“Moneyball” and Real Estate – Part 1

Moneyball: The Art of Winning an Unfair Game is a book by Michael Lewis, published in 2003, about the Oakland Athletics baseball team and its general manager Billy Beane. Its focus is the team’s modernized, analytical, sabermetric approach to assembling a competitive baseball team, despite Oakland’s disadvantaged revenue situation. A film based on the book starring Brad Pitt and Jonah Hill opened September 23, 2011.

 

Synopsis of Moneyball: The Art of Winning an Unfair Game

 

The central premise of Moneyball is that the collected wisdom of baseball insiders (including players, managers, coaches, scouts, and the front office) over the past century is subjective and often flawed. Statistics such as stolen bases, runs batted in, and batting average, typically used to gauge players, are relics of a 19th century view of the game and the statistics that were available at the time. The book argues that the Oakland A’s’ front office took advantage of more empirical gauges of player performance to field a team that could compete successfully against richer competitors in Major League Baseball.

 

Rigorous statistical analysis had demonstrated that on-base percentage and slugging percentage are better indicators of offensive success, and the A’s became convinced that these qualities were cheaper to obtain on the open market than more historically valued qualities such as speed and contact. These observations often flew in the face of conventional baseball wisdom and the beliefs of many baseball scouts and executives.

 

By re-evaluating the strategies that produce wins on the field, the 2002 Athletics, with approximately $41 million in salary, were competitive with larger market teams such as the New York Yankees, who spent over $125 million in payroll that same season. Because of the team’s smaller revenues, Oakland is forced to find players undervalued by the market, and their system for finding value in undervalued players has proven itself thus far. Read the rest here

 

“Moneyball” and Real Estate

 

Similar to the discoveries made by Billy Beane and the Oakland A’s, we at Catalyst Analytics believe that there is a need to re-evaluate the process of site selection for retail real estate.

 

Retailers and restaurant owners/managers around the world use detailed customer intelligence for strategic real estate leasing and acquisition planning, new market expansion, franchise development, and marketing strategies and tactics – including product mix, pricing, promotion and advertising tailored to each of their locations. A common misconception by outsiders is that the key to retail success is “location, location, location.” The real key is recognizing that it’s not the real estate itself, but rather the make-up and spending mentality of the consumers surrounding the real estate, (including daytime employees) that will determine success or failure.

 

Find success in new/different retail locations

 

It has taken time, but most businesspeople in the U.S. have come to recognize that this “economic recovery” is very different from those in past decades. We have had major structural change that will last for years.

 

If your current decision making tools utilize annually updated database printouts with no means to interpret the major structural changes that have occurred within the U.S. economy since the upheavals of 2008, you may be in trouble. Your location hasn’t changed, your product mix hasn’t changed, but your customer base may have significantly changed from what you knew it to be 2 years ago, 6 months ago, or even one quarter ago. Significant structural changes have occurred in the U.S. and Global economy since 2008, changing not only who your customer is but also how and when they part with their disposable income.

 

To give you an brief example of a few of the changes that we are talking, about we recommend that you watch the video below about Echo Boomers and Baby Boomers.

Continue reading “Moneyball” and Real Estate and see how we use the 3L Score to help a small business owner find the best location for their growing business. Click here for part 2.