Moneyball
The Art of Winning an Unfair Game
by Michael Lewis
W.W. Norton, 288 pp., $24.95

AFTER BEGINNING his career on Wall Street, Michael Lewis turned to writing and focused his ironic sensibility on the world of commerce. His memoir of the bond-trading business, "Liar's Poker," has become a Wall Street classic--and rightly so. But his most recent book, "Moneyball," is the best business book Lewis has written. It may be the best business book anyone has written.

Focusing on Billy Beane, the general manager of the Oakland Athletics baseball team, "Moneyball" tells the story of how someone considers his business in an entirely different way from his competitors--and achieves consistently outsized returns.

Of course, the fact that Beane works in baseball helps make "Moneyball" so compelling, but anyone in business can derive lessons from the book. The central question asked and answered in "Moneyball" is, How can the Oakland A's consistently be at the bottom of the league in payroll and at the top of the league in performance?

One answer is, essentially, luck. That's the answer of Commissioner Bud Selig and the blue-ribbon panel (with George Will, Paul Volker, George Mitchell, and Richard Levin) he commissioned to study the issue of payroll parity. Given the abundance of baseball information and its transparent distribution to countless participants and observers, the market for baseball players should be perfectly efficient--which means, absent luck, teams that can afford to sign the most expensive players will win, and teams that cannot afford expensive players will lose. The solution is payroll parity, which can be achieved through a mechanism like a salary cap or a tax on high-spending teams.

But perhaps the market isn't as efficient as we think. According to Billy Beane, most of the criteria baseball people use to identify a valuable player are overrated or simply wrong. And most of the criteria they should use are underrated or simply ignored. Beane's competition uses a combination of conventional wisdom, sentiment, and superstition, allowing Beane to get the players that he wants for low prices and to trade the players that he does not want for high prices. As Paul DePodesta, Beane's twenty-eight-year-old Harvard-educated protégé, says, "What gets me really excited about a guy is when he has warts, and everyone knows he has warts, and the warts just don't matter."

Most general managers are excited by great high-school athletes; Beane won't look at them because high-school competition is too variable for its statistics to be meaningful. Conventional wisdom holds that it is important a prospect "look like" a baseball player; Beane, who tells his scouts they aren't "selling jeans," believes players who can get on base come in all sizes. Conventional wisdom holds that good "closers"--the pitchers who finish games for teams--are worth millions of dollars. Beane's analysis has not uncovered anything remarkable in retiring the final three batters for a team that's ahead. So he has twice had pitchers accumulate many saves, become regarded as outstanding closers, and traded them to teams who valued this contribution a lot more than he does.