Bringing "Moneyball" to the NBA

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Bringing “Moneyball” to the NBA

Brian Kenny: Today we’ll hear from Professor Frances Frei about her case entitled “Discovering Hidden Gems: The Story of Daryl Morey, Shane Battier, and the Houston Rockets.” I’m your host, Brian Kenny, and you’re listening to Cold Call.

Professor Frei teaches in the MBA and doctoral programs [at Harvard Business School] as well as the Executive Education program. Her research examines how organizations and individuals can reliably deliver excellence. And that, in fact, is a theme that ties directly to the case that we’re going to discuss today. Frances, welcome.

Frances Frei: Thank you very much.

BK: I’m going to ask you to start just by simply opening the case up for us. Tell us: who is the protagonist here, and what’s the setting?

FF: The protagonist is Daryl Morey and he is the general manager of the Houston Rockets, and Shane Battier is one of the players that he recruited. Essentially, the story is…that Shane Battier has a different value depending on which team he goes to. While that might have been understood prior to this, he was probably paid the same price regardless of which team he was on, even though his value to that team would be very different. So this case is an exploration of how you figure out the value of a player paired with a specific team context.

BK: Great. And we’re going to get into that more deeply. Your research, by and large, focuses on service excellence and service organizations. So I’m wondering how you made the leap to the NBA.

FF: In my world, a service organization is anything you cannot drop on your foot. And so in basketball, you can drop a basketball on your foot, but that’s about it.

BK: I’ve done it before.

FF: To me it’s a service organization. I played college basketball, so there is a deep-seated desire on my part to do this, and I have—I found myself working with the general managers of a few NBA teams. Daryl was not the first one. It’s a private obsession of mine to help NBA teams. And I’m interested in how you can unleash the talent of individuals. To me that’s what basketball is about.

BK: I thought the case gave a wonderful overview of the game. There’s historical context here. I thought the most amazing thing that you did was you encapsulated the rules of basketball into a single paragraph. It’s very clear and concise, probably the most concise it’s been written anywhere.

FF: We teach a very international audience. Basketball is only known to maybe 20 or 30 percent of them. So I acted as if I was writing about cricket, but did it for basketball and tried to describe basketball to a non-US or a non-basketball centric environment. That you think I might have gotten close is great. I will tell you that I wrote this case with Matt, an MBA student who was obsessed about getting it right for every one of his classmates. I think he went and tested the paragraph so that at least all 90 people in his section said that they understood basketball as a result of it.

BK: That’s nice.

FF: So hats off to Matt.

BK: At the time of the case the Rockets were kind of a mediocre team. They were a 51% winning team. They were never terrible. They were never great. But in comes this new GM, Daryl Morey. Can you describe: a) what’s the role of the GM and the team and b) what’s Daryl’s leadership style like?

FF: It’s important context to know that Daryl came [to the NBA] after having deep roots at MIT and was a geek. I mean, he played basketball, but he was a geek first. He came to a team and the general manager has to get the players that the coach is going to coach. So you have to satisfy the coach, and you have to satisfy the owner. The owner gives you a budget, and the coach gives you demands. So the general manager makes it happen in between. He did not have the budget that everyone else had—he didn’t have the budget he wanted to satisfy the needs. So he had to apply a great deal of intelligence for: “how do I meet their needs without spending a fortune?” Because he’s a data hound, he was really obsessed with “Moneyball”, as was I, and so we would talk about “Moneyball”.

BK: “Moneyball” being the book that had come out that year about Billy Bean, who was the general manager of the Oakland Athletics.

FF: Yes. Thank you. And if I could summarize the learning for “Moneyball” for baseball it was that you found out what you were overpaying or underpaying for. The interesting thing is that, if I was overpaying for walks or underpaying for walks, every team would know they were overpaid or underpaid. They had the same value for every team.

The interesting thing about basketball is basketball is the ultimate team sport, right? No one can score a basket without the help of someone else. So it’s not possible if we step back and think everyone should have the same value no matter what team they’re on. It has to do with: how well do I fit with the team? So Daryl was really interested in thinking about how well does Shane Battier, as the example here, how well does a person fit with a team? The end result was coming up with a beautiful (if you like math and big data), a poetic way of looking at: “how much better are my teammates when I’m on the floor, and how much worse are my opponents when I’m on the floor versus when I’m off the floor?”

