Moneyball for Private Equity

 The Private Equity Moneyball is Here

“We are card counters at the blackjack table and we’re going to turn the tables on the casino.”

– Billy Beane, General Manager, Oakland Athletics, 2011 “Moneyball” the movie

The concept of the “Moneyball” is a real life story of an underdog baseball team that rises quickly to the top of the league.  No one had ever done this before. Unconventional player strategies were developed by baseball outsiders and dictated by data rather than relying on the intuition of coaches and scouts to recruit the best talent. How can you optimize without the best talent? That was the contingency plan they never anticipated.

The term “Moneyball” was coined when the team lost key players and retained those with mediocre performance.  They turned a losing season into wins, actually 20 wins in a row, with a new strategy based on data. Moneyball can be interpreted as a profitable, strategic win made possible by scientific method.

The sports world took notice. Soon after, data science became a “thing” that sports teams embraced. Large successful sports teams like the Houston Rockets and San Antonio Spurs employ data scientists. They are even recording player biometrics during play so they can use the real-time data. This science is replacing the red faced coach in the locker room mapping out plays on a chalk board.

So who in business would like to produce excellent results using less resources, creating global advantages and exponential profit? That is the holy grail for the C-Suite. Getting people to consistently and reliably act upon real data is the challenge for business leadership.

I did a talk at Super Return 2016, one of the world’s largest Private Equity and Venture Capital conferences.  My presentation caught the attention of another conference speaker, Brett Hickey, CEO of Star Mountain Capital. Brett sees Moneyball science, and he gets it.

Many in the financial industry find it challenging to envision how to apply data science to financial transactions. It’s the unconventional methodology that creates apprehension, especially when it comes to money. Clearly an unconventional thinker, Brett invited me to present a webinar to his industry audience.  We titled the webinar “Moneyball for Business” and gave attendees a front row seat to how we get optimization with modeling.  When Private Equity embraces the Moneyball methodology, it will transform the industry. Getting stakeholders on board starts with a discussion and teaching moments just like this. Thanks to companies like Star Mountain Capital, that transformation is happening.

The discipline of the Scientific Method is the key to sustainable solutions. Predicting the future by scouring trend analysis reports with data that is 30-60-90 days in the past is old corporate strategy. Today, we align the company to the predictions or futures, based on scientific models and algorithms. Automating iterations of a process and changing the input with each scenario gives us a probable outcome. When you do that 10,000 times in a few seconds using a software program, well that’s where we see the “money” outcome. The optimal iteration.

Corporate strategy is fundamentally changing. Finding strategic options that work well in the majority of futures scenarios is key.

Comparatively, every business is really a factory. It consists of workflows, ques, and cycle times. Once you get to that metaphor, you can analyze any business.

So how does Private Equity and the financial world get started with data science?

3 Steps to Getting Started

  1. Start thinking of all your decisions and problems as science
  2. Build an analytical “Sandbox” to encourage action
  3. Embrace an experimental environment and culture

The economics of automation are too compelling to ignore. The movement of capital is invisible; computer simulation makes it visible.

So where does this change begin? It begins in the C-Suite. In five years, every buzzword you hear today when it comes to digital transformation, will be the vocabulary of business. The time to take action is now. Be unconventional and create your financial Moneyball now.

View Replay of Moneyball for Business Here