beane has a maxim that should adorn every fund manager's wall: "You are constantly searching for the ability to pay for future performance and to stay away from paying for past performance."
Adds Kahn: "You want to apply that scientific approach to every place you possibly can. The extrapolation of recent events happens so much in investing. There are so many glamour stocks that had great run-ups in the recent past, and everybody just latches on to those." As an example, Kahn points to Cheesecake Factory (ticker: CAKE), a glam stock for which investors are willing to pay 40 times trailing earnings, based on projecting forward its past growth trajectory."