The Magic Formula Behind Moneyball
"Moneyball" is a great baseball movie starring Brad Pitt, Philip Seymour Hoffman, and Jonah Hill. It tells the tale of the 2002 Oakland Athletics. They had a budgeted payroll of $41 million and played against teams like the New York Yankees with $125 million. Pitt played the general manager, Billy Beane, who knew that A’s would not be able to compete with such a low payroll without dramatically changing how they played the game and structured their team. Beane hired Peter Brand, a statistician who evaluates baseball players by using mathematical metrics. In Brand’s eyes there were many undervalued players in the league who the A’s could afford that would help them not only win games, but take them to the championship. When you watch the movie, the math behind it is pretty complex and not well explained. Here is a brief description behind the idea of Moneyball:
First Brand calculated that in order to guarantee a spot in the playoffs the A’s would have to win 99 games, which equates to a win percentage of 61.1%, since there are 162 games in a season. Brand then uses the Pythagorean Expectation equation to determine how many runs the A’s need to score and could allow over the course of the season. The formula is:
So we put the 0.611 as our desired win percentage and we find out that our runs allowed/runs scored must be less than 0.798. Brand did further calculation of runs per game and found that over the course of a season the A’s must score at least 814 runs and not allow anymore than 649 runs. In any case, how can we calculate runs scored?
This means that the amount of runs scored by a team in a season is directly correlated to the teams on-base percentage, slugging percentage and conference. Although this seems to be a relatively simple idea, it hit the league by storm. General managers tended to have tunnel vision for a particular talent of a player. They wanted a big hitter and they would only look at the number of home runs he hit or they would look negatively on a player with a weird form. Although people were skeptical of this idea at its entrance, it eventually became widely accepted to like at a wide array of correlations instead of specific skill sets.
Brand then used formula to find out how much each player should be worth. The player’s salary formula takes a couple things into account. First the numbers of games played. It gives players value based on their experience in the MLB and then will gradually devalue them at the end of their career. The formula also uses on-base and slugging percentage, which should add to the number of runs the team will score. Finally, it takes into account if the player is a skill position (catcher or shortstop) and if he is in the National League or not. Brand would look at how much that player’s salary should be according to his formula, and then find out how much the A’s could get them for. They were able to find several players that were undervalued and even worth twice as much as they were going for in the free agency or their contract at the time.
A season after losing the three best players on their team the A’s were able to put together a playoff caliber baseball team with the third smallest salary in the MLB. Now teams all over the MLB have hired sabermetric analysts to help their team. Still, there are intangibles of the game that numbers cannot explain, so having an economist on your team isn't the sure way to win a champion. However Billy Beane and the Oakland A’s showed that numbers do exist in baseball and are important.
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