Moneyball

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Can MoneyBall Effect Last Forever?


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  • Good morning Section 2. We are group number 20, professionally known as PANTS, consisting of ofPramod, Aiwen, Nicolas, Tim and myself, Sean. We will be presenting on the topic of Moneyball, based on the Hollywood blockbuster starring Brad Pitt. And I believe there was also a novel written by Michael Lewis that some of you may have read.
  • Today, we will explain the concept of Moneyball and how it is being implemented in a sport other than baseball. First, we will give a brief background on the conceptual model behind moneyball, then we will introduce a revolutionary statistic in football called Total quarterback rating, and then finally conclude the presentation by talking about the required conditions for the model to work andsome limitations of the model. Aiwen…
  • We have a General Manager, Billy Beane, with limited quantities of one resource, money, who needs to trade this resource as efficiently as possible for another resource, baseball players. Any average General Manager would follow the tried and true norms of baseball and spend more money the more valuable a player is perceived to be.Instead, Billy realized an alternate model where, because he was bound by monetary restrictions, he exploited existing inefficiencies in the market and brought in alternative players who had much greater marginal benefit per dollar spent on them.The conceptual model of Moneyball wasRealize the existing biases and therefore inefficiencies in the marketNarrowing down your goals such as instead of saying let’s win the world series, think how many games versus loses do I need to qualify for the play-offs probabilistically, how many runs must I get rather than give per game, what is my expected run value from second to second in a game, and finally With these new goals in mind pin point specific actionable statistics to achieve those goals such as looking at players who get on base, looking at players with the greatest number of walks
  • We have a General Manager, Billy Beane, with limited quantities of one resource, money, who needs to trade this resource as efficiently as possible for another resource, baseball players. Any average General Manager would follow the tried and true norms of baseball and spend more money the more valuable a player is perceived to be.Instead, Billy realized an alternate model where, because he was bound by monetary restrictions, he exploited existing inefficiencies in the market and brought in alternative players who had much greater marginal benefit per dollar spent on them.The conceptual model of Moneyball wasRealize the existing biases and therefore inefficiencies in the marketNarrowing down your goals such as instead of saying let’s win the world series, think how many games versus loses do I need to qualify for the play-offs probabilistically, how many runs must I get rather than give per game, what is my expected run value from second to second in a game, and finally With these new goals in mind pin point specific actionable statistics to achieve those goals such as looking at players who get on base, looking at players with the greatest number of walks
  • We have a General Manager, Billy Beane, with limited quantities of one resource, money, who needs to trade this resource as efficiently as possible for another resource, baseball players. Any average General Manager would follow the tried and true norms of baseball and spend more money the more valuable a player is perceived to be.Instead, Billy realized an alternate model where, because he was bound by monetary restrictions, he exploited existing inefficiencies in the market and brought in alternative players who had much greater marginal benefit per dollar spent on them.The conceptual model of Moneyball wasRealize the existing biases and therefore inefficiencies in the marketNarrowing down your goals such as instead of saying let’s win the world series, think how many games versus loses do I need to qualify for the play-offs probabilistically, how many runs must I get rather than give per game, what is my expected run value from second to second in a game, and finally With these new goals in mind pin point specific actionable statistics to achieve those goals such as looking at players who get on base, looking at players with the greatest number of walks
  • So how can this new Quarterback rating be used to evaluate talent in the NFL? Just like Billy Beane discovered
  • All right.Having talked about all good things about Moneyball, lets see what is needed for moneyball to work?Firstly, you should be able to find undervalued assets ignored by everyone else. As easy as it sounds, finding the undervalued assets requires relentless search. Clearly, whoever does it first gets an advantageBut how do you decide that the asset is undervalued. This requires you to possess information/interpretation using statistical model that no one else knows. Using statistics for making managerial decisions would need a good amount of time series informationAnother aspect the manager needs to be good at is ability to assign values to intangibles. Not everything we observe is quantifiable, manager should have model to assign values to as abstract a quality as motivation or even how pretty is her girl friend?Talking of Limitations:Since it is based on probabilistic models, there are good chances that decisions could backfire.Also, can moneyball effect last forever?No, moneyball can work as long as you possess information or interpretation that no one else does.The firms needs to be relatively small and should have high risk appetite to challenge the accepted normsAlso, as the firm reaps the benefit of moneyball and gets bigger , it becomes difficult for firm to do that forever.
  • Thank you Pramod. The key takeaways from today’s presentation are, First: Statistics can become stale. People are looking for new ways and new models based on different data to evaluate performance and achieve a competitive advantage. Billy Beane recognized the existing bias and inefficiency in the market and used a different approach to select players and build his team. Then we we talked about the Total Quarterback Rating in football, which accurately measures what a quarterback does and WHEN he does it as opposed to the conventional Passer Rating that is not as accurate in assessing the individual contribution of the quarterback to scoring touchdowns and winning football games. Finally, as a comparison to Moneyball, you can imagine the quarterback rating similar to Billy Beane’s on-base percentage, whereas the passer rating is analogous to the old school batting average. Thank you for your time and attention, and We hope you enjoyed our presentation.
  • Moneyball

    1. 1. Moneyball<br />Group 20: PANTS<br /> Section 2<br />Pramod Jindal<br />AiwenXu<br />Nicolas Mulroney<br />Tim Dong<br />Sean Ray<br />
    2. 2. Introduction<br />Moneyball: A Conceptual Model<br />Moneyball in Football<br />Prerequisites and Limitations<br />Questions<br />
    3. 3. Moneyball: A Conceptual Model<br />1. Realize your biases <br />2. Narrow down goals<br />3. Use specific actionable statistics to achieve those goals<br />
    4. 4. Moneyball in Football<br />Passer Rating (Est 1971)<br />Completion %<br />Passing Yards<br />Touchdowns<br />Interceptions<br />Total Quarterback Rating (Est. 2008)<br />Passing<br />Running<br />Avoiding Sacks and Fumbles<br />Time of the Play<br />TOUCHDOWN!<br />End zone<br />
    5. 5. Moneyball in Football<br />Passer Rating (Est 1971)<br /><ul><li>Completion %
    6. 6. Passing Yards
    7. 7. Touchdowns
    8. 8. Interceptions</li></ul>Total Quarterback Rating (Est. 2008)<br /><ul><li>Passing
    9. 9. Running
    10. 10. Avoiding Sacks and Fumbles
    11. 11. Time of the Play</li></ul>TOUCHDOWN!<br />End zone<br />End zone<br />
    12. 12. QBR Example<br />11<br />2<br />Passer Rating RANK<br />+8<br />-6<br />3<br />8<br />Quarterback Rating RANK<br />Playoffs<br />No Playoffs<br />Result<br />
    13. 13. Prerequisites & Limitations ?<br />Prerequisites<br /><ul><li>Undervalued Asset
    14. 14. Information Asymmetries
    15. 15. Statistical Model & interpretation
    16. 16. Humongous data
    17. 17. Quantifying intangibles</li></ul>Limitations<br /><ul><li>50/50
    18. 18. MoneyballForvever?
    19. 19. Market Efficiency
    20. 20. Entity Size</li></li></ul><li>The WRAP<br />MoneyballConcept<br />Quarterback Rating<br />Comparison<br />Conditions and Limitations<br />Questions?<br />

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