International Journal of Sport Finance, 2007, 4, xx-xx, © 2007 West Virginia University

Moneyball: A Business Perspective

Richard Wolfe1, Kathy Babiak1, Kim Cameron1, Robert E. Quinn1, Dennis L. Smart2, James R. Terborg3, Patrick M. Wright4
1
University of Michigan
2
Texas State University
3
University of Oregon
4
Cornell University

Richard Wolfe, PhD, is an associate professor and Director of the Sport Management Master’s Program in the Division of
Kinesiology. The current research he is involved in includes Managerial Efficiency in Major League Baseball; The Application of the
Consumer Satisfaction, Loyalty, Profitability Model to Sport; and Professional Sports and Corporate Social Responsibility.
Kathy Babiak, PhD, is an assistant professor in the Department of Sport Management. She has explored the key strategic factors
motivating sport organizations to enter into partnership relationships with organizations in the non-profit, government, and pri-
vate sectors.
Kim S. Cameron, PhD, is a professor of Management and Organization at the Business School and professor of Higher Education
in the School of Education. His current research focuses on the virtuousness of and in organizations and their relationships to orga-
nizational success.
Robert E. Quinn, PhD, is the Margaret Elliott Tracy Collegiate Professor in Business Administration and a Professor of
Management and Organizations. He is interested in the process of positive change and he seeks to understand processes that lead
to increased individual and collective capacity.
Dennis L. Smart, PhD, is an associate professor of management in the McCoy College of Business His current research interests
include the identification and development of competitive advantages through innovation and entrepreneurial activities, organi-
zational restructuring/diversification strategies, leadership, and sport management related issues.
James Terborg, PhD, is the Carolyn Chambers Professor of Management and the James H. Warsaw Academic Director of the
Warsaw Sports Marketing Center at the University of Oregon. His research interests include leadership and management topics in
the context of sports.
Patrick M. Wright, XXX, is the William J. Conaty/General Electric (GE) Faculty Chair in Strategic Human Resources and Director
of the Center for Advanced Human Resource Studies in the School of Industrial and Labor Relations, Cornell University. He con-
ducts research in the area of Strategic Human Resource Management (SHRM), particularly focusing on how firms use people as a
source of competitive advantage.

Abstract
Moneyball(Lewis, 2003) is a book about baseball. The book describes how a small-market major league baseball team,
the Oakland Athletics, has been able to compete with large-market teams by being innovative in a tradition-laden indus-
try. But, when read through a business management lens, one discerns that this baseball book, in fact, has general man-
agement lessons in a variety of areas including leadership, innovation, overcoming resistance to change, and creating a
sustainable competitive advantage. In this article, we outline and illustrate the valuable lessons for business that emerge
from the Moneyball story. More specifically, we provide a brief overview of the book; summarize arguments for apply-
ing Moneyball ideas to management as presented in the popular media as well as in academia; determine the underlying
management themes contained in the Moneyball story; and propose Moneyball lessons for managers.

Keywords: competition, innovation, resistance to change, innovation diffusion, competitive advantage

At its surface, Michael Lewis’ New York Times best seller,
Moneyball (Lewis, 2003), is a book about baseball. When
read through a broader business lens, however, one
appreciates that at its core, Moneyball is about challeng-
ing the established orthodoxy, about the resistance faced
in being innovative within a tradition bound industry,
and about the substantial competitive advantage that can
result from doing so. It is not surprising, therefore, that
it has been argued that Moneyball contains lessons that
can have substantial implications for management in the
private and public sectors (Thaler & Sunstein, 2004), that
the book can contribute to managerial effectiveness in a
Goddard, Thomas
broad array of fields (e.g., law schools (Caron & Gely,
2004), education (Lips, 2004), the film industry (Gross,
2006), and financial institutions (Santoli, 2005)), and
that the “Oakland A’s are not the only ones playing
Moneyball. Companies of every stripe want to be part of
the game” (Davenport, 2006, p. 107).
In this article we clarify and highlight the valuable les-
sons for business leaders that emerge from the Moneyball
story. More specifically, we (1) provide a brief overview of
the book with descriptive evidence of Beane’s impact on
winning percentage and payroll; (2) summarize arguments
for applying Moneyball ideas to management as presented
in the popular media as well as in academia; (3) determine
the underlying management-relevant themes contained in
the Moneyball story; and (4) propose Moneyball lessons
that have implications for a firm’s competitive advantage
and financial performance. While the other contributions
in this special issue address the application of a Moneyball
approach to various sports, we address the application of
Moneyball lessons to business. Though presented within a
broad corporate context, the lessons are very relevant to
management within the sport industry.
Moneyball, the book.
Moneyball, describes how Billy Beane, general manager of
the Oakland Athletics, revolutionized Major League
Baseball (MLB) by exploiting an inefficiency in the base-
ball labor market—the ability to get on base had been
seriously undervalued. Beane exploited the inefficiency
by implementing an employee (player) performance
measurement and feedback system that allowed him to
field a highly competitive team while having one of the
lowest payrolls in MLB. Beane accomplished this by
applying rigorous statistical analysis (i.e., sabermetrics)
to determine the traits most associated with a player’s
true value to his team1. Such analysis had important
implications for drafting, trading, and compensating
players as well as for in-game tactics.
For over a century, the accepted approach for evaluat-
ing prospective baseball talent relied on subjective analy-
ses—that is, personal scouting, with an emphasis on the
use of the naked eye (Roberto, 2005). The desired attrib-
utes on which scouts assessed position players were the
250 Volume 2 • Number 4 • 2007 • IJSF
“five tools”: hitting for average, hitting power, fielding,
foot speed, and arm strength. Pitchers were assessed on
three factors: arm strength, types of pitches thrown, and
control. Sabermetrics, on the other hand, applies rigor-
ous statistical analysis to determine the traits most asso-
ciated with scoring runs and winning ballgames rather
than these traditional attributes.
The tension between the use of subjective vs. objective
data is, of course, not limited to management in baseball;
it underlies keen interest in theory and research in the
related fields of behavioral decision making, behavioral
economics, and behavioral finance (Brockner & Flynn,
2006). The predilection of baseball front-office profes-
sionals to use soft data is understandable, as is the advan-
tage that Beane has gained by using sabermetrics. As
presented by Thaler and Sunstein (2004) “In making
judgments, people tend to use the ‘availability heuristic.’
… people often assess the probability of an event by ask-
ing whether relevant examples are cognitively ‘available’
… Yet reliable statistical evidence will outperform the
availability heuristic every time. … Baseball scouts (also)
use (the representativeness) heuristic by relying on a pro-
totypical picture of a promising prospect … in a way
that leads to systematic errors” (p. 1395-1396).
It is, thus, not surprising that scouting, which had been
the principal player evaluation method in baseball for
over a century, was proven to be inferior to objective, sta-
tistical analysis. The use of sabermetrics indicated that
certain statistics that had been used for decades were poor
predictors of performance, while other, newly developed,
statistics were superior. More specifically, using saber-
metrics, Beane replaced the traditional batting statistics
(batting average, home runs, runs batted in) with on-base
percentage plus slugging percentage (OPS) in assessing a
player’s offensive value to a team. Beane discarded two of
the three traditional statistics for pitchers (wins, earned
run average) in favor of “DIPS”—defense independent
pitching statistics—which focus on those statistics exclu-
sively within a pitcher’s control: walks, home runs, and
strikeouts (Caron & Gely, 2004).
The A’s statistical analyses also found that players draft-
ed out of college are much more likely to succeed than
those drafted out of high school. Beane, therefore, draft-
ed no high school players, regardless of how highly they

