Moneyball and business ethics

The best-selling book about baseball stats is a must-read for anyone interested in corporate ethical performance.

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(Photo: Caroline Culler/Wikimedia)

I’m finally getting around to reading Moneyball, Michael Lewis’s best-selling ode to the study of baseball statistics (and the source material for the new Brad Pitt movie of the same name). It’s one of the most engaging books I’ve read in a long time—something that won’t surprise those of you who happen to have read The Big Short, Lewis’s lively account of the 2008-2009 financial collapse.

What did surprise me is that Moneyball isn’t really a book about baseball. It’s fundamentally about epistemology. Epistemology is the critical study of knowledge itself—how we get it and how we use it. And though Lewis doesn’t (as far as I can recall) use that word, Moneyball is about how managers should use information to achieve better outcomes.

The book holds important lessons for business managers generally, but in particular it holds lessons about business ethics. But the messages aren’t the obvious ones you’d expect from a book on baseball—they aren’t about the ethics of labour negotiations, for example, or the incomplete alignment of the twin goals of satisfying your fans and making money.

Three key lessons of the book, as far as I can see, are as follows:

1) The numbers matter. So, don’t guess—measure. In baseball, this means scouts need to look closely at a player’s stats, rather than relying on the fact that he’s got a “nice swing” or a “body made for baseball.” In business, it means measuring actual performance—not just bottom-line financial performance, but social and environmental performance, too, rather than just relying on the vague feeling that your company is “doing OK.”

2) The numbers don’t come out of thin air. The numbers you have available to you aren’t just a feature of the universe around you. The numbers represent what happens to have been measured. The “bottom line” (net income) is no more a natural feature of business than “Earned Run Average” is a natural feature of baseball. Both are artefacts of a particular system, one with a particular history and its own set of biases.

3) Numbers can lead you astray. Managing based on the numbers someone else more-or-less arbitrarily decided to keep track of can result in disaster. This is especially the case when those decisions are rooted in idiosyncratic interests or biases. Lewis points out, for instance, that early baseball stats didn’t bother to record the number of walks a batter earned—mostly because one of the early promoters of baseball stats, a journalist named Henry Chadwick, happened to be a fan of cricket, a sport where there’s no such thing as a ‘walk.’ Chadwick decided not to keep track of how many walks a batter achieved. The result was that there was no way to track which batters had the good judgment to watch a high-and-inside fastball sail past instead of swinging at it. And coaches’ management strategeis suffered for that omission. The exact same point can be made about various elements of social and environmental reporting.

The overarching lesson here is about the need for (pardon the pun) a measured approach to the use of numbers in business. Numbers matter, and they matter a lot. The old saw that “you can’t manage what you can’t measure” is surely a vast over generalization, but one that contains a kernel of truth. But what matters even more than the numbers is knowing what the numbers mean, and what they can and cannot tell you.

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