Moneyball in the Hospital

Further to the Z Man’s latest, excellent piece on health care, let’s talk about baseball.

Betcha didn’t see that coming!

As previously mentionedMoneyball is a 2003 book by financial journalist Michael Lewis, in which he explores the “sabermetric revolution” going on within the Oakland A’s organization.  The A’s’ system is pretty simple, but as its fundamental assumptions go against everything “everybody knows” about scouting ballplayers, the baseball world’s reaction to the book tells you everything you need to know about True Believers.  It’s worth reading the new edition for the afterword, where Lewis details some of the hate he, A’s General Manager Billy Beane, and the A’s organization itself got in the book’s wake.  For the record, none of the following are in any way shape or form the point of Moneyball:

  • There is one correct way to scout baseball players.
  • Billy Beane is the greatest General Manager in baseball history.
  • Michael Lewis is a genius who knows more about baseball than the players.
  • You can build a championship team entirely on paper.

Problem is, Moneyball’s actual thesis is so simple, so commonsensical, so “no shit, Sherlock” that it can’t be right.  Boiled down to its fundamentals, Moneyball’s thesis is:

Nothing else matters in the game of baseball but outs.

You get a maximum of 27 outs in a standard baseball game.  Take the likelihood of a given guy making one of those 27 outs, divide it into his yearly salary, and that’s how much he’s really costing you.

It’s a bit more complicated than that, but not much.  Adam Dunn hits 40 homers a year, but strikes out 200 times a year.  Thanks to those 200 strikeouts, Adam Dunn’s opportunity cost is much greater than his value added — if nothing else, you have 200 less chances to just put the ball in play and see what happens.  Meanwhile, Skinny McNobody hasn’t hit a homer since high school, but walks 100 times a year and rarely strikes out.  So he’s on base at least 100 more times, and anything can happen with a runner on first.  Similarly, a high school kid who throws 95 mph might turn into Roger Clemens…but he probably turns into Steve Dalkowski.*  A college pitcher who couldn’t reach 95 with a bazooka, but with a sub-3.00 ERA, already gets guys out, lots of them, and at a much higher level of competition than the high school phenom ever faced.  That’s why a smart team, a team that has to make every dollar count, drafts Jeremy Brown over Justin Verlander.**

BUUUUUT, everybody in baseball asked, what about fielding?  What about the sac bunt, the stolen base, the suicide squeeze?  What about scouting, for pete’s sake?  Sure, Adam Dunn’s a lifetime .237 hitter and is the #3 strikeout leader in baseball history, but man, you gotta see this guy….

And that’s the problem right there.  Philosophy folks call this a category error; Billy Beane says “we’re not selling jeans here, people.”  Just because the guy looks like a future Hall of Famer doesn’t mean he plays like one, and in fact the Hall of Fame is full of guys who look like big ol’ unathletic dorks.***  The computer can fool you — GIGO — but not like the naked eye can.  As most everyone does with most everything, baseball scouts see what they want to see.

Which brings us to health care.  The Z Man lays down three fundamental truths of health care:

  • No health care plan or system can ever be taken seriously unless it addresses, up front, how it will say “No, you cannot have it” to people who want it.
  • The current insurance model is just a wealth transfer from the middle-class to the health care industry, in order to cover the cost of poor people and the metastasizing layer of people who live off the system.
  • Health services are a massive skimming operation.

Should he come over here and read this, I hope the Z Man knows I mean this in the best possible way: No duh.  You’re the Billy Beane of heath care, dude, and again, I mean that as a very high compliment.  Read Moneyball, and it just seems obvious — like, hit-you-over-the-head, brain-blisteringly obvious — that baseball is about making outs, not selling jeans.  And yet, there are hundreds, probably thousands, of guys — collectively making millions of dollars a year — who don’t see that.  Who, in fact, refuse to see it — in his afterword, Lewis claims lots of baseball people, e.g. ESPN announcer (and Hall of Famer!) Joe Morgan, take pride in not having read his book.  And so the A’s keep fielding a competitive team, year after year, at about 1/100th of the Yankees’ payroll…. and a whole bunch of professional baseball people keep claiming to be baffled by that.