were rated by the scouts (Thaler & Sunstein, 2003). This
was consistent with Beane’s proclivity for objective over
subjective information as “(w)ith statistics now available
on the Internet for virtually all of the top college baseball
players, Beane was able to project a prospect’s major
league potential with increasing reliability” (Caron &
Gely, 2004, p. 1495).
In addition to assessing talent, sabermetrics also influ-
enced tactics used during games. Statistical assessment of
traditional game-time strategies indicated that a number
of them were not effective. As examples, neither the sac-
rifice bunt nor stolen base attempts tend to increase runs
scored (Thaler & Sunstein, 2003). Also, sabermetric
analyses found that patience at the plate is a very valuable
tactic. In addition to contributing to walks, and thus
being consistent with OPS, patience at the plate results in
getting better pitches to hit and in tiring out the opposing
pitcher (Roberto, 2005).
Moneyball, the results.
The Oakland Athletics’ approach to identifying players
with superior skills, without paying a market premium
for them, resulted in winning games at a discount relative
to the competition. Beane’s A’s have been near the top of
MLB’s standings despite being outspent by nearly all their
competitors (Hakes & Sauer, 2006). Table 1 presents
descriptive evidence.
Since Billy Beane took over the Athletics prior to the
1998 season, the team’s winning percent has increased
considerably (from 47.5 to 56.6%, an increase of 19.2%)
while the team’s payroll has decreased considerably as
Table 1. Oakland Athletics Costs per Win
Oakland A’s Wins/Costs
1991-1997 1998-2006*
Win % 47.5 56.6
Win % Rank** 18.1 7.8
Payroll Rank 12.7 24.3
Cost/Win Rank 17.6 5.6
* Billy Beane became GM in 1998
** Among MLB’s 30 teams
Efficiency of the UK fixed-odds betting
well. Such significantly improved output with signifi-
cantly decreased input is rare indeed.
Arguments For Applying Moneyball Ideas
Outside of Baseball
As presented above, Billy Beane was very successful in
exploiting a labor market inefficiency by applying saber-
metrics’ rigorous statistical analysis to talent assessment
and to tactics used during games. As argued by Caron
and Gely (2004), if exploiting an inefficiency in the base-
ball labor market led to the A’s advantage, the potential
for similar results in other industries is considerable:
If gross miscalculations of a person’s value could
occur … before a live audience of thirty thou-
sand, and a television audience of millions more,
what (does) that say about the measurement of
performance in other lines of work? … Bad as
they may have been, the statistics used to evaluate
baseball players were probably far more accurate
than anything used to measure the value of people
who didn’t play baseball for a living (p.7).
Consistent with Caron and Gely’s argument, we turn
now to lessons from the Moneyball story which can be
applied to management in many fields.
While Moneyball is a book about baseball, it has been ref-
erenced quite broadly over the short period since its publi-
cation by authors proposing that the book can have
substantial implications for various types of enterprises and
functions. More specifically, it is argued that the ideas con-
tained in Moneyball can inform individuals involved in:
General Management:
Organizations such as Amazon, Harrah’s,
Capital One … have all dominated their fields
by deploying industrial-strength analytics …
(just as) … Lewis’s best-selling book Moneyball
… demonstrated the power of statistics in pro-
fessional baseball (Davenport, 2006, p. 99-100).
To what extent are top managers … able to
push a rational but radical change down through
an organization? Beane has an owner who is
sympathetic to his philosophy, but … he has to
convince the field manager … The difficulty of
achieving sensible change in organizations is
Volume 2 • Number 4 • 2007 • IJSF 251
Goddard, Thomas
hardly special to baseball (Thaler & Sunstein, rience, prior teaching and publications … the
2004, p. 1400). legal education landscape (is) inexorably moving
While many would agree that the radical inno- … toward greater accountability and transparen-
vation (sabermetrics) described in Moneyball cy … the law school version of Billy Beane may
represents a “new vision of management” in emerge to seize the opportunities afforded in this
baseball, this article describes how adopting a new world order (Caron & Gely, 2004, p.1501).
broader lens might contribute to a “new vision A dumb statistic could be harmless, but … as
of HRM” in various types of organizations is often true, the very fact that the number is col-
(Wolfe, Wright & Smart, 2006, p. 111-112). lected and tabulated ends up influencing behav-
ior. The existence of the ‘save’ statistic … seems
Financial Advising:
to have altered the way teams use their relief
Just like the value investor who shuns the pop-
pitchers. … Though this strategy … is clearly
ular and expensive growth stocks in favor of …
stupid. … similar phenomena occur in other
ignored and underfollowed issues, Billy Beane
domains. Consider the role of citation counts in
searches for the most unloved and unwanted
the academic labor market. … another example
baseball players. While Wall Street is preoccu-
is placements in top law reviews. This is a flawed
pied with … fast pitches and home runs, (suc-
proxy for quality, to say the least …(Thaler &
cessful investors) are quietly walking their way to
Sunstein, 2004, p. 1399-1400).
home plate (Rogers, 2003, p. 216).
George Mason University “has excelled on the
Among the parallels between baseball and
court and in the classroom … GMU has hunt-
investing, by Beane’s lights, is the common mis-
ed for inefficiencies in its markets. Coach Jim
take in both fields of attributing the wrong cause
Larranaga follows the Moneyball model …
to a result. … Beane improves the odds by
hunting for the undervalued players … and
trusting the data on how a player has performed,
then building them into a team. This is also the
and what traits most closely correlate with future
idea behind GMU’s free-market-oriented eco-
success (Santoli, 2005, p. 39).
nomics department. … From the 1960s into the
In baseball … (if) you want to score more
1980s, a small university such as GMU could hire
runs, figure out which attributes of players corre-
conservative and free-market thinkers of true
late to scoring runs, and hire the players who best
genius … (who) were so undervalued that
exhibit those qualities. … With investing … (if)
GMU could afford the best of them (Boettke &
you want to improve your … returns, what sta-
Tabarrok, 2006, ¶ 2).
tistics should you track? ... Just as (in) Moneyball
… the right statistics … can help you zero in on The Film Industry:
a couple of key attributes for making money as an Private-equity investors and investment banks
investor (Kam, 2005, ¶ 1-2). are challenging one of the dominant forces in film
financing: commercial banks … in an analogue
Academia:
to … Billy Beane’s method … The dominant
If Billy Beane were to become a law school
commercial … banker in Hollywood … John
dean, he would try to figure out how to best
W. Miller … (has) devised a system for measur-
measure players’ contributions .... In drafting
ing and mitigating risks - a proprietary database
students, what is the relative importance of LSAT
of how films have performed (Gross, 2006).
scores and undergraduate GPA? In drafting
We see that the arguments concerning the rel-
entry-level faculty and signing … faculty ‘free
evance and applicability of Moneyball ideas to
agents,’ what is the relative importance of aca-
management, as they have diffused to date, are
demic pedigree, judicial clerkships, practice expe-

