Moneyball is a term christened by author Michael Lewis (in the book of the same name) which refers to a major shift in the philosophy of constructing a professional baseball team, enabling teams with a smaller payroll to compete with clubs with a lot of money. Basically, moneyball is how you beat the man at his own game.
The Philosophy
Rather than using high-priced players as decreed by the old standards in professional baseball (i.e., high batting average, high home run count, low earned run average, and/or a scout's subjective evaluation), moneyball uses a completely different set of criteria for evaluating players, which revolves around deep statistical analysis.
At its core, moneyball seeks to maximize the output of players per dollar invested in them. In order to do this, teams must develop statistical tools that go beyond those used by other teams in order to properly evaluate players. The earlier innovators of moneyball relied heavily on the use of the on base percentage rather than batting average or home run total to evaluate players. Since a number of teams have now moved to the moneyball system, much more complicated tools are required, usually involving a heap of statistics and usually a handful of statisticians employed by the team to evaluate these statistics.
Another important concept of the moneyball philosophy is the devaluation of traditional scouting. In the traditional baseball world, teams would send scouts to high school baseball games seeking out players based solely on their potential: does this kid have the potential to turn into something wonderful? Moneyball eschews that idea and avoids high school prospects like the plague; instead, the moneyball method relies on statistics kept by the NCAA and applies statistical methods to these to find the best potential prospects.
Since most teams that adopt a moneyball strategy are relatively poor teams, they're not going to be able to acquire players like Barry Bonds or Roger Clemens or Alex Rodriguez; these players are phenoms in every aspect of the game, both obvious and hidden. Instead, the moneyball philosophy involves churning the numbers to find the hidden gems, players like Scott Hatteberg and Nick Swisher and Jeremy Brown.
The Impact on the Sport of Baseball
Such analysis had long been shouted from the rooftops by independent
statisticians such as
Bill James (who is not coincidentally now a consultant for the
Boston Red Sox), but had largely been ignored by major league baseball until recent years.
The introduction of the moneyball philosophy into the sport should be credited to Sandy Alderson, the former general manager of the Oakland A's. After the demise of the Oakland A's dynasty in the early 1990s, it became clear to Alderson that he was not going to be able to compete on a financial level with the Yankees, Mets, or Dodgers, who were able to just throw money at any player they wanted to have. Subtlety, scientific investigation, and reason was needed to solve this problem, and by the time the mid-1990s rolled around, the Oakland A's front office had the pieces in place for a revolution of sorts.
Enter Billy Beane. Beane was formerly a can't-miss prospect in the New York Mets organization who somehow missed. He bounced around the high minor leagues, winding up with the Oakland A's and during this journey, he watched a lot of "can't miss" prospects like him flame out, while guys that everyone ignored made steady careers for themselves in the majors. What was the difference?
Billy got the chance to find out. He joined the front office of the Oakland A's in 1993, when the ideas of Sandy Alderson were really taking hold, and Beane ran with them. He didn't have the statistical know-how himself to evaluate such things, but it was clear to him that statistics held the key to the future. Alderson's experimentation with evaluating baseball players had, by 1995, led the team to evaluate one statistic above all: on base percentage. This statistic caused them to make several completely shocking moves in the middle of the decade in terms of their drafting, vastly overvaluing such prospects as Jason Giambi, Mark Mulder, and Barry Zito, at least in terms of standard baseball knowledge at the time.
When Alderson retired in 1997, Beane became the general manager and he hired a small group of statistics-oriented fellows to be his central team: Paul DePodesta (later GM of the Los Angeles Dodgers) and J.P. Riccardi (later GM of the Toronto Blue Jays) were among them. Together, they began a process of converting the entire management system, over a period of years, to one based almost exclusively around deep statistical analysis.
Meanwhile, their "frontier years" were beginning to pay off. Mulder, Zito, and especially Giambi came up through the farm system and became the foundation of a team that had one of the lowest payrolls in baseball and yet was making the playoffs on an annual basis at the turn of the century, no easy feat. They had the second lowest payroll in baseball in 2000 at $34 million and yet managed to win 102 games (any season with more than 100 wins is very good and pretty unusual in baseball) and their division.
Unsurprisingly, other teams wanted to know what was going on in Oakland, and gradually the methods began to spread, first to the Toronto Blue Jays via J.P. Riccardi in 2001, then to the Boston Red Sox in 2003 and the Los Angeles Dodgers in 2004. In each case, the team fired their old general manager, who did things the old way, and hired a man interested in the moneyball approach.
In essence, moneyball is currently revamping the way baseball is managed, moving away from the subjective view of scouts and the old school to the more objective perspective of statistical analysis and "bang for the buck."
The Book
Michael Lewis (the already established author of Liar's Poker and The New New Thing) spent the 2002 season with the front office of the Oakland A's in order to find out first hand what the moneyball concept was about (note that at the time, it didn't really have a name; Lewis coined the term when he named his book). He was given an unprecedented amount of access and was even allowed to see the process of how the first amateur draft done entirely with moneyball principles went. When the book hit the shelves in May 2003, it sent shock waves through the world of baseball because of its damning critique of the "old school" way of doing things, coupled with a lot of praise for Billy Beane and the job he was doing in Oakland.
The book is strongly written, and anyone with any sort of interest in baseball will be sucked right into the tale; I finished the book in two sittings. The 2002 season of the Oakland A's is told from the perspective of the front office, with great detail on the logic and negotiations that went into the decisions by the team. Two major sections of the book stick out: how the team handles the amateur draft, where the team uses a first round draft pick on a player (Jeremy Brown) most other teams didn't plan on picking until the fifteenth round, and also the acquisition and development of Scott Hatteberg, who turned from a player basically left out to dry into an essential part of a playoff-bound team. Also of note are lengthy profiles of Billy Beane and also one on Bill James, who is famous for his long-time work on baseball statistics.
Moneyball is currently in print in hardback (ISBN 0393057658) and softcover (ISBN 0393324818).
Why Does Moneyball Matter? A Larger Context
Basically, the book comes down to one essential point that can be applied to pretty much anything: objective analysis is worth its weight in gold. The entire book is a tale of the objective winning out over the subjective, and from most perspectives, particularly those in which competition is involved, subjective analysis is often inherently flawed.
Moneyball is worth reading if you're a fan of baseball or if you're involved in any sort of competitive pursuit that requires analysis.