Moneyball

Michael Lewis, the former Salomon Brothers bond salesman who wrote Liar's Poker, wanted to know how the Oakland Athletics kept reaching the playoffs while spending about $44 million on players in 2002, against more than $125 million for the New York Yankees. The answer was general manager Billy Beane and his assistant Paul DePodesta, who, building on ideas Bill James had published for years, valued players by what actually produced runs and wins, notably on-base percentage, rather than by the speed, power and physique that scouts prized.

Lewis had extraordinary access, and Booklist noted that the book reads like the product of it. The economist Richard Thaler and the legal scholar Cass Sunstein, reviewing it with a behavioral-economics eye, called it a sensation while noting puzzles it leaves unresolved.

Critics, including David Haglund and Jonah Keri, pointed out that Lewis underplays the conventionally scouted stars on the roster: pitchers Tim Hudson, Mark Mulder and Barry Zito, the 2002 Cy Young winner, and the league MVP Miguel Tejada. Others argued that Oakland won mainly by preventing runs.

The lesson travels well beyond baseball. Any analyst who wonders why mispricings exist, and how quickly they disappear once others copy the method, should read it.

1. Markets misprice what they cannot see. Baseball undervalued walks and on-base percentage because they were unglamorous, the same kind of bias that leaves boring stocks or bonds cheap.
2. Look for the overlooked metric. Beane's edge came from measuring what actually produces wins, not what the industry habitually tracked.
3. Small budgets force better process. Without money to buy consensus stars, Oakland had to find value in castoffs and unfashionable players, a lesson for any capital-constrained investor.
4. Edges get arbitraged away. Once other teams, notably the Boston Red Sox, hired their own analysts, the cheapest inefficiencies narrowed.
5. Short series are noisy. Beane's approach worked over a 162-game season but could not guarantee playoff wins. Separate a good process from a lucky or unlucky outcome.

Lewis interweaves the A's 2002 season with Billy Beane's own history and the rise of baseball statistics.

1. The failed phenom. Lewis opens with Beane as a high school star whom scouts were sure would be great, and with how his failure as a player made him distrust scouting judgments.
2. The draft. In the 2002 draft room Beane and DePodesta overrule scouts to pick college players with strong records, such as Jeremy Brown, whom other clubs undervalued.
3. The ideas. Lewis traces how Bill James and other outsiders spent decades showing that traditional statistics and scouting misjudged what wins games, and how Oakland put their findings to work.
4. Buying undervalued players. Beane assembles a roster from bargains: Scott Hatteberg, a former catcher converted to first base for his ability to draw walks, and Chad Bradford, a submarine-style reliever no one else wanted.
5. The season and its limits. Through the trade deadline and a long winning streak, the A's win their division. Beane then admits his methods cannot control playoff outcomes, and other teams begin to copy him.

This delightfully written, lesson-laden book deserves a place of its own in the Baseball Hall of Fame. —Forbes Moneyball is a quest for the secret of success in baseball. In a narrative full of fabulous characters and brilliant excursions into the unexpected, Michael Lewis follows the low-budget Oakland A's, visionary general manager Billy Beane, and the strange brotherhood of amateur baseball theorists. They are all in search of new baseball knowledge—insights that will give the little guy who is willing to discard old wisdom the edge over big money.