July 13, 2010
Jeff Ma is one of the few people who had a movie made about part of his life, and yet remains much more interesting than the character that Hollywood invented. He was one of the "MIT Blackjack Team" portrayed in the movie 21 and in Ben Mezrich's book Bringing Down The House. He started ProTrade and Citizen Sports, which was sold to Yahoo last year. Now, he's brought all of his background and love for sports into a new book, The House Advantage.
Jeff Ma: I think that the unique thing about my background for the last 15 years has been that I’ve had this incredible set of experiences where I took what was sort of a hobby/job in the casinos utilizing statistics and math to beat the casinos and I was able to transform that into a passion which was sports. We’re all the same way, the type where we get to take this hard subject, utilizing analytics, and make it into something we’re truly passionate about: sports. It’s a pretty neat thing.
So for the last five years, I’ve had a corporate speaking career where I’ve gone and talked about these lessons in the world of corporate America. What I’ve found is that there are a lot of people that are very receptive to this message and there are a lot of parallels between what we did in the gambling and sports world and the problems that they’re facing in whatever industry they’re in whether it’s medicine, financial, or media. And what I want to do is write a book which sort of ties these things altogether. I think that the work that people like you, Joe [Sheehan], and Nate Silver have done along the way has been really important. Nate is certainly doing it with FiveThirtyEight.com, and I want to try to make the work that we’ve done accessible because it’s really important and it’s going to become more important as we go further and more information is being captured, more people have access to software to do heavy statistical things. I just wanted people to understand that what we’re doing is not necessarily geeky math, but really important ways of helping people make better decisions and run businesses better.
WC: One of the things that's always been leveled against our side of the argument is that we're arrogant. Joe Sheehan always says that no matter what he says, he always tries to have facts to back him up. I've been using that line that I first heard from President Obama: "You're entitled to your own opinion, but not your own facts." At some point, is this as much about how we say it as what we say?
JM: Yeah, I do. I think that’s part of what this is about, too. I think that one of the ways I would criticize “our group” from the standpoint of acceptance is we’ve always been a little too reluctant to try to… we’ve both kind of had a little bit of a chip on our shoulder as we’ve approached the problem and I think that’s to some degree what has made it harder for the old guard to just accept that this might be a very valuable way to make decisions. So I think the same is true in business where we have to start making our message and what we are doing more approachable.
Roland Beech [the founder of 82games.com] now works with the [Dallas] Mavericks full-time. He travels with their coaching staff. His whole goal when I talked to him about it in the book was the he wanted to start looking at the intangibles in sports to try to see coaching, team chemistry, is it quantifiable? But what he also wanted to do was be in the trenches with these guys because he thought that would be the way it would easier to get them to accept some of his methods. And what he found was that as long as he is pretty approachable on how he does things that people are accepting of his message because at the end of the day, all people want to do is win and if you give them a better opportunity to do that, they will be very accepting of it. I think that’s the same thing in business, if you give them a way to help them make more money and you can be demonstrable about it then I think they are always going to be open to it, regardless of what it is.
WC: So it's about co-opting the old guard where possible, doing things like checking to see if any of those intangibles can be made tangible, while at the same time doing the kind of slow generational change? We're at a point where Bill James and the people that grew up reading him are getting heard. We're seeing people move into baseball and basketball and even football a bit who have grown up reading Prospectus or Football Outsiders...
JM: Yeah, I think it’s important that we don’t really think of them as the “old guard” and we just try to work collaboratively with them, I mean… I think that…
WC: I don't think "old guard" so much as "in power." I mean, if you watch ESPN or MLB Network, you're going to see a bunch of ex-players. They hire Steve Philips or J.P. Ricciardi for big bucks and never think "Hey, why don't we get a cheap stathead?" Part of it is that we don't have the right kind of people for TV but, to use a basketball example, Larry Bird is getting infinite chances to tear down the Pacers while Paul DePodesta barely got any chance to put his mark on the Dodgers.
