Michael Lewis continues quest to find market inefficiencies

The Sunday NYT magazine has a a great article by Michael Lewis on Shane Battier, the former Duke basketball player who is currently playing with the Houston Rockets. The focus by Lewis is on the no-stat all-star who is able to make the team better even when there is no tangible numbers which we usually associate with superstars, or more importantly, there are no readily available measures or stats for someone like Battier.

This is a new version of his sports work on Moneyball which discussed the use of new stats for measuring undervalued baseball players. He did a similar analysis with Blindside, the story of changes and inefficiencies in football. Once again Lewis looks at the changing landscape of a sport, this time the NBA. There is now a greater need for team and role players when there is a shortage of money after you pay your two superstars. How do you find the player that can make the team better? how can you measure the success of this type of player. The team player may not be measured through points scored, rebounds, or assists yet there may be intangibles that are valuable to winning.

There is also the problem that players respond to incentives, so they will play to increase individual stats because that is how they are compensated and not always help the team win. If the incentives are changes or if you can measure the intangibles, you can exploit an inefficiency and change behavior.

Here Battier is a player who does not generate normal stats but can do a great job of making the team better. New stats have been developed to measure team productivity. Numbers can be used to find these inefficiencies.

This can be turned back to the investment world through the search for inefficiency and new measures for value. The markets are dynamic and have to learn to adjust to find new ways to create value. Sports and markets follow the same behavior.