252 Volume 2 • Number 4 • 2007 • IJSF


related to the power of statistics in uncovering
relationships concerning individual and organi-
zational performance. Objective indicators and
statistics, in and of themselves, however, are not
the keys. It is measures that have been proven to
be valid indicators of desired performance that
form the bases of Moneyball. In the remainder of
this paper we build on these Moneyball ideas, as
we present what we believe to be the underlying
management insights of Moneyball.
Learning from Moneyball:
Insights for Managers
As stated earlier, Moneyball is about creating a competi-
tive advantage by being innovative within a tradition
bound industry. We suggest that challenging the conven-
tional wisdom by being innovative and overcoming
resistance presents potential for achieving sustainable
competitive advantage in many industries. In what fol-
lows we elaborate on these themes as we address how the
Moneyball story is related to, and expands our under-
standing of, the adoption, implementation, and diffusion
of innovation and the creation of sustainable competitive
advantage. We then adopt a more applied orientation in
addressing particular management applications of
Moneyball ideas. Finally, we discuss the generalizability
of the Moneyball lessons.
Moneyball and Innovation Adoption and
Diffusion
New statistics similar to those used in sabermetrics were
proposed long before the adoption of sabermetrics by the
A’s in 2001. Bill James, author of the comprehensive
Historical Baseball Abstract (James, 2001), spent three
decades challenging baseball’s conventional wisdom,
applying quantitative analysis to develop statistics most
associated with scoring runs and winning ballgames.
James’s findings and his approach, however, were
ignored by those in MLB until adopted by the A’s.
The slow diffusion of sabermetrics.
One of the most intriguing themes emerging from the
Moneyball story is the reaction in baseball to Beane’s
adoption of sabermetrics. In this section we focus on the
Efficiency of the UK fixed-odds betting
slow diffusion of sabermetrics and suggest some lessons
for managers that can be gleaned from this.
As suggested earlier, interest in the ideas presented in
Moneyball outside of MLB has been significant. As pre-
sented by Lewis in the afterword to the paperback edition
of Moneyball:
The people most certain they had nothing to
learn from the book … were in the front offices
of other major league teams. … In business if
someone … exposes the trade secrets of your
most efficient competitor, you’re elated. Even if
you have your doubts, you grab the book, peek
inside, check it out. Not in baseball. In baseball
many of Beane’s competitors were furious. …
there was no need to read the book, and, with the
exception of several owners who took an inter-
est; baseball executives bragged that they hadn’t
read the book because, well, it was offensive
(Lewis, 2004, p. 294).
The diffusion of this innovation has been slow in MLB, in
spite of the remarkable results the A’s have achieved since
adopting sabermetrics. A handful of the 30 MLB teams (the
Boston Red Sox, Toronto Blue Jays, Texas Rangers, Arizona
Diamondbacks) have hired general managers committed to
rigorous statistical analysis (the Los Angeles Dodgers hired
such a GM and then fired him after two seasons).
Why has the diffusion of sabermetrics been so slow?
The baseball establishment’s long-term rejection of
sabermetrics is reminiscent of another classic case of an
institution dismissing a source of competitive advan-
tage—“continuous-aim-firing” (Morison, 1966). At the
turn of the 20th century, a junior officer in the U.S. Navy,
William Sims, notified his superiors of a technological
breakthrough. Sims’ innovation, continuous-aim-firing,
allowed a ship’s sights to be trained on a target regardless
of rough seas. The traditional approach of firing at sea
involved having to mathematically calculate the likely
position of a target based on distance as well as its hori-
zontal and vertical movement on the water. Sims report-
ed that continuous-aim-firing improved shooting
accuracy by 3000%. His superiors responded first by
ignoring Sims, then by denying that such a breakthrough
was possible, and finally by branding Sims as a “crack-
Volume 2 • Number 4 • 2007 • IJSF 253
Goddard, Thomas
brained egotist, … a deliberate falsifier of evidence”
(Brockner & Flynn, 2006, p. 135).
A way to understand the tradition bound nature of
MLB and the slow diffusion of sabermetrics compared to
innovations in other industries involves MLB being a pro-
tected monopoly. The “firm” can be seen as being the
entire league and not the individual teams—each of which
has to operate within very stringent guidelines. Moreover,
unlike more usual business situations, there is no oppor-
tunity for an entrepreneurial owner of a successful team to
merge with unsuccessful teams and thereby strengthen its
advantage. Likewise, there is no opportunity for a success-
ful team to “proliferate” its product offering by expanding
to other markets and thus capitalize on its competitive
advantage. All of these factors blunt the incentives to
innovate and for innovation to be quickly adopted.
Moving to the individual level of analysis, radical inno-
vations threaten those with a vested interest in maintaining
the status quo. Very often those in top management are
hesitant to admit that systems they had implemented are
inferior. Another force working against adopting someone
else’s innovation is simply resistance to change; wanting to
remain in the “normal state,” not being willing to do the
very hard work necessary to achieve fundamental personal
and organizational change (Quinn, 2004). Such vested
interest may run very deep, overriding technical rationali-
ty. It is easy to understand why lower level employees and
baseball scouts would reject sabermetrics; if sabermetrics
was in, many of the scouts would be out, and those that
remain would be dependent on new skill sets.
Moneyball, thus, reminds us that organizational inno-
vations affect multiple constituents who may have multi-
ple, non-obvious, reasons for wanting to maintain the
status quo, such as when their sense of personal identity
is based upon the system, as it exists (Brockner & Flynn,
2006). Exacerbating resistance to the adoption of saber-
metrics has been the tradition bound nature of MLB.
Lessons from Moneyball Concerning
Innovation Adoption and Diffusion.
In spite of the anti-innovation pressures described above,
the A’s did successfully adopt and implement sabermetrics.
How did this occur? Billy Beane, the innovation champi-
on in the Moneyball story, was the seminal determinant of
254 Volume 2 • Number 4 • 2007 • IJSF
the successful implementation of sabermetrics. Because
predicting innovation consequences is inherently uncer-
tain and a radical innovation’s very existence can be threat-
ening to vested interests, such innovations tend to
stimulate political activity (Galbraith, 1982). It is the rela-
tive power of organizational actors that resolves such activ-
ity; a champion with sufficient power is required to
counter threatened groups with reason and, if necessary,
organizational authority. Beane faced considerable resist-
ance within the A’s as scouts were expected to substitute
new statistics for traditional measures and qualitative judg-
ments which had been the accepted approach for evaluat-
ing baseball talent for over a century. Beane, however, was
(almost) all-powerful, reporting only to team ownership.
Ownership was supportive, as the small-market A’s had to
be innovative to compete with large-market teams.
In addition to the innovation champion, organizational
context is an important determinant of innovation imple-
mentation. Radical innovation is often accompanied by
technological discontinuities in the external environment.
Advances in computing technology were important deter-
minants of the implementation of sabermetrics as power-
ful PCs provided the fast, powerful computational
capabilities necessary for implementing the innovation.
A seminal lesson in the Moneyball story involves the
length of time it took for sabermetrics to be adopted, its
slow diffusion, and the considerable competitive advan-
tage it has provided the A’s. The more tradition laden an
industry is and the more second nature its operating pro-
cedures are, the less prone its employees will be to discov-
er innovative opportunities. In such situations, radical
innovation provides significant potential for developing a
competitive advantage, one with good promise for con-
siderable sustainability.
Moneyball and Competitive Advantage
As indicated earlier, the adoption of sabermetrics has con-
tributed to remarkable results for the A’s—significantly
improved outcomes (winning per-cent) with significantly
decreased input (salaries). These results have been sus-
tained while consistently allowing the team’s most
acclaimed players (i.e., All-Star players) to move on (via
trades or free-agency); since taking over as GM in 1998,