JM: I agree and I think it’s a little bit worn down, but I think it’s “we” as a group have to be very persistent and have to try to find creative ways to make people understand the value of what we’re doing. I’ll give you a perfect example: when I first started talking about some of this stuff, I was speaking at the World Congress of Sports, I was on the panel. And this guy, Craig Duncan from the company SAS came up to me after the event and he said, “I’m think about trying to sell our software into teams.” And SAS has a really expensive pricepoint, it’s in the millions. I said “you’re crazy there’s no way teams are going to pay for it…” but then he said actually I want to sell to the business side of teams. I don’t want to sell necessarily to the baseball ops or football ops; I want to sell to the business operations. I thought that was interesting because if you can actually demonstrate a return on investment to these guys where they actually see “OK, if I use this software it might cost me a million dollars but I’m able to see that it is saving me or increasing my revenue $5 million.”
That really clear message is the kind of message that somehow we have to be able to demonstrate to a Larry Bird to say “hey, you might be paying or having this one new person on payroll, but they are able to do five times what an average scout can because they are able to combine all of these statistics, look at all of these different numbers and essentially watch all of these games that you’re scouts aren’t able to.” So I think it is on us. Larry Bird is in a position of power and these athletes are in a position of power because someone, probably the owner, thinks that they have some level of credibility to run a business and because of that we have to somehow demonstrate that same level of credibility and we have to come up with, again, creative ways to demonstrate our value. And we really can’t be discouraged if we come across some roadblocks here and there. We just have to keep going forward.
WC: I can't argue. One of the things that both took hold a bit and that I took a lot of heat for was my idea to "Be Stupid." A lot of people didn't get it, or I didn't articulate it well, but it was mostly that we're spending so much time on things that barely make sense to a niche audience, filing down that last fraction and we spend no time making sure that the most basic things are understood by the broadest population. Is it that hard for smart guys to dumb it down, even a little?
JM: One thing that I talk about in my book, there was a buddy of mine who was one of the card counters on our team and his approach to blackjack was always to seem really stupid because he felt that if he seemed really stupid, the casinos would not be intimidated by him and therefore would not look to kick him out. He used to do crazy things like walk around the casino eating an apple. He used to play at the handicapped table. He’d ask, “Are these tables the same?” Yeah, they are the same, just a little bit shorter for the handicapped people. “OK, same but shorter.” He would just do these very quirky, idiosyncratic things to make people think he wasn’t sharp. There was one point where he was playing with a teammate at a table and he played the entire hand with his head under the table while tying his shoe, but the partner was essentially telling him what to do by giving him the signals. So they were at the table telling him what to do via signals and he played an entire hand with his head under the table tying his shoe because he was having trouble tying his shoe, but he was able to know what to do because the teammate was signaling everything. He lasted at casinos for a long time because people weren’t intimidated by him because they didn’t think he was smart.
So I think to some degree, we all know how smart we are, but leading with that to the Larry Birds of the world will always put them on the defensive. So it’s almost like you want to be very approachable and one of the ways to do that is not lead with “I’m smarter than you, I went to MIT, you didn’t go to college” it’s better to be like “You’re a great athlete, you played the game and I want to learn from you. And by the way, here are some ways we can use your knowledge in a way you might not have ever thought.”
WC: Which leaves us needing an evangelist. We need that one person, someone who's in the mainstream but is willing to listen and I guess gets converted. Rob Neyer has been a gateway drug for a long time, but I think we need someone who's even more "101 level." I said for a long time that sabermetrics needed a Bill Simmons and now, there are signs that Simmons might be coming around.
