Moneyball, the movie, tells the story of the Oakland Athletics professional What Beane and his assistant, Peter Brand in the movie (Paul Depodesta in real life) did The relationship between these two men is interesting. But the book explains how Paul DePodesta convinced Beane and others that As one reader emailed me this quote from the book on page , ways tended to be dramatically underpriced in relation to other abilities. Moneyball, a film based on Michael Lewis' book, details the struggles of QUOTE (Stephen Schott, Oakland A's owner): “Bill we're a small market team and Yale economist (Peter Brand in the film, Paul DePodesta in real life) who has the past season, and most importantly losing the relationship Beane has with.
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What makes this movie so appealing for me is that it portrays complex people with exaggerated and fascinating personality styles. I really loved it.
The Superiority personality types live their lives according to certain core ideas, a few of which are: These people are always experts in some subject. I can set multiple goals and I will reach them. I treat life seriously. I must figure it out whatever it is. I must be accurate, thorough and maintain high standards at whatever I do. I want to make some meaningful contribution to life.
Using the information above and studying both Billy Beane and DePodesto, we can see that they are both exaggerated Superiority people. So yes, exaggerated Superiority styles they both are. The relationship between these two men is interesting. Superiority people can be active or passive with their behavior. Those who are active focus on a goal and concentrate all their energy on reaching it. Once they decide to go for the finish line, they will take calculated risks to succeed.
We see this personality a lot in small business owners. Passive Superiority people are more cerebral; we see them use much less active behavior. Their goals are more detailed-information oriented. The key insight adopted by Beane was that the team was not buying players, it was buying runs on the board.
All player assessment was reduced to this one metric, whether the player hit home runs or took walks didn't matter. By the way, Lewis is also the author of several books that are actually about investment markets and business.
For example, Liar's Poker, about the corruption and excess of Wall Street in the s; and The Big Short, about the events leading up to the global financial crisis. These books are also based on true stories but don't portray the industry in a good light, which may explain why I haven't seen any investment funds try to co-opt them for their marketing.
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Safer to stick with a sporting analogy. Anyway, I spoke to Paul Moore, chief investment officer at PM Capital, about how the principles of Moneyball applied to funds management. Just as recruiting for a baseball team is about buying runs on a board, investing is about earning an appropriate return.
As a measure for success, nothing else matters.Putting Data to Work: Lessons from "Moneyball" (Paul DePodesta)
That means their customers are wasting the fees they pay for active management. Of course, every investment fund manager likes to portray themselves as a contrarian investor able to hunt down the under-valued stocks and exploit the market anomalies. It's easier said than done. In the movie, the work was done by Beane's assistant general manager, Peter Brand, a geeky economics graduate from Yale who used computer algorithms to rate players.
If you took the lesson of Moneyball, at least the movie version, to its logical conclusion, in baseball you could replace scouts with statistics, and in investment you could replace business analysts with technology.
And of course, technology disrupting the funds management industry is an actual trend. First, technology has enabled the rise of passive investment options such as exchange-traded funds ETFs or index funds that track the market or a market segment. Moore argues the growing dominance of passive investing is an advantage for active managers seeking anomalies.
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Index funds by definition don't take into account underlying corporate valuations and therefore can reinforce price distortions in the market.
The irony is that the more money flows into passive funds, the greater the distortion in asset pricing, and therefore the more opportunity for long-term active investors to find and exploit the anomalies. But Moore also agrees that passive funds fit the bill for many investors, either as the whole or part of their portfolio.
Second, low-cost automated investment advisers or robo-advisers are becoming increasingly popular with younger investors. Third, technology is challenging even the sort of value investing that Moore is advocating. The Economist recently reported: But even here technology is eroding the case for active management.
Computer programs can select stocks on the basis of such criteria at low cost.