Billy Beane has traded or simply not re-signed eight All-
Stars (i.e., Mark McGwire, Jason Isringhausen, Jason
Giambi, Miguel Tejada, Keith Foulke, Ramon Hernandez,
Tim Hudson, Mark Mulder)2. Not retaining these players
has contributed to maintaining the A’s salaries consider-
ably lower than average while maintaining a winning per-
cent well above average. In every year subsequent to Billy
Beane’s first year as GM, the A’s have been among the top
third of MLB teams in winning per-cent, and in every year
but one, the A’s have been among the bottom third in
salaries (the exception was 2004 when they were among
the bottom half in salaries). In what follows we address
how sabermetrics provides a competitive advantage and
how that competitive advantage might be sustainable.
Sabermetrics and competitive advantage.
The strategy literature has identified two main forms of
creating competitive advantage: resource-picking and
capability-building (Makadok, 2001). We address the A’s
use of these two forms of creating competitive advantage
in turn. Sabermetrics is a resource-picking mechanism
wherein “managers gather information and analysis to
outsmart the resource market … The resource-picking
mechanism creates economic rents when the firm pur-
chases resources for less than their marginal productivi-
ty” ( Makadok, 2001, p. 387). Competitive advantage
through resource-picking is only possible when the firm
has superior information.
According to the resource-based view (RBV) of the firm,
(Barney, 1991) resource-picking is the main mechanism
for creating economic rent (Makadok, 2001). The RBV
stipulates that firms are endowed with heterogeneous bun-
dles of resources and that competitive advantage accrues if,
and only if, a resource (or bundle of resources) is valuable
and rare. It is reasonable to conclude that by identifying
players with superior skills that were undervalued in the
labor market, the A’s resource-picking mechanism—
sabermetrics—meets the value criterion. When imple-
mented by Beane, sabermetrics met the rare criterion as
well. Based on the RBV criteria, therefore, sabermetrics
provides (or provided) a competitive advantage.
Sabermetrics and sustainable competitive advantage.
In addition to the RBV value and rare criteria just dis-
cussed, to contribute to a sustained competitive advan-
Efficiency of the UK fixed-odds betting
tage, a resource must meet two further criteria. It must
be imperfectly imitable/substitutable and the firm must be
organized such that it can realize a competitive advantage
based on resources which add value, are rare, and are
imperfectly imitable/substitutable (Barney, 1991).
A number of MLB teams have attempted to imitate what
the A’s have implemented. For example, when John Henry
purchased the Boston Red Sox, in 2002 he decided to
…eschew … traditional baseball metrics and
qualitative judgments in favor of newer statisti-
cal measures that better gauge the way games are
actually won. Henry hired a cadre of baseball
number crunchers … and gave them the task of
testing baseball’s hoary conventional wisdoms
against the cold, hard facts of performance
(Birger, 2005, p. 173).
During and following the 2003 season, two senior man-
agers from the Athletics’ front office were hired as gener-
al managers by the Toronto Blue Jays (J.P. Ricciardi) and
the Los Angeles Dodgers (Paul DePodesta). Since that
time, the Texas Rangers have hired Jon Daniels, a 28 year-
old who “like most new-breed general managers … is a
stats maven” (Cannella, 2005, p. 71) and the Arizona
Diamondbacks have hired 35-year old Josh Byrnes as
general manager. Byrnes, who had been with the Boston
Red Sox, is “known for his elaborate statistical analysis”
(Baum,2005).
An obvious question which comes to the forefront is
whether sabermetrics as implemented by the A’s is
imitable. Given the movement of senior managers who
had been involved in implementing and administering
sabermetrics with the A’s to two teams, as well as the hir-
ing of “number crunchers” by three other teams, has the
A’s competitive advantage been lost? Preliminary analy-
ses indicate that this may be the case, that sabermetrics
has diffused such that prices in baseball’s labor market
may no longer exhibit the “Moneyball anomaly.” Hakes
and Sauer argue that baseball’s labor market inefficiency
disappeared when members of the Athletics’ organization
and like-minded individuals were hired to run competing
franchises. It remains too early, however, to make a
definitive statement concerning the sustainability of the
A’s competitive advantage (Hakes & Sauer, 2006).
Volume 2 • Number 4 • 2007 • IJSF 255
Goddard, Thomas
In addressing imitability, it is helpful to consider the
