‘Moneyball’ and Intangible Assets

Michael D. Moberly   July 9, 2014   ‘A long form blog where attention really span matters’.

Conference rooms…

Being an intangible asset strategist and risk specