Turn away from tradition.

For the many decades since its creation, Baseball success was inextricably tied up with the wealth of the team. The more money you had, the better players you could sign. The better players you could sign, the more you won.

This was the status quo for Baseball. And as a result player recruitment was a fairly traditional endeavour. Scouts with an eye for the game would use a mix of instinct, hearsay, and observation to decide who they wanted to sign each season.

If you had a lot of money, this worked just fine. You could afford to make the odd wrong decision. But for teams who were less financially-enabled, this traditional approach was a problem.

In 2002, the Oakland A’s had a budget of $44 million for player salaries. Sounds like a lot of money, right? But when compared to New York Yankees’ budget of $125 million, you can clearly see why the A’s would struggle to put up any real fight.

At this time, statistics had started to come into play. Scouts and managers would now use some rudimentary data to help make better decisions. Or so they thought.

Billy Beane, the General Manager of the Oakland A’s, was struggling to get the kind of budget he knew he needed if he wanted to fight the bigger teams head on. But then he met Paul DePodesta, a sharp statistician. What set DePodesta apart from others in the game was that his background wasn’t in Baseball, it was in economics.

And it was this outside perspective that allowed him to see past the traditional scouting approach and its shortcomings.

DePodesta noticed that the stats people focused on (batting average, stolen bases) were no longer accurate measures of a player’s value to the team. And that focusing on stats like on-base percentage and slugging percentage were much better indicators.

The result was that players who DePodesta identified as highly valuable were considered less valuable by traditional models. In other words, useful players were undervalued. Which gave the Oakland A’s, and their limited budget, a chance to swoop in and sign them without breaking the bank.

Beane brought DePodesta on to the team as an assistant and advisor. Together they uprooted the traditional viewpoints of other scouts and managers, making a lot of enemies in the process.

So, did it work?

Well, it took the lowly minnows of the Oakland A’s to the playoffs for the first time in years. It gave them an incredible, unheard-of, unbeaten run partway through the season. And despite being 27th for average team payroll, were able to have the joint-best win percentage.

Their strategy, often known as Moneyball, was made into a book, a movie, and has been adopted by all kinds of sports teams around the world.

By breaking free from traditional approaches to a problem, the team identified a radically different way to win. Beating teams by outflanking them rather than by fighting them head-on.

WHY SHOULD YOU CARE?

In hyper-competitive markets, startups often face the same problem as the Oakland A’s. You have less money, fewer resources. You probably can’t hire the best people in the market. Ultimately, if you try to fight your competitors head-on, you’re going to lose. You have to outflank them. Outsmart them.

Luckily for you, those big incumbents are more established. Which means they’re more tied up in tradition. They have ways of doing things, ways of seeing the world, that made perfect sense back when they started.

But nowadays, those traditional beliefs are probably holding them back. They’re winning despite those traditions.

Which gives you an opportunity.

If you can spot those traditions, and figure out why they’re no longer fit for purpose, then you’ve opened up a gap. And if you can take advantage of that gap by showing a new way of thinking about a problem, then that gap becomes yours. You own your own slice of the market.

Be healthily sceptical. Question everything. And if the only reason for doing something is “that’s how we’ve always done it”, then pay extra close attention. Because that often means it’s a tradition that’s ripe for undoing.

PUZZLE OF THE WEEK.

I love puzzles. And I think they’re a great way of training you to think differently. I’m convinced they help me do my job better. And so I thought I’d share a puzzle with you each week.

You can think about it over the weekend and reply to this email with your answer. If you’re correct you’ll get a shout out in next week’s newsletter.

Here goes…

Forrest left home running. He ran a ways and then turned left, ran the same distance and turned left again, ran the same distance and turned left again. When he got home, there were two masked men. Who were they?

Good luck!

That’s all from me today.

Yours radically,
Joe