importance of organizational history as well as socially
complex resources. Over time, as organizations evolve
they acquire skills, abilities, resources, and cultures that
are unique to them. Whenever the acquisition or devel-
opment of valuable and rare resources depends upon
unique historical circumstances, those imitating these
resources will be at a disadvantage (Barney, 1991,
1995).While it is relatively easy to purchase hard- or soft-
ware, this is not the case with socially complex resources,
i.e., organizational phenomena such as trust, friendship,
teamwork, and culture. It might be that the Athletics’
unique historical circumstances and related organiza-
tional phenomena such as the teamwork and culture
developed by Beane, as well as his leadership, will result
in those attempting to imitate what he achieved with the
A’s being at a disadvantage.
The importance of history and related socially complex
resources foreshadows the fourth RBV criterion—organi-
zation. Numerous aspects of a firm’s organization are rel-
evant here: e.g., structure, control and reward systems,
culture, and leadership. Such components of an organiza-
tion are considered complementary resources as they have
limited ability to contribute to competitive advantage
directly. Their true value comes in combination with
other resources and capabilities (Barney, 1991, 1995).
In the case of sabermetrics, a competitive advantage
was created by the A’s by their choice of implementing
this innovation. The A’s competitive advantage, howev-
er, may be sustained by performing sabermetrics more
efficiently than their competitors. Issues of importance,
then, in addressing whether the A’s sabermetric based
competitive advantage will be sustained are whether the
A’s socially complex resources—i.e., the front-office
teamwork and culture developed by Beane, his leader-
ship, and the control and reward systems he put in
place—will result in those attempting to imitate saber-
metrics being at a disadvantage.
We return to the role of capability-building here;
according to Makadok (2001), a capability is “a special
type of resource—specifically, an organizationally embed-
ded, nontransferable, firm-specific resource whose pur-
pose is to improve the productivity of other resources
possessed by the firm” (p. 389). Capability-building
256 Volume 2 • Number 4 • 2007 • IJSF
involves architecting and constructing capabilities inter-
nally. In the current context this involves developing and
embedding capabilities related to the implementation of
sabermetrics. If the A’s competitive advantage is to be sus-
tained, we suggest that it will be due to the capabilities that
Beane has built in the A’s (e.g., front-office teamwork and
culture, control and reward systems, leadership) which
“improve the productivity of other resources possessed by
the firm” (Makadok, 2001, p. 389). The “other resources”
in the case of the Athletics are sabermetrics—the A’s
resource-picking mechanism, as well as the ballplayers the
A’s acquire.
Lessons from Moneyball Concerning
Competitive Advantage
While the Red Sox, Blue Jays, Rangers, and Diamondbacks
appear to have made the choice to adopt sabermetrics, the
sustainability of the A’s advantage, as is the case of a com-
petitive advantage for any organization, remains a ques-
tion of performance; a question of how well an
innovation—sabermetrics in this case—is embedded in an
organization’s processes, structure, and culture.
Porter (1996) presents arguments which are informa-
tive here. Porter makes the case that competitive advan-
tage arises from an organization’s choice of particular
activities and/or by performing the chosen activities more
efficiently than competitors. He states that firms’ advan-
tages (e.g., those of Southwest Airlines and Ikea) are
based on unique, tailored sets of congruent activities;
their competitive advantages stem from the way entire
business systems of activities fit and reinforce one anoth-
er. Strategic fit among activities reduces costs and/or
increases differentiation and is fundamental to the sus-
tainability of competitive advantage as it is more difficult
to match an array of interlocked processes and activities
than it is to imitate one or two processes or activities.
Porter’s ideas concerning interlocked activities, Barney’s
proposition that to sustain a competitive advantage, a
firm must be appropriately organized, as well as
Makadok’s arguments concerning resource-picking (i.e.,
information gathering and analysis to outsmart the
resource market) and capability building (i.e., embedding
resources such that they are firm-specific, nontransfer-
able), help explain the continued advantage of the A’s.