Imagine if you could know that for every person, then I get to know how valuable Shane is. And then the funny thing is Shane was being paid, as was every basketball player, by their individual statistics. So you could predict somebody’s salary based on the number of years they were out, the points they had, the rebounds. The correlation was ridiculously high. So here’s a perfect arbitrage situation: I pay you for your individual performance, but your team performance matters wildly. So I’m going to go find people who don’t have good individual performance as a first get, and great team performance, and get them for what turns out to be a bargain. Shane Battier was one of the best team players of all time. The reason he became that example, even though he was paid well, was that he wasn’t paid as a superstar. And he was a superstar team performer.

BK: What’s interesting about that is it’s completely counter to the way most people think about how you build a championship team. You go find champions. You go find people who perform great individually. But here he’s looking at the team chemistry. He’s working within the economic confines of how you pay. Can you talk a little bit about those limitations?

FF: Yes. The first thing is everyone who is not in basketball thinks is the way to build a championship team is to put together a bunch of stars. I don’t know a single basketball player who thinks the way to do it is to put together all-stars, because there’s only one ball, and there’s a lot of work to be done on the court. The economic situation is that not everyone has the same budget, for a whole bunch of media reasons and because of how much any individual group of owners is going to invest, and if you’re in a small market or a big market. So what I love is when the well-intentioned, energetic little guy wins. Shane began this. I think a lot of teams are doing it now, but Daryl began this with Shane. This was using your intelligence to outwit the seemingly unlimited (although that’s probably not true), but the seemingly unlimited budgets of the competition. The parallel would be the New York Yankees today. In baseball they don’t seem to have the same type of problems that the Pittsburgh Pirates might have in terms of meeting their budget.

BK: In the case you quote the Houston Chronicle as saying—this is about Daryl Morey when he was brought on—that it was an astounding change of direction and he was the first GM, it sounds like, in the NBA to really take this kind of an analytical approach to bringing players in. Can you talk about the notion of a trade asset? Because that’s central to the beginning of the case when he picks up the superstar player and all the fans are elated. And then within minutes he pops that bubble and then does a deal.

FF: That was one of the more courageous acts because to get short-term gratification from the fans, the thing to do was to keep that person. He knew that to get long-term benefit that wasn’t the right thing to do. This is a classic leadership problem. Do you succumb to the short-term joy, or do you suck it up without being able to explain a rationale that they will be able to understand in order to plan for the future? I think Daryl Morey is a great leader. He just happens to be a GM in basketball.

BK: So if we can take this into the classroom, you’ve discussed this case in class. I would love to hear how the students approach this. How do they tackle this challenge?

FF: People beyond those who like basketball (which, again, was maybe 20 percent of the class)…everyone walked away with leadership lessons. Everyone walked away thinking, “am I likely to be in a [baseball-like environment], so more of an individual sport, or a [basketball-like environment], more of a team sport?” If I give you that continuum and you’re going to go out into your job, where are you likely to be? They all found themselves on the basketball side of the continuum. And so the lesson that they could take from this was: how much better are people as a result of my presence? Really fundamental lesson that this might be the best case for teaching. Shane Battier; how much better are players when he’s on the court? Now there is the twist of how much worse are the opponents that we don’t often have in competitive markets, but my favorite definition of leadership is: are people better off as a result of your presence? Daryl Morey did that for basketball in a way that it hadn’t been done before and I think that’s pretty amazing.

BK: Is there a corollary to this in another industry maybe, since you’ve studied so many organizations? Is there a place where you’ve been would you would say that?

FF: Let’s bring it to academia.

BK: Bring it to academia?

FF: We get measured on our individual performance on how many papers we [publish]. How about if we looked at a unit and said: how much better is the unit as a result of your presence? How much worse is the unit when you’re not there? I think every organizational form is a team dynamic, and I think by and large we’re a lot like basketball. We pay you for your individual metrics, and we thrive based on your team performance. I think we’re just at the dawn of figuring out how to do it.

BK: I may have to take that to the Dean. That’s great advice, Professor Frei. Thank you for joining us.

FF: What a deep pleasure. Thank you.

BK: You can find this case along with thousands of others in the Harvard Business School case collection at HBR.org. I’m Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.