So, too, with all those fools who talk about “health care” as if it’s just the mean ol’ Republicans keeping anyone from getting everything he wants.  Or those fools who insist that socialized medicine will raise quality and lower costs.  Or that there won’t be “death panels.”  Of course there will be death panels!  Needs are infinite; resources are finite.  This seems like the most obvious thing in the world… but it’s not.  Just ask all those baseball scouts whose prospects are now jean models.  Sometimes there’s great value in stating the should-be-obvious, especially now.

 

*For those un-steeped in baseball history, Dalkowski was the inspiration for “Nuke” LaLoosh (Tim Robbins) in the movie Bull Durham.

**Jeremy Brown is internet famous as Moneyball’s “fat catcher;” Verlander was a high-school fireballer who flamed out, albeit after a brief (and briefly electric) major league career.  The fact that Brown never made it to the Show — and, in fact, most of the ballyhooed Moneyball draft class didn’t — should tell you all you need to know about the predictive power of any system featuring human beings.

*** For non-baseball fans, I give you Greg Maddux, arguably the greatest pitcher of all time.

PHILADELPHIA, PA - JULY 2:  Greg Maddux #31 of the Atlanta Braves looks on from the dugout during the game against the Philadelphia Phillies at Veterans Stadium on Sunday, July 2, 1995 in Philadelphia, Pennsylvania. The Braves won the game 5-3. (Photo by Rich Pilling/MLB Photos via Getty Images) *** Local Caption *** Greg Maddux

PHILADELPHIA, PA – JULY 2: Greg Maddux #31 of the Atlanta Braves looks on from the dugout during the game against the Philadelphia Phillies at Veterans Stadium on Sunday, July 2, 1995 in Philadelphia, Pennsylvania. The Braves won the game 5-3. (Photo by Rich Pilling/MLB Photos via Getty Images) *** Local Caption *** Greg Maddux

13 thoughts on “Moneyball in the Hospital

  1. …in his afterword, Lewis claims lots of baseball people, e.g. ESPN announcer (and Hall of Famer!) Joe Morgan, take pride in not having read his book.

    Indeed; ironic since Mr. Morgan looks like one of the best second basemen who ever lived when looked at through a Billy Beane-esque lens. The problem is (and IIRC this was even covered by Lewis in Moneyball), can Oakland afford a player like that? Probably not. A guy like Morgan looks good to everyone, stats aside, so he’s out of the A’s price range. Lewis tried to obtain Kevin Youkilis from Boston for a while, long before he became known as “The Greek God of Walks” and his value became immediately apparent to the whole world. The Sox wouldn’t budge since Youk was tearing up the minors and they didn’t want to lose him in a horrible trade the way they lost Jeff Bagwell.

    Instead, Beane settled for a guy who could give you 85% of Youk’s value at a tenth of the cost – in this case, I think it was Scott Hatteberg, who was an awful catcher that the A’s turned into an average first-baseman, on the theory that they could find a better defensive catcher on the cheap (catcher defense being another undervalued trait) and upgrade two positions at once.

    Did Hatteberg rake like a typical Steroid-Era first-baseman? Hells no, but he walked more than he struck out, was a competent fielder, and generally hit well enough to justify his contract.

    Also, this is where we pour out a tall Gatorade to Fire Joe Morgan, the excellent website devoted to mocking bad baseball ideas. The co-creator, Michael Schur (aka Ken Tremendous), has since gone on to many big things in the entertainment industry.

    And speaking of entertainment: what happens when Greg Maddux throws BP to current NL MVP Kris Bryant?

    • That was actually the organizing theme of Moneyball, and one of the most hilariously wrong reactions to it. Those baseball people who hadn’t read it thought it was about “how to find the next Joe Morgan,” i.e. a new way to scout for superstars. But the “money” part of “moneyball” was that the A’s could never afford the next Joe Morgan, so they had to get two or three or four guys who could produce Morgan’s offense at a fraction of the cost. That’s why they thought Jeremy Brown was such a good buy — he got on base like a corner infielder, but they could pay him like a catcher.

      As an Astros fan, I’ll always love the Red Sox a little bit for the Bagwell trade. They got us back, though, by taking some no-name scrub called Curt Schilling off our hands. (And recall that it wasn’t “the Bagwell trade” back then. He was a good prospect, but the Astros were terrible and dumping their veterans; the Sox got some pretty good pitchers out of the deal to help them in their stretch run. I forget the details, but at the time it looked like they got the better end of the deal).

