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I wrote a book about this, called "Moneyball." It was ostensibly about baseball but was in fact about something else. There are poor teams and rich teams in professional baseball, and they spend radically different sums of money on their players. When I wrote my book the richest team in professional baseball, the New York Yankees, was then spending about $120 million on its 25 players. The poorest team, the Oakland A's, was spending about $30 million. And yet the Oakland team was winning as many games as the Yankees — and more than all the other richer teams.

This isn't supposed to happen. In theory, the rich teams should buy the best players and win all the time. But the Oakland team had figured something out: the rich teams didn't really understand who the best baseball players were. The players were misvalued. And the biggest single reason they were misvalued was that the experts did not pay sufficient attention to the role of luck in baseball success. Players got given credit for things they did that depended on the performance of others: pitchers got paid for winning games, hitters got paid for knocking in runners on base. Players got blamed and credited for events beyond their control. Where balls that got hit happened to land on the field, for example.

Forget baseball, forget sports. Here you had these corporate employees, paid millions of dollars a year. They were doing exactly the same job that people in their business had been doing forever. In front of millions of people, who evaluate their every move. They had statistics attached to everything they did. And yet they were misvalued — because the wider world was blind to their luck.

This had been going on for a century. Right under all of our noses. And no one noticed — until it paid a poor team so well to notice that they could not afford not to notice. And you have to ask: if a professional athlete paid millions of dollars can be misvalued who can't be? If the supposedly pure meritocracy of professional sports can't distinguish between lucky and good, who can?

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Posts: 4600 | Registered: Mar 2000  |  IP: Logged | 

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My case illustrates how success is always rationalized. People really don’t like to hear success explained away as luck — especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don't want to acknowledge the role played by accident in their lives. There is a reason for this: the world does not want to acknowledge it either.

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Posts: 12591 | Registered: Jan 2000  |  IP: Logged | 

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Originally posted by Rakeesh:
Dan, I'm looking at you for quick explanations as to why these economic and workplace examples don't really apply to the rest of reality;)

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Heh, you called?

Hmm, what do you mean? Of course luck is a factor (in reality in general and economics in particular). And yeah, lots of people are bad at differentiating between luck and skill. Doing so is itself a skill, after all.

I'm confused. Is the point of the OP that it's all luck? Or that it's impossible to differentiate them? I thought that's part of the explanation for why the A's were good. Because they were actually good at differentiating between luck and skill and were able to value players more accurately than other teams.

Look man, I know people like to characterize my position as bootstraps and everything is under your control and you make your own luck and blah blah blah... but I don't actually think any of those things.

I just think more things are under (perhaps a better turn of phrase would be "can be under") our control than you probably do. And I think that focusing on the things that can be under your control makes more sense than focusing on the things that are just luck.

I hope that was the response you wanted.

Posts: 3580 | Registered: Aug 2005  |  IP: Logged |