JM: I think that’s a really good point, Will. I just don’t know who that is and I guess to some degree, I am hoping that I can be that from the standpoint of trying to make a lot of these concepts that we do accessible in major media. As much as I enjoy Bill and enjoy reading him, if he’s our evangelist, then we’re in a lot trouble, because he doesn’t completely get everything. He appreciates it and can understand, but he only appreciates and understands it when it works with whatever point he is trying to make. I had a big argument with him about Bill Belichick’s 4th-and-2. He’s kinda backed off of his main point which was that he didn’t like where the Patriots were from a team standpoint, from a frame of mind: they had screwed up some timeouts, if they were going to do that then they should have run on third down; he was making valid points. When we got through this conversation, at the end he said, Jeff it was the wrong decision. I asked, “How do we know that?” He said we know it for sure because it didn’t work. And to me that’s crazy, and I said, “Well Bill just because it had a bad outcome…” and this is something I focus on in the book: bad outcomes don’t necessarily mean bad decision, I said to him, “Bill, if I’m playing blackjack and I have 19 and the dealer has a seven up and for some reason I decide that I want to hit the 19 and I happen to get a two to hit the 21, was that a good decision? There’s no way that was a good decision!” So that’s kind of the problem I have with Bill. I think that he would certainly be a great evangelist if we could get him around all of the principles because he carries so much weight in sports.
But I think major media is just so far behind. If you think about the Sean Payton play in the Super Bowl where he went for that onside kick, no one in the media talked about the fact that there’s a distinction between a regular onside kick and a surprise onside kick. And no one talked about the fact that a regular onside kick, the average onside kick, gets recovered at 25 percent. So if that was the case then was that certainly was an extremely risky and maybe poor decision. But surprise onside kicks get recovered around 60 percent of the time and that was certainly not an onside kick that anyone in the world expected. So suddenly that decision becomes much smarter and you understand it a lot better. I think that the fact that no one in the major media talked about that is irresponsible. It’s not necessarily that they don’t care about statistics. It’s just being able to describe the situation in a much more relevant way than continuing to say, “Omigod, it’s a good thing Sean Payton got it because that was just the riskiest decision and it paid off for him.” That’s not interesting, it doesn’t add anything to the conversation. I think that ESPN is trying in some ways. John Walsh [SportsCenter executive editor; ESPN senior vice president], as I’m sure you know, has been a big proponent of trying to get things in there. It’s hard, though. And that is one of the reasons that I wrote this book, it’s to get these numbers and these things into a place where people will read them and a mainstream audience will read them. Think about what Bringing Down the House did, the first book that Ben Mezrich wrote about me and the MIT guys. It was absolutely not the first book on card counting, there have been plenty, but it was the first book written in a narrative way, in sort of a mainstream way, that made the story accessible to so many people and hopefully that’s what my book will do.
WC: It's interesting you bring up the Pats-Colts game and that play. I was there and I'm telling you, no one in the building was thinking odds. They all gasped. There was no oxygen in the room and the roof was open. Up to the point where Brady took the snap, there was a big portion just thinking this was a deke, trying to draw the offsides. I've never seen anything like it. Even after, in all the discussion, where I went from "stupid play" to "oh, that makes some sense" I felt like people lost the story, the drama. Moneyball wasn't the first book about sabermetrics. Ben Mezrich's book wasn't the first about poker, but it was such a great story...
JM: Right. But written in a different way, and written a way that made it accessible to people in some ways. Michael Lewis has become a real good friend of mine and we’ve talked about it and I’ve always been like, you need to write a sequel to Moneyball, and he is, but it’s going to be a little bit of a different angle than sort of what we all think it would be. He is going to talk about the players and what happened with that and more of the human stories. And I said you need to write about what’s happened since Moneyball, and he said, “I can’t write that book.” And to some degree I felt that I’ve written that in this book, where I talked a little bit about Moneyball, it’s impact and hopefully the next chapter of where this goes and how this becomes mainstream outside of sports. Again, if you think about what Nate’s been able to do, creating this whole new world for himself, that’s a testament to Nate, but that’s also a testament where our society is going in their acceptance of different methods to try and predict things.
WC: So who did you write this book for? I know publishers always talk about target audience, but for me, when I write something I have a specific person in mind.
JM: I think I want people who hate math or are afraid of math to read this book.
WC: So, me.
