Daryl Morey - Systems Thinking in Sports

Key Takeaways

1. Basketball's Perfect Balance Between Skill and Luck: Basketball occupies a unique space on the skill-luck continuum, with it being more skill-dominant than many other sports like football or soccer. The outcome of a single jump shot can be influenced by a myriad of factors – from the player's past training to the quality of the pass he received. This contrasts with games like baseball, which are more easily broken down by data. Basketball is driven by star players having a disproportionate impact on the game. This outsized influence means that strategies revolve heavily around acquiring and leveraging these top-tier talents.
2. Incessant Tracking of KPIs for Sport: Teams tracking the primary drivers of success in a sport. In basketball, it boils down to point differential, which in turn is influenced by the number of possessions and how efficiently each possession is used. Essential elements include shooting efficiency, turnovers, and rebounding
3. Understanding Player and System Synergies: Basketball teams often operate within specific systems or styles of play, and certain players may thrive or underperform based on how they fit within these systems. For instance, Shane Battier was acquired by the Houston Rockets not just for his standalone skills, but also for his potential to unlock the capabilities of their superstar, Yao Ming. This highlights the importance of not only recognizing raw talent but also understanding how that talent can be optimized within a team's existing structure.
4. The Value of Specialized Assets in Evolving Game Dynamics: As basketball trends towards a specific style of play (e.g., 5-out offense, switch every ball screen), there emerges a counter-opportunity to exploit teams that are ill-equipped to handle different styles. For instance, while many teams might be moving away from traditional big men in favor of more spread-out offenses, having a dominant big man like Joel Embiid can offer a competitive edge, especially against teams unprepared to handle such a player.
5. Importance of Superstars, Asymptotic Value, Power Laws in both Sport and Investing: Just as superstars in basketball offer disproportionate value to a team, certain investments or assets in a portfolio can disproportionately impact its performance. For instance, Microsoft and Apple's market cap, when compared to companies like Snowflake, can be seen as analogous to the impact of NBA superstars like LeBron James.
6. Decision-making Processes and Avoiding Groupthink: Effective decision-making is crucial in both sports and investing. Daryl's approach of using a 'Game of Thrones’ small council' model where individual votes, informed by data, are cast before discussions can be likened to investment committees in funds. Having a structured decision-making process that uses data-driven insights and aims to counteract groupthink can lead to more optimal outcomes.
7. Adapting Rules for Optimal Outcomes: Daryl expresses concern about soccer's existing rules, particularly the offside rule and penalties, arguing they hinder the game's potential. He underscores that while soccer is popular, it's not because of its rules. He cites the NBA's ongoing debate between transition and offensive rebounding as another instance where the prevailing wisdom can be misguided.
8. Challenge the Status Quo for Personal and Professional Growth: Daryl advises younger individuals not to simply accept the established "operating system" of life. He had own experiences of feeling out of place during his youth, he emphasizes the importance of self-reflection and being open to change.

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