“Having the most money doesn’t always make you the winner,” Moneyball author Michael Lewis said to us on stage.
For example, in 2002, the Oakland Athletics had the third-lowest payroll of any team in baseball. The New York Yankees paid their players nearly three times more – an extra $80 million.
[ad#Google Adsense 336×280-IA]Yet the two teams made it the same distance in the playoffs.
Money didn’t make the Yankees the winner. And a lack of money didn’t hold the Oakland A’s back from making it the same distance as the Yankees.
So how could this happen?
Lewis’ bestseller Moneyball tells the story of how it happened.
And at the Morningstar Investment Conference in Chicago last month, he also talked about why it happened…
At one point, Lewis said he was in the A’s locker room, and he saw the players leaving the showers. He told the execs in the front office that the guys didn’t even look like pro athletes. Several had big bellies. They weren’t good-looking, chiseled, and lean. They didn’t have the classic pro-athlete look.
But that was OK, the A’s management told him. These misfits had a particular set of skills…
You see, the big-money teams like the Yankees were relying on old-school “scouts” to find potential players. A scout trusts his gut and uses basic stats to make an assessment… the same stuff you and your buddies use to compare players.
In other words, the big-money teams weren’t doing anything unique… They thought they could throw money at old ideas and get results.
The A’s didn’t have money, so they took a different approach.
What did the A’s do?
Lewis told us the A’s wanted players who didn’t look like pro athletes, but had subtle abilities… specific abilities they’d determined were the actual keys to success in baseball.
The A’s did in-depth research to learn which stats actually matter in getting wins. They stopped looking at batting averages and instead focused on things that were proven to deliver runs, like on-base percentage and slugging percentage. They looked at “number of walks” as a good thing, for example.
No one else realized these skills were important… So the A’s were able to build a roster of misfits for a low price. And it worked. The A’s figured out what mattered, and they succeeded.
On stage in Chicago, Lewis said that Moneyball wasn’t a book about baseball… As he told us, “Moneyball was a book about how the markets didn’t value people properly.”
It’s really about human behavior. It’s an example of how you can exploit certain situations to your benefit.
So what does this mean for us as investors?
It means it’s OK if you don’t have the most money or the biggest portfolio. Don’t worry if you can’t invest in a high-priced hedge fund or hire a hotshot investment advisor.
You simply have to find your own way to exploit your situation to your benefit. You have to find the edge. You have to figure out what matters, and stick with it.
You don’t need to be rich to use Steve Sjuggerud’s “cheap, hated, and in an uptrend” strategy. Steve figured out what matters – what works – and he sticks with it.
Knowing what matters can give you the advantage in your career, too…
For example, if you’re a real estate agent, you likely know more about the real estate market than 99% of people out there. You live it and breathe it every day. Heck, you probably know it better than most Wall Street analysts.
I encourage you to learn to find the edge in your business, just like the A’s did. Your business will perform better. And it might help your investing, too…
Realtors see supply and demand in housing every day. They’ve got a strong gauge of when prices are likely headed higher… And that could make homebuilders a great buy.
Don’t worry about what other people think. Find the numbers that really matter. See what others aren’t looking at.
Like the A’s did, find your edge. Have an analytical advantage in what you do, not an emotional one. And profit from it.
Good investing,
Brian Weepie
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Source: Daily Wealth