May Baseball’s Irrational Heart Keep On Beating; what moneyball thinking has failed to conquer in the sport

World Series Recap: May Baseball’s Irrational Heart Keep On Beating

Columnist Alison Gopnik on what moneyball thinking has failed to conquer in the sport.

Nov. 1, 2013 8:27 p.m. ET

The last 15 years have been baseball’s Age Of Enlightenment. The quants and nerds brought reason and science to the dark fortress of superstition and mythology that was Major League Baseball. The new movement was pioneered by the brilliant Bill James (adviser to this week’s World Champion Red Sox), implemented by Billy Beane (the fabled general manager of my own Oakland Athletics) and immortalized in the book and movie “Moneyball.”Over this same period, psychologists have discovered many kinds of human irrationality. Just those biases and foibles that are exploited, in fact, by the moneyball approach. So if human reason has changed how we think about baseball, it might be baseball’s turn to remind us of the limits of human reason.

We overestimate the causal power of human actions. So, in the old days, managers assumed that gutsy, active base stealers caused more runs than they actually do, and they discounted the more passive players who waited for walks. Statistical analysis, uninfluenced by the human bias toward action, led moneyballers to value base-stealing less and walking more.

We overgeneralize from small samples, inferring causal regularities where there is only noise. So we act as if the outcome of a best-of-7 playoff series genuinely indicates the relative strength of two teams that were practically evenly matched over a 162-game regular season. The moneyballer doesn’t change his strategy in the playoffs, and he refuses to think that playoff defeats are as significant as regular season success.

We confuse moral and causal judgments. Jurors think a drunken driver who is in a fatal accident is more responsible for the crash than an equally drunken driver whose victim recovers. The same goes for fielders; we fans assign far more significance to a dramatically fumbled ball than to routine catches. The moneyball approach replaces the morally loaded statistic of “errors” with more meaningful numbers that include positive as well as negative outcomes.

By avoiding these mistakes, baseball quants have come much closer to understanding the true causal structure of baseball, and so their decisions are more effective.

But does the fact that even experts make so many mistakes about baseball prove that human beings are thoroughly irrational? Baseball, after all, is a human invention. It’s a great game exactly because it’s so hard to understand, and it produces such strange and compelling interactions between regularity and randomness, causality and chaos.

Most of the time in the natural environment, our evolved learning procedures get the right answers, just as most of the time our visual system lets us see the objects around us accurately. In fact, we really only notice our visual system on the rare occasions when it gives us the wrong answers, in perceptual illusions, for instance. A carnival funhouse delights us just because we can’t make sense of it.

Baseball is a causal funhouse, a game designed precisely to confound our everyday causal reasoning. We can never tell just how much any event on the field is the result of skill, luck, intention or just grace. Baseball is a machine for generating stories, and stories are about the unexpected, the mysterious, even the miraculous.

Sheer random noise wouldn’t keep us watching. But neither would the predictable, replicable causal regularities we rely on every day. Those are the regularities that evolution designed us to detect. But what can even the most rational mind do but wonder at the absurdist koan of the obstruction call, with its dizzying mix of rules, intentions and accidents, that ended World Series Game 3?

The truly remarkable thing about human reasoning isn’t that we were designed by evolution to get the right answers about the world most of the time. It’s that we enjoy trying to get the right answers so profoundly that we intentionally make it hard for ourselves. We humans, uniquely, invent art-forms serving no purpose except to stretch the very boundaries of rationality itself.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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