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Bringing “Moneyball” to the NBA

Brian Kenny: Today we’ll hear from Professor Frances Frei about her case entitled “Discovering Hidden Gems: The Story of Daryl Morey, Shane Battier, and the Houston Rockets.” I’m your host, Brian Kenny, and you’re listening to Cold Call.

Professor Frei teaches in the MBA and doctoral programs [at Harvard Business School] as well as the Executive Education program. Her research examines how organizations and individuals can reliably deliver excellence. And that, in fact, is a theme that ties directly to the case that we’re going to discuss today. Frances, welcome.

Frances Frei: Thank you very much.

BK: I’m going to ask you to start just by simply opening the case up for us. Tell us: who is the protagonist here, and what’s the setting?

FF: The protagonist is Daryl Morey and he is the general manager of the Houston Rockets, and Shane Battier is one of the players that he recruited. Essentially, the story is…that Shane Battier has a different value depending on which team he goes to. While that might have been understood prior to this, he was probably paid the same price regardless of which team he was on, even though his value to that team would be very different. So this case is an exploration of how you figure out the value of a player paired with a specific team context.

BK: Great. And we’re going to get into that more deeply. Your research, by and large, focuses on service excellence and service organizations. So I’m wondering how you made the leap to the NBA.

FF: In my world, a service organization is anything you cannot drop on your foot. And so in basketball, you can drop a basketball on your foot, but that’s about it.

BK: I’ve done it before.

FF: To me it’s a service organization. I played college basketball, so there is a deep-seated desire on my part to do this, and I have—I found myself working with the general managers of a few NBA teams. Daryl was not the first one. It’s a private obsession of mine to help NBA teams. And I’m interested in how you can unleash the talent of individuals. To me that’s what basketball is about.

BK: I thought the case gave a wonderful overview of the game. There’s historical context here. I thought the most amazing thing that you did was you encapsulated the rules of basketball into a single paragraph. It’s very clear and concise, probably the most concise it’s been written anywhere.

FF: We teach a very international audience. Basketball is only known to maybe 20 or 30 percent of them. So I acted as if I was writing about cricket, but did it for basketball and tried to describe basketball to a non-US or a non-basketball centric environment. That you think I might have gotten close is great. I will tell you that I wrote this case with Matt, an MBA student who was obsessed about getting it right for every one of his classmates. I think he went and tested the paragraph so that at least all 90 people in his section said that they understood basketball as a result of it.

BK: That’s nice.

FF: So hats off to Matt.

BK: At the time of the case the Rockets were kind of a mediocre team. They were a 51% winning team. They were never terrible. They were never great. But in comes this new GM, Daryl Morey. Can you describe: a) what’s the role of the GM and the team and b) what’s Daryl’s leadership style like?

FF: It’s important context to know that Daryl came [to the NBA] after having deep roots at MIT and was a geek. I mean, he played basketball, but he was a geek first. He came to a team and the general manager has to get the players that the coach is going to coach. So you have to satisfy the coach, and you have to satisfy the owner. The owner gives you a budget, and the coach gives you demands. So the general manager makes it happen in between. He did not have the budget that everyone else had—he didn’t have the budget he wanted to satisfy the needs. So he had to apply a great deal of intelligence for: “how do I meet their needs without spending a fortune?” Because he’s a data hound, he was really obsessed with “Moneyball”, as was I, and so we would talk about “Moneyball”.

BK: “Moneyball” being the book that had come out that year about Billy Bean, who was the general manager of the Oakland Athletics.

FF: Yes. Thank you. And if I could summarize the learning for “Moneyball” for baseball it was that you found out what you were overpaying or underpaying for. The interesting thing is that, if I was overpaying for walks or underpaying for walks, every team would know they were overpaid or underpaid. They had the same value for every team.

The interesting thing about basketball is basketball is the ultimate team sport, right? No one can score a basket without the help of someone else. So it’s not possible if we step back and think everyone should have the same value no matter what team they’re on. It has to do with: how well do I fit with the team? So Daryl was really interested in thinking about how well does Shane Battier, as the example here, how well does a person fit with a team? The end result was coming up with a beautiful (if you like math and big data), a poetic way of looking at: “how much better are my teammates when I’m on the floor, and how much worse are my opponents when I’m on the floor versus when I’m off the floor?”