JM: [laughs] I want them to understand that math and the actual act of going and doing a logistical regression or data mining or a Monte Carlo simulation, all of that has become a commoditized thing. You and I could put up an ad on Craigslist and have 50 people respond right away that have those kinds of skills. The unique thing and the important thing is for thought leaders who know an industry inside & out to be able to ask the right questions to solve problems and then have those people that have those commoditized skills go and solve them. In other words, Nate’s key point, if you think about the FiveThirtyEight, wasn’t necessarily his ability to do the statistical methods, it was him challenging convention to say maybe these polls mean absolutely nothing. Is there a better way to predict performance of athletes? When we look at all the things that have been done in sabermetrics, certainly the methods people have done have been important, but the key points have been saying:
“Are RBI really a good measure of how good a player is?”
“Aren’t ERA or wins and losses a bit misleading?”
So those questions and being able to seek the real truth, that’s the important part. Think about Billy Beane. Billy wouldn’t know a logistical regression if it hit him in the head, but he’s been successful because he has this knowledge of baseball and surrounded himself with the Paul DePodestas of the world who have helped him take that knowledge and make it important and relevant using these commoditized statistical skills we have talked about.
WC: So how do we get past the ex-player mentality that seems to be entrenched? Beane is kind of a middle ground, though he's not in media, though only because he doesn't want to be. Kicking Joe Morgan is too easy, but there's no meritocracy in media. There's some players—Morgan Ensberg, Brian Bannister—that seem to be kicking the tires on more progressive ideas, but that's not like Albert Pujols or Ryan Howard.
JM: I think what you’re talking about to some degree is a major frustration for me. I watch ESPN and these guys that they make us continue to listen to who are just failed players or recently retired players or whatever, it’s like why do I want to listen to these guys?! I don’t know what the answer there is, but I think that maybe it is getting more people like a Brian Kenny from ESPN, who is really open to learning about this stuff or it’s getting some of these new athletes that are in there trying to give. Because they’re probably just trying to learn as much as they can about the industry and they’re scared as crap about not having anything to talk about. So giving them more ammunition of things to talk about . It’s hard to get over that hump of the recent athlete being the guy that they always hire. And maybe the answer, Will, to some degree is that whole “if you won’t let me play in your game, then I’m going to take my ball and play somewhere else.” Maybe it’s us continuing to find opportunities within the media to make a BP [BaseballProspectus.com] on the web that’s more multimedia that continues to push chat or video. Maybe it is trying to grow out that brand even more. When you and I talked a little bit about this, the idea of working with BP or something like that at some level, I’ve always been fascinated by the potential. This goes back to when Nate was there and Nate and I used to talk all the time, I’ve always been really interested in the potential of Baseball Prospectus to try to get out into the mainstream and try and create a more mainstream product. I think that, to a large degree, what you guys have done is create this incredibly sophisticated niche audience, but it is still a little bit of a niche audience, trying to grow that into a more mainstream audience and maybe that’s the answer rather than beating on our heads.
And of course ESPN controls so much distribution so it’s hard. Just look at the whole ridiculousness of the LeBron James thing. They control so much audience and distribution that it’s hard. But this is the web and this the world 2.0 where there are a lot of different ways to distribute what you’re doing. We, our company Citizen Sports, was able to build out a successful business by largely ignoring major media and going after places where we knew we could gain audience such as the iPhone and Facebook and maybe that’s what like a Baseball Prospectus needs to do is try to figure all these different ways that they grab audience and then create sort of a more mainstream product that will allow more people access to what they’re doing.
WC: I know you're more a blackjack guy, but with the poker boom in the last decade, I find it an interesting parallel to baseball. It's not an ex-player there, it's Norman Chad, mostly because he's funny and kind of safe and I bet he was cheap at first. And you have the stories and dramas and quirky characters, but in the end, the real star of the show is that little bug that tells you what the odds of winning are. I know people can calculate that in their head and pot odds and all that, but when you're watching, that instant feedback is so amazing. Baseball has something like that with win probability. Why isn't some network embracing that?
