Lessons Learned from Daryl Morey
I was listening to the Spotrac podcast and heard Mike Ginnitti rave about the moves Daryl Morey made for the 76ers this offseason. Morey, the new president of basketball operations of the 76ers, is similar to a predecessor, Sam Hinkie, in his thinking and framing.
Then I decided to consolidate all the lessons I’ve learned from Morey in a format that Tren Griffin utilizes for his wonderful blog, 25iq. As Picasso said, “good artists borrow, great artists steal.” Below are just a few of the lessons I’ve learned from one of the NBA’s greatest front office executives.
1. Utilize data-driven decision making
One important piece to the puzzle is Morey’s background as a computer science major. He stressed the importance of executing on and off the court, and data is a pivotal part in getting to the right answer (as long as you come at it with a humble approach). One lesson that he learned early in his career was from an early job of his. Foregoing a sports position for the promise of getting rich, he accepted a consulting job that offered equity in the company. With second order thinking, however, he soon realized that companies making that offer probably weren’t very good.
Data applies not just intra-sport but inter-sports as well. Many of the examples he gives come back to base rates. For example, an NBA game is the most predictable to model, yet their playoff series are longer than football. As a result, NBA titles are more concentrated than Super Bowls. The NBA is better designed to have the “best” team win. He also mentions the level of minutiae that is analyzed for playoff series, and the importance of not over-adjusting to it.
2. Gain advantages
Proprietary data is a surefire way to gain an advantage over other teams. Currently, the NBA makes all this data available across all teams, so the 76ers need to find something else proprietary. This reminds me of the recent surge in financial services with alternative data. However, once everyone is using the same alternative data, it’s no longer useful.
Something I learned from Bronco Mendenhall is that knowledge is the purest form of competitive advantage. It is perhaps my favorite of the Five Smooth Stones, and it certainly applies in this case.
Morey repeatedly mentioned the importance of playing to a sport’s strengths. He juxtaposed basketball with baseball in the sense that, imagine if Mike Trout can get up to bat, hit a home run, and decide to get right back up to bat. That’s basketball on offense.
3. Put players in the best position to succeed
One way to do this is to synthesize all the data that goes into making a game plan. A favorite saying of mine is “maximum compression, minimum distortion.” If you’re able to compress what players should do on the court without losing the essence of your game plan, that’s putting your players in a position to succeed.
He mentions Andy Reid, head coach of the Chiefs, as a great example. Reid tells players that he’s going to maximize their ability to make money. He does this by maximizing their talent. This generates buy-in, puts them in a position to succeed, and creates positive feedback loops. Another way to look at a positive feedback loop is as a virtuous cycle.
4. Manage the team like a portfolio
The name of the game is finding value. If you’re treating the team like a portfolio, you need to know how to invest. One of my favorite articles is Tren Griffin’s on Ben Graham’s value investing. You’re trying to find players worth more than their contract. This does not mean finding players to pay the minimum wage. Did you know that the contracts in the NBA with the greatest value are often super-max contracts? If there was no limit to what LeBron James could be paid, he’d be making a lot more than he is now.
As Morey said, M&A data underpins everything, but the market for NBA players is set by supply and demand. No matter what you think a player’s worth is, supply and demand win out. If the 76ers are searching for a certain type of player with specific strengths, and only one of those guys is available, the price will be driven up. Like in the housing market, comparables don’t matter when you have 10 people bidding against each other. So at the end of the day he’s asking: are there 2+ people interested in this player’s services or not?
5. You won’t learn anything until there’s disagreement
Information is found in disagreements/friction. You don’t learn anything until you have two thoughtful people come to two different conclusions on something. Ideally, these are passionate people who are as smart and informed as they can be coming to a different answer. Then, when they do, they demonstrate strong opinions, weakly held. Until then, there is no opportunity for learning.
6. Start from the end and work backwards
You have to know what the goal is. In football, Michael Lombardi explains that you need to have a plan to win each game. That creates the framework to work backwards from. In the NBA, Morey makes sure to consistently ask certain questions. How much money in the system? (Easier with the NFL.) By how much will each player you pay increase the odds of winning relative to what you pay them? The goal is to win a title. Every decision you make has to be made with the goal of getting closer to winning a title.
For example, Morey mentions strategies he’s looked into in order to win more games. On offense, these revolve around the two ways to improve, taking more efficient shots, or taking extra shots. To take extra shots, you need to be getting offensive rebounds or generating possessions through steals. This is the framework that we need to be using more often.
Links:
The Pomp Podcast 309: Daryl Morey On Using Data To Make Decisions