An Insider’s Eye for the Game
Most people at the ballpark are fairly casual observers who watch the ball move as they carry on a conversation or enjoy their beer and ballpark frank. As with other sports, there is activity critical to the outcome of every game that takes place away from the moving ball.
Sometimes, from pitch to pitch there are decisions made, signals sent and minor tweaks applied by batter, pitchers, fielders, and the manager and his staff. If base runners are on, the batter may receive a new command via hand signals from the third base coach who is acting as relay-man from the manager in the dugout. Squatting behind home plate, the catcher signals the desired next pitch type and location, taking in all information available about the situation, the batter’s strengths and weaknesses, the pitcher’s command of his pitch location that game. The players in the field may make a small shift in their positioning depending on the type of pitch coming.
Understanding all the intricacies can engage people in an otherwise slow game – although it is sometimes still too slow even for those who are engaged. In my role as an official scorer, all of these things are important to understand in case the next thrown or batted ball leads to a scoring decision that has to acknowledge whether a play should have been made routinely, or required extraordinary effort, given the situation.
If you miss these finer points, it’s the equivalent of evaluating, buying and selling investments based only on recent performance (only watching the ball move). There is a lot more to the story. Scouts, media and the insiders at the ballpark have access to resources (advanced stat packages, game notes, their experience seeing hundreds/thousands of games and players). These resources help them evaluate and interpret each player’s performance, core talents and future prospects.
Professional evaluation of investments is similar. A sophisticated approach looks beyond the year-to-date leaders to understand why they lead and whether the approach that created good recent performance can be reasonably expected to continue to produce in the future.
Evaluating a mutual fund manager, for example, requires understanding of the manager’s investment philosophy (quantitative, qualitative, contrarian, top-down, bottom-up, etc.), the market segment they emphasize, performance relative to comparative benchmarks, experience of the manager and his/her team, investment decisions at past peaks and valleys, costs of the fund and perhaps most importantly – risk taken to produce eye-catching results. Market-leading performance is usually achieved alongside more risk taken by the manager. For those managers who do achieve market leading performance, it’s necessary to come back to the identification of skill vs. luck, trying to separate the two.
Often, identifying investment managers who may add long-term value for their shareholders, can be a bit like trying to identify which player will advance beyond Triple-A and establish themselves as major league talent, rather than “4-A” players that reach the majors but don’t have what it takes to stay.
Baseball scouts are paid to make this assessment. They make valuable contributions to a team’s future success. (The scouts receive World Series rings also.) But like investing, it’s not an absolute business. Player evaluation often requires a lot of relative comparison.
In my early years as an official scorer, the Tacoma Rainiers had two good outfielders with tools that projected major league ability – Adam Jones and Wladimir Balentien. Seattle Mariners GM Bill Bavasi was compelled to add a starting pitcher, assumed to be the missing link to get the team back to the postseason. Jones was the most highly regarded prospect. He had been a first-round draft pick out of high school in San Diego whereas Balentien had worked his way through the organization after signing as a 16-year-old out of Curacao.
The Baltimore Orioles preferred Jones and minor league pitcher Chris Tillman (along with three others) in exchange for left-handed pitcher Erik Bedard. The Mariners certainly knew it was a high price given the projected talents of minor league prospects they gave up. But they also likely felt that they could afford to deal from strength and give up Jones while they still had Balentien as a strong outfield prospect. Balentien’s Tacoma performance had been equal to Jones’.
|2007 Tacoma Rainiers||Avg.||HR||RBI||SB||K||OF assists|
Of course, Jones became a major league All-Star for Baltimore. Bedard, though talented, was essentially a bust. And Balentien’s career fizzled. He made it to the majors with Seattle and Cincinnati hitting 15 home runs in 511 at bats, before going to Japan and breaking Sadaharu Oh’s single-season home record with 60 in 2013.
It can be similarly difficult to choose between two (or 1,000) mutual funds in any category. Don’t fret, though, the choice between fund A and fund Q is usually less important than decisions about your higher level of asset allocation. Your weight of stocks vs. bonds, U.S. vs. international, etc. will usually drive overall performance outcomes more so than any underlying investment.
Takeaway: There are layers of depth beyond a surface observation of baseball or investment performance.
Investing and baseball (Part 1) – What do they have in common?
Investing and baseball (Part 2) – Tony Gwynn and Understanding Probability
Investing and baseball (Part 3) – Statistical Analysis
Investing and baseball (Part 4) – Team building and investment portfolio
Investing and baseball (Part 5) – An insider’s perspective on the game
Investing and baseball (Part 6) – Ongoing re-evaluation and adaptation
Investing and baseball (Part 7) – Keeping scores can be a matter of perspective
Investing and baseball (Part 8) – The rarity of most valuable “players”
Investing and baseball (Part 9) – Fantasy baseball (growth vs value)
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