Moneyball: Managing Data for Competitive
Advantage
In this section we adopt a more applied orientation, pro-
posing that several Moneyball lessons can be related to
management effectiveness and firm financial perform-
ance in various types of industries. We focus on three
separate but related themes: (1) managing by intuition
and accepted wisdom vs. managing based on good
empirical data; (2) achieving competitive advantage
through people; and (3) achieving superior financial per-
formance through effective measurement and theory
testing. We expand on how each theme is related to the
Moneyball story and to management practice next.
Accepted theories of competition: Potential disadvan-
tages of “common sense”.
A critical issue raised in Moneyball concerns traditional,
broadly accepted, views of what player attributes, and
what tactics contribute to winning baseball games. Lewis
repeatedly returns to executives, players, and commenta-
tors who do not believe that Billy Beane’s approach
works, even in the face of continued success. In fact, it is
in large part the uniqueness of Beane’s approach that
enables the A’s to continue to achieve success. His
approach is different from that of the “experts” and is
discounted by them.
As detailed in their book, Pfeffer and Sutton (2006)
report that similar forces work within the strategic deci-
sion processes found in many organizations and indus-
tries. They recommend that management decisions be
based on first, demanding empirical evidence; second,
examining the cause-and-effect reasoning that would
explain the empirical evidence; third, experimentation;
and fourth, continuous learning. Moneyball is a case
study on the application of evidence-based management.
Consider parallels to the Moneyball story in some of the
most innovative business models that have emerged over
the past few decades. For instance, within the computer
industry, IBM once held a near monopoly through its
sales and service of large mainframe computers. The cul-
ture of IBM promoted a mindset that viewed computers
as complex tools for highly technical scientists. Because of
this, the emergence of the PC market was met with both
skepticism and scorn within IBM as decision makers
Efficiency of the UK fixed-odds betting
clung to their view of the industry. It was only when IBM
faced bankruptcy that its decision makers embraced a new
model of competition. While IBM’s story is old and well
known, consider other organizations’ radically innovative
business approaches: WalMart’s focus on rural areas,
Dell’s direct model, Amazon’s exploitation of the internet,
and Priceline.com’s creation of the customer as a price-
maker instead of a price-taker. All were innovations that
were dismissed as anomalies but were accepted and imi-
tated later when their advantages became manifest.
Are there current parallels that managers should take
note of? What might be an area where an innovative
approach might threaten a shared view of management
and competitive advantage? Consider the common
occurrence of organizational downsizings or “rightsiz-
ings.” Often a languishing stock price leads CEOs to
announce a workforce reduction as a means of reducing
costs. The stock price receives a short term jump, but one
which is often not sustained. Workforce reductions can
result in loss of valuable human capital and reduced
engagement among remaining employees. These affects
soon translate into reduced organizational capability,
which in turn results in customers taking their business
to competitors, presenting a new challenge to the stock
price. The conventional wisdom, which suggests that
downsizing constitutes effective management, continues
in the face of contradictory evidence that layoffs, while
generating short term profits, do not better position
firms for long term growth (Cascio, 2002). In fact, it is the
contrarian view that taking every possible step to avoid
layoffs results in higher short, (Society of Human
Resource Management, 2001) and long term perform-
ance, (Cascio, 2003) that often holds3.
Capturing rents: Focus on the core, not the stars.
Another strong Moneyball theme is Beane’s approach of
acquiring good core players who have yet to achieve their
potential, and thus, are under-priced. Beane signs such
players to long-term contracts during which they often
demonstrate superior contribution; other teams then
sign them to contracts more consistent with their market
value. As previously discussed, Beane decided not to
retain eight All Stars, each of whom went on to earn sig-
nificant pay increases. In their place, he identified players
Volume 2 • Number 4 • 2007 • IJSF 257
Goddard, Thomas
who were undervalued, but either individually, or collec-
tively, provided equivalent contributions at a lower than
market cost. Clearly the management strategy is to gath-
er asymmetric information regarding employees’ poten-
tial to contribute, and capture the rents of increased
performance at a lower cost.
Baseball salaries have increased dramatically since the
implementation of free agency, particularly among con-
sensus “stars” (e.g., Randy Johnson, Curt Schilling, Alex
Rodriquez). One might argue that the “free agent” nature
of the employment relationship within MLB is very differ-
ent from that faced in other industries. However, consider
the trend within executive pay which continues to rise at
rates far greater than hourly pay, with multi-million dollar
packages becoming the norm. For instance consider the
retirement packages of Jack Welch at GE (worth between
$20 and $50 million (Borrus, 2004)), Hank MacKinnell of
Pfizer (worth up to $83 million (Knowledge @Wharton,
2006)), and Lee Raymond of Mobil-Exxon ($400 million
(Foroohar, 2006)). While these packages become transpar-
ent following retirement announcements, the agreements
are arranged as part of CEO contract negotiations. The
“free agency” trend among executives was bolstered by the
success of Louis Gerstner III at IBM. Gerstner’s entry to the
technology industry from consumer goods seemingly
demonstrated that executives could move across indus-
tries. While this innovative hiring model served IBM well,
it also created a virtual spot market for CEOs.
It is due to this trend that Wright, McMahan, and
McWilliams (1994) argued that sustainable competitive
advantage more likely stems from the larger workforce
than from a few talented executives. Talented executives
have significantly more visibility in the market and conse-
quently are able to capture their rents, whereas the contri-
bution of members of the larger workforce is less visible
and consequently, they are less able to capture their own
rents. This leads to two opportunities for identifying char-
acteristics that might be undervalued in today’s market.
First, recruiting future executive talent from MBA pro-
grams. Graduates from top 20 MBA programs such as
Northwestern, Harvard, and Wharton are able to com-
mand a premium in the marketplace because of the large
number of employers who seek to attract them. There
appears to be a self reinforcing cycle as MBA programs are
258 Volume 2 • Number 4 • 2007 • IJSF
rated, in part, based on the average starting salaries of their
graduates. An intensely competitive market for graduates
of “elite” programs has emerged, resulting in prices being
bid up relative to the next tier of MBA programs. However,
“second tier” programs have highly talented students who
receive excellent educations, and thus, are well positioned
to be successful executives. Hiring companies could find
ways to assess the abilities of MBA students at these pro-
grams and obtain excellent talent at a discount relative to
the graduates of top schools. Performance in previous
work settings and, as discussed next, tests of cognitive abil-
ity could be substituted for Beane’s college baseball statis-
tics. This approach would parallel Beane’s success at hiring
talent at less than market prices.
Second, the search for rents suggests identifying other
undervalued characteristics among potential employees.
For instance, Rynes, Brown, and Colbert found that even
in the face of convincing data suggesting that cognitive
ability serves as the best predictor of job performance,
human resource professionals continue to resist using
related tests in candidate selection (Rynes, Brown &
Colbert, 2002). Timmerman (2005) investigated the
potential contribution of experience (a characteristic val-
ued by many recruiters) and cognitive ability to the returns
that each might generate. Using a simulation Timmerman
showed that firms could capture significant rents by
recruiting based on the less valued attribute (cognitive
ability) relative to the more highly valued one (experience)
( Timmerman, 2005). Adopting a Moneyball approach,
hiring on cognitive ability, like sabermetrics’ OPS, should
result in hiring talent at less than market rates.
Measurement and theory testing as a key to profits.
Billy Beane’s staff invested considerable energy into gath-
ering good data and then relating variables to one anoth-
er in a theory testing format. Moneyball, thus, describes
how one competitor developed a different theory of the
business, tested it, and then managed according to the
theory in a manner that provided superior returns. What
Beane demonstrated was the value of a comprehensive
and strategically aligned financial and performance meas-
urement system that contains aspects of activity-based
costing (ABC), economic value added (EVA), and the bal-
anced scorecard (Kaplan & Norton, 2000). Specifically,

