You know the Moneyball story, but do you know the math?
You've seen the Brad Pitt movie or read the Michael Lewis book. If not, at least you've
heard the expression, "Moneyball for X". Here are the numbers.
There is no salary cap in baseball, thus, teams spend money to win. And a team's payroll
amount is highly predictive of win numbers. Between 1998 and 2001, every incremental $2M
spent on payroll would yield an extra seasonal win. Thus, if a team was winning
70 games with a $30M payroll, an additional $60M spend would yield 30 more seasonal wins.
The Oakland A's leveraged the analytics edge to gain an outlier position.
They were winning 90 games on a $30M payroll.
The A's discovered that average on-base-percentage and slugging percentage predicted wins.
Since players salary was historically tied to batting average,
they staffed their team with players with high on-base-percentage, high slugging percentage,
and low batting average. In other words, they staffed up with low cost winners.