Imagine if you could know that for every person, then I get to know how valuable Shane is. And then the funny thing is Shane was being paid, as was every basketball player, by their individual statistics. So you could predict somebody’s salary based on the number of years they were out, the points they had, the rebounds. The correlation was ridiculously high. So here’s a perfect arbitrage situation: I pay you for your individual performance, but your team performance matters wildly. So I’m going to go find people who don’t have good individual performance as a first get, and great team performance, and get them for what turns out to be a bargain. Shane Battier was one of the best team players of all time. The reason he became that example, even though he was paid well, was that he wasn’t paid as a superstar. And he was a superstar team performer.

BK: What’s interesting about that is it’s completely counter to the way most people think about how you build a championship team. You go find champions. You go find people who perform great individually. But here he’s looking at the team chemistry. He’s working within the economic confines of how you pay. Can you talk a little bit about those limitations?

FF: Yes. The first thing is everyone who is not in basketball thinks is the way to build a championship team is to put together a bunch of stars. I don’t know a single basketball player who thinks the way to do it is to put together all-stars, because there’s only one ball, and there’s a lot of work to be done on the court. The economic situation is that not everyone has the same budget, for a whole bunch of media reasons and because of how much any individual group of owners is going to invest, and if you’re in a small market or a big market. So what I love is when the well-intentioned, energetic little guy wins. Shane began this. I think a lot of teams are doing it now, but Daryl began this with Shane. This was using your intelligence to outwit the seemingly unlimited (although that’s probably not true), but the seemingly unlimited budgets of the competition. The parallel would be the New York Yankees today. In baseball they don’t seem to have the same type of problems that the Pittsburgh Pirates might have in terms of meeting their budget.

BK: In the case you quote the Houston Chronicle as saying—this is about Daryl Morey when he was brought on—that it was an astounding change of direction and he was the first GM, it sounds like, in the NBA to really take this kind of an analytical approach to bringing players in. Can you talk about the notion of a trade asset? Because that’s central to the beginning of the case when he picks up the superstar player and all the fans are elated. And then within minutes he pops that bubble and then does a deal.

FF: That was one of the more courageous acts because to get short-term gratification from the fans, the thing to do was to keep that person. He knew that to get long-term benefit that wasn’t the right thing to do. This is a classic leadership problem. Do you succumb to the short-term joy, or do you suck it up without being able to explain a rationale that they will be able to understand in order to plan for the future? I think Daryl Morey is a great leader. He just happens to be a GM in basketball.

BK: So if we can take this into the classroom, you’ve discussed this case in class. I would love to hear how the students approach this. How do they tackle this challenge?

FF: People beyond those who like basketball (which, again, was maybe 20 percent of the class)…everyone walked away with leadership lessons. Everyone walked away thinking, “am I likely to be in a [baseball-like environment], so more of an individual sport, or a [basketball-like environment], more of a team sport?” If I give you that continuum and you’re going to go out into your job, where are you likely to be? They all found themselves on the basketball side of the continuum. And so the lesson that they could take from this was: how much better are people as a result of my presence? Really fundamental lesson that this might be the best case for teaching. Shane Battier; how much better are players when he’s on the court? Now there is the twist of how much worse are the opponents that we don’t often have in competitive markets, but my favorite definition of leadership is: are people better off as a result of your presence? Daryl Morey did that for basketball in a way that it hadn’t been done before and I think that’s pretty amazing.

BK: Is there a corollary to this in another industry maybe, since you’ve studied so many organizations? Is there a place where you’ve been would you would say that?

FF: Let’s bring it to academia.

BK: Bring it to academia?

FF: We get measured on our individual performance on how many papers we [publish]. How about if we looked at a unit and said: how much better is the unit as a result of your presence? How much worse is the unit when you’re not there? I think every organizational form is a team dynamic, and I think by and large we’re a lot like basketball. We pay you for your individual metrics, and we thrive based on your team performance. I think we’re just at the dawn of figuring out how to do it.

BK: I may have to take that to the Dean. That’s great advice, Professor Frei. Thank you for joining us.

FF: What a deep pleasure. Thank you.

BK: You can find this case along with thousands of others in the Harvard Business School case collection at HBR.org. I’m Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.

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