Certain Habits

In the last ten years, baseball has been transformed by the use of statistics to identify and exploit inefficiencies in the market for baseball players. Michael Lewis told the story to great effect in Moneyball. Billy Bean, the Oakland A’s general manager, exploited his peers’ conventional (wrong-headed) preference for young hard-throwing pitchers and athletic power to build teams on a shoestring loaded with accurate pitchers and batters with astronomical on base percentages. The result? Billy Bean’s Oakland teams were competive with the best of the high-priced competition year in and year out.

Football hasn’t been as amenable as baseball to the application of statistics. But as reported by Stephen Dubner of Freakonomics fame, a recently published article on the role of injuries in football, suggests some interesting lessons:

• “A superstar is worth about six to seven times as much as a reserve.”
• “Offensive injuries are more significant than defensive ones.”
• “Injuries to the starting halfback do not affect the running game.”

In other words, the coach’s system and overall teamwork tell more on defense and or in the running game than in success passing the ball. NFL pay disparity, and the high value attached to the quarterback, might be rational.

This difference—between areas system and organization itself determine results, and those where superstars matter—is more broadly applicable. The research suggests superstar teachers can make a profound difference to student’s performance. And yet we pretend the system is responsible and pay them like their lower performing coworkers. Contrariwise, the bulk of Wall Street earnings are arguably systemic (particularly today, when banks are borrowing at 0% from the government and lending to the government at 3%), with bank executives earning economic rent from their position of privilege. (True investing superstars, notably Warren Buffett, excepted).