  2. One of the Z Man’s 3 Fundamental Truths of Health care:
    Health services are a massive skimming operation.

    I’m not exactly sure what is covered under this law, but “administrative costs” (ie bullshit paperwork&processing) is probably very high, perhaps 20% – 35% of total cost.

    Over the last several years, I’ve gone to a small “urgent care” place (1 doctor, 1 receptionist/admin person) a few times to deal with some minor stuff. This guy charges $75 – $85, but insists that you pay cash. He’ll give you everything you need to file a claim with your insurer, but won’t do it himself.

    I shopped around, and other similar operations charged about $110 – $200 per visit. Doing some ballpark arithmetic — $85/$120 = 70.8% — indicates to me that the cost of just dealing with an insurance bureaucracy (private or public) accounts for about 29% (or more) of the total cost here.

    Now there’s no way to do insurance without some paperwork, but at 29% of total cost, it sure looks like there’s a lot of room for “skimming” to pay for useless administrators and God knows what else.

    • As in all things some administration is needed (what’s that saying? “everybody thinks the manager’s useless until the miss him”) but yeah, nobody has any idea how much of it is just devoted to insurance AND regulation (things like HIPAA). And those restrictions hinder flexibility.

      For example, it’s just plain best to know a patient’s full medical history. So doc offices keep entire rooms full of nothing but files on their patients. If you do something medical related, it’s up to you to tell the office.

      Well why not have medical files be put onto patients’ phones? Then when you go to an office you scan or copy your medical history into the new doctor’s office?

      Stuff like that. We’re in a data revolution and yet the medical records are being kept with the offices, not with the patients.

    • There’s a few other factors in play. I used to go to a chiropractor in Beverly Hills, CA in the early 90’s and he explained it as follows (Dollars a little low in this example, but you’ll get the general concept).

      “I need to make about $40 per visit. If I send a $40 bill to the insurance company, they will reply, ‘AGGGGHHHH!!! That’s way too much! We’ll pay you $15.'”

      “So I charge $40 for one treatment, another $40 for another manipulation, and another $40 for diathermy (basically putting hot towels on your back to loosen you up), and send a bill for $120 to the insurance company. They will reply, ‘AGGGGHHHH!!! That’s way too much! We’ll pay you $40.’ — which is what I need to operate this business.”

      • Yep. It’s also the issue with hospitals that take medicaid.

        So to extend your example.

        Need to make $40 per visit. Government says they’ll only pay you $25 for the visit. So you charge the private insurance $65.

      • There’s also the factor of the desperately-needed tort reform. I have a cousin who is a sports-medicine doctor, who was sued by an individual whose life’s work is to falsely sue for medical “malpractice.” He was her 3rd mark, she had already sued two others for a million apiece and had burned through that in a few years. She sued him for 3 million claiming an ultrasound he administered was left on too long and caused a “burning sensation.” Now…ultrasound can’t burn. But, the hospital, knowing FULL WELL the court would not allow them to bring up her previous lawsuits, fired my cousin and settled for a million. I’m sure in the years since that happened she’s won other suits.

        • It makes one wonder just how colossally dumb someone has to be to actually be caught and punished for insurance fraud, when others skate on such obvious nonsense. And it’s nauseating that the hospital would rather hand out a million bucks than go through the expense of litigation and the risk that they’ll actually lose the verdict.

  3. I don’t suppose anyone here even vaguely considers cricket, but the same rule applies in that game: if you can get someone out then they won’t be making runs. So those who can hold catches and remove opposing wickets are essentially more valuable than the ones who can rack up centuries (er, that’s 100 runs or more in an innings) However everyone gets way more excited about big run scorers than someone who doesn’t drop a catch.

    • I tried watching cricket in India, but without someone to explain the game to you it’s pretty hard to follow. I assume there are professional cricket leagues? And if so, I assume there’s some similar way of valuing players.

      Moneyball was so controversial in America because baseball is the national pastime, and some dork with an MBA who’d never played an inning in his life came along and told all the professional baseball people they’d been doing it wrong for 100 years. The reactions were fascinating — apparently people who were paid millions to put baseball teams together were willing to lose those millions rather than change their approach. (I guess it’s not just the Social Justice Warriors who “fucking love science”).

  4. I have little hope that adopting a socialized medicine in a nation will preserve freedom in that nation. Quite the contrary. One could look at other nations, or just examine the recent IRS scandal which just involved taxes. You think it won’t be worse when healthcare is involved?

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