JM: You know that’s funny that you say that. I’m not sure if you know much about what we did early on in trying to get that win probability into television broadcasts. We did a deal with ESPN, I don’t know if you remember, about three years ago where they did win probability within the College World Series. That was us powering that. And we did win probability in the broadcasts for the [Arizona] Diamondbacks; we got it into the Golden State Warriors broadcasts. I think those were the places that we got. We also got really, really far with DirecTV where we were going to do a whole enhancement to their Red Zone Channel around win probability. There are a couple reasons why it never became mainstream. One I don’t think people were quite ready for it yet. I think that there may be a time when it does get pushed a little bit forward. These broadcasts are all about money and if you are making them do something that doesn’t bring them money, in fact that they have to pay, they’re not going not necessarily going to be open to it. We did win probability, I think you probably remember, we did win probability for ESPN on their mobile phone about 2-3 years ago and at the end of the season, they wanted to do it again for the next year, but they didn’t want to pay us anything. We just said we can’t do it anymore, we’re not going to let you use it if you’re not going to pay us. We let you guys do it as a trial. When we got really far down the road with DirecTV, I had a call with their VP of sales and their VP of sales was like, “Ya know what, we don’t care about this because we might able to sell it for an extra $100,000, but it’s just not interesting to us.” And I remember being on the phone, I was at Logan Airport (in Boston), and I’m basically yelling at this guy because I’ve never been so frustrated in my life. I remember saying to him, “Even though your consumer thinks it’s really compelling content, you don’t care because you can’t make enough money off of it to make it worth your effort?” And he said, “Exactly.”
So you know, at the end of the day, it’s about money. I think that if you can get this into a couple of broadcasts and all of sudden people felt like it was as useful as the yellow line on football broadcasts and everyone had to have it, you know it’s just like the K-Zone and all of those kinds of things. You just need to get it into a situation where people really see it and understand it and like it. Win probability in games, it’s interesting because it’s one of those things that you have to figure out when to show it and how to do it right. You certainly don’t want to show it all the time. If a team is up by 50, or rather, if a team is up by 25 points, you don’t want it saying they only have a 1 percent chance of winning. Although if they do a comeback and as they’re starting the comeback and you see a graph of how that win probability changed, all of a sudden it might become compelling content.
JM: Yeah, exactly. I’d be remiss to talk about this without talking about the work that Jason is doing at Fangraphs[.com]. If you look at what he’s doing on that site in terms of just the win probability charts and whatnot, he definitely understands it, but again Fangraphs is an unbelievable site, but it’s not consumable for the average human being right now. So I think to answer your question is that I think we just haven’t had a great application of this yet. We haven’t found a way to do it really well and until we do, and we haven’t had a champion behind it. I heard Orel Hershiser loves it. So if Orel ever got to a point where he was working with a producer who liked it as well and we could spend a lot of time with them, you know maybe all of a sudden it becomes really valuable.
WC: As a guy who knows the numbers and businesses and revenue, have you been following MLB debuting this ticket futures market for the playoffs?
JM: I assume it’s like some market where you can buy playoff tickets, it’s like you’re bidding on them in a market and you’re team wins… yeah. No I haven’t, but I’m familiar with them. I think they’re definitely a cool concept. I think if you could, again it’s one of those mainstream things, if you could get people to… what’s more interesting about them is are the people, OK so anytime you have a market you have two players: hedgers and speculators. You need hedgers to really have a market because otherwise it’s just gambling, but you need speculators to make the market go because they’re the ones who are really going to do more of the trading. So certainly in this world, you have hedgers people who are real fans of this team that want to lock in potential playoff tickets if their team makes it, but the key is going to be if they can make this product something that speculators are going to want to try and play around with and trade in and out of and that will make this a relevant product. Otherwise it’s no different than just trying to lock in a price from a ticket broker or something.
Thanks to Paul Sporer for helping with transcription.