activity-based costing requires a logical cause-and-effect
analysis of the links between resources, costs of resources,
and performance. ABC allows an organization to accu-
rately trace expenses to output, which also allows for the
discovery of inefficiencies in the production process. EVA
analysis has potential to correct for both over-investment
and under-investment by explicitly considering invested
capital and the cost of capital.
EVA can be improved in several ways, such as reducing
costs, disposing of unproductive assets (i.e., those with
returns below the cost of capital), and investing in assets
with returns that exceed the cost of capital. The balanced
scorecard (BSC) integrates key aspects of ABC and EVA
into a comprehensive strategy map that identifies non-
financial performance measures, or intangible assets, that
drive financial performance measures. In effect, a BSC
proposes a causal model of how human capital, informa-
tion technology, organizational culture, internal process-
es, and the customer value proposition drive financial
performance. Beane’s approach to the evaluation, acqui-
sition, and disposal of individual baseball players is high-
ly consistent with the ideas proposed in ABC, EVA, and
BSC. He reduced cost and improved asset productivity.
In addition, better performance on the field led to
increased attendance and revenue.
The BSC approach has the potential to contribute sub-
stantially to firm outcomes. Data from 157 companies
suggest that firms with extensive causal modeling and
validation have, on average, a 2.95% higher ROA and
5.14% higher ROE than firms with minimal causal mod-
eling and validation. As attractive as the BSC approach
might be, however, the key to success with this approach
is to validate the links in the cause-and-effect model.
Failure to do so is common as less than 25% of firms ver-
ify proposed linkages (Ittner & Larcker, 2003).
The implementation of sabermetrics by the A’s is, in
effect, a lesson in performance measurement and per-
formance management. A number of innovative busi-
ness strategies have been similarly data driven. Consider
the following examples. CapitalOne’s “information strat-
egy” consisted almost entirely of superior exploitation of
information in the credit card industry. Having current,
specific information on the value gained from each one of
Efficiency of the UK fixed-odds betting
its customers’ credit card usage, CapitalOne could tailor
its credit card offerings.
As a second example, consider Sears’ application of the
Service-Profit-Chain principles. Working with econo-
metricians using employee climate, customer satisfac-
tion, and financial data across all its stores, Sears was able
to calculate the drivers of profitability. This revealed that
employee climate predicted next quarter customer satis-
faction, which predicted the following quarter’s revenues.
This allowed Sears to focus its efforts on engaging
employees as the first step in its turnaround. In essence,
the Sears story describes how the firm was able to devel-
op a theory of the firm (i.e., what things drove profitabil-
ity and through which mechanisms), empirically test that
theory, and then take action to manage the firm in a
manner consistent with the theory.
As increasing numbers of organizations implement
enterprise-wide information systems, the potential to
capture and exploit data for competitive advantage
becomes more possible. Firms are increasingly able to
capture far more data than had been possible—data on
operations, employees, and customers. As managers
develop knowledge about such data, they can develop
and test theories about what drives success on a number
of dimensions (e.g., customer satisfaction, operational
performance, talent retention, revenues).
An extension of Beane’s measurement and theory test-
ing approach in adopting and implementing sabermetrics
would be to apply it to the Oakland A’s business units.
Applying the same logic and execution to ticket sales,
sponsorship, customer relations management, and stadi-
um operations could result in the benefits which have
accrued to the A’s on the field of play; i.e., significantly
improved output with significantly decreased input.
Moneyball and Generalizability
Generalizability of Moneyball lessons can be addressed
from two perspectives. In this section we address gener-
alizability from the perspective of the sabermetrics
approach to talent assessment, selection, and utilization.
Generalizability of Moneyball lessons as they relate to rad-
ical organizational change is addressed subsequently, in
the conclusion.
Volume 2 • Number 4 • 2007 • IJSF 259
Goddard, Thomas
While the basic rationale of sabermetrics is sound, its
application might be context specific, being more appro-
priate for some organizations and industries than for oth-
ers. In what follows we assess the extent to which a
sabermetric approach might be most appropriate for an
organization (sport) with minimum interdependence
(e.g., baseball), while being more challenging to imple-
ment in an organization (sport) in which interdependence
among employees (players) is of considerable importance
(e.g., basketball). Thompson contributed to our thinking
about organizational interdependence with his distinction
among pooled, sequential, and reciprocal technologies.
Just as the technologies become more complex as they
move from pooled to sequential to reciprocal, so too do
the resultant interdependencies62 (Thompson, 1967).
The relative contribution of individual skills and per-
formance to team performance (which sabermetrics
determines) is different in industries (sports) which
employ different technologies. Baseball is an excellent
example of pooled interdependence, wherein perform-
ance is determined by relatively autonomous, discrete,
activities, which cumulate to yield total organization out-
put (Keidel, 1987).While overall direction and coordina-
tion is paramount in football wherein there exists
“hierarchical control over the parts,” and in basketball
where “cooperation among the parts” is necessary,
“(b)aseball is a metaphor for the autonomy of organiza-
tional parts (i.e., players)” (Poppo, 2000, p. 585).
Coordination and cooperation among players, thus, is
less important in baseball than in other sports.
Given the importance of interdependence in other
sports (other types of organizations), it is more difficult
to predict team (organizational) performance from
measures of individual performance in those sports
(other types of organizations) than it is in the pooled
technology of baseball. Just as complexities increase as
technology moves from pooled to reciprocal interde-
pendence, so too would the complexity of sabermetrics
applicable to sequential and reciprocal technologies.
Consider basketball and other contexts where there is
reciprocal interdependence. Here, performance meas-
ures need to exist at the level of the interdependent unit.
Could Michael Jordan have been replaced “in the aggre-
gate,” as Billy Beane replaced Jason Giambi with three
260 Volume 2 • Number 4 • 2007 • IJSF
players (Lewis, 2003) in the pooled technology of base-
ball?; in football, how would the performance of a run-
ning back and members of the offensive line, all of whom
are interdependent, be assessed?
The above examples demonstrate the challenges, not the
impossibility, of applying a sabermetric approach in other
sport and other industry contexts. Sport applications are,
of course, addressed in the other papers in this special
issue. As reported elsewhere, efforts to apply sabermetric-
type approaches are being attempted in football (Campos
& Chait, 2004), soccer, rugby (Babiak & Gerrard, 2005),
basketball (Ballard, 2005), and hockey (Davidi, 2006). As
presented above, others have discussed the relevance of
sabermetrics to general management in the corporate sec-
tor ( Davenport 2006, Schmalenee, 2004) and to a num-
ber of specific, non-sport, work settings (e.g., academia,
(Boettke & Tabarrok, 2006; Caron & Gely, 2004; Dolan,
2006) the film industry (Gross, 2006), financial advising
(Kam, 2005; Rogers, 2003; Santoli, 2005).
Conclusion
While the applicability of sabermetrics-type performance
assessment approaches might be most appropriate for
certain types of organizations (i.e., those with relatively
low interdependence), we believe that Moneyball lessons
related to achieving radical organizational change are
broadly generalizable. The lessons:
- the more tradition laden an industry, the more diffi-
cult it is to recognize innovation opportunities,
though the greater the opportunity to develop a sus-
tainable competitive advantage when innovative
opportunities are discovered.
- while it is relatively easy to purchase or copy some
types of resources (e.g., software), this is not the case
with capabilities—which are socially complex
resources (e.g., trust, friendship, teamwork, culture).
Achieving sustainable competitive advantage with
administrative innovations such as sabermetrics
often is dependent upon the organizational capabili-
ties which surround it.
- implementing an innovation more efficiently than
competitors can result from embedding the innova-
tion in unique, tailored sets of consistent activities;

the competitive advantage, then, stems from the way
entire business systems of activities fit and reinforce
one another.
- the presence of an innovation champion is a seminal
determinant of successful radical innovation imple-
mentation. The very consideration of a radical inno-
vation can be threatening to vested interests; such
innovations, thus, tend to stimulate political activity.
A champion is necessary to counter threatened
groups with reason and/or power and authority.
- recent increases in information technology capabili-
ties have resulted in a plethora of data at the finger-
tips of managers. This has created the potential to
both develop strong theories of how people con-
tribute to business success and to test those theories
for their veracity.
Baseball, both as sport and as industry, differs greatly
from the competitive environment faced by most organi-
zations. It is important to note, however, that generaliz-
ability concerns often constrain radical organizational
change. Consider the Moneyball story itself, wherein those
working within the established paradigm ignored the
value of an outside perspective. Sabermetrics challenged
baseball’s extant paradigm, providing significant evidence
that the extant paradigm focused on the wrong player sta-
tistics and that different statistics and player characteris-
tics could be used for price and team performance
advantages. While those within the establishment ignored
sabermetrics, the Oakland A’s gained strategic advantage.
The Moneyball “lessons” presented in this paper
address the related corporate processes of innovation
adoption and implementation; data measurement and
theory testing; and the development of sustainable com-
petitive advantage. The lessons are presented within a
broad corporate context. They are as relevant, however,
to the sport industry as they are to any other. The way for
managers to successfully apply the Moneyball lessons is
not to copy them, but to understand why they were suc-
cessful and to extend those concepts to their contexts.
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Endnotes
1
Sabermetrics refers to a statistical approach for developing
objective knowledge about baseball. This statistical approach is
an important determinant of player evaluation and “in-game”
tactics (e.g., bunting, stealing). The term derives from SABR,
the acronym for the Society for American Baseball Research.
2
1997 1998 1999 2000 2001 2002 2003 2004 2005
Win Per-cent 40.1 45.7 53.7 56.5 62.9 63.6 59.3 56.2 54.3
AllStars Traded/ McGwire Isringhausen Giambi Tejada Foulke Hudson
Not Resigned* Hernandez Mulder
Win % Rank** 28.0 22.5 10.0 6.0 2.0 2.0 4.0 9.5 9.5
Salary Rank 24.0 28.0 27.0 25.0 29.0 28.0 23.0 16.0 22.0
* prior to the next season
** among 30 MLB teams

3
We do not argue that layoffs are universally ineffective.
Certainly economic conditions and competitive pressures
require managing the size of the workforce in a way that might
require reductions. However, the trend toward announcing lay-
offs simply as a means to bump the stock price seems to be both
increasing and stemming from an agreed upon wisdom that does
not match well with recent analyses regarding its effectiveness.

262 Volume 2 • Number 4 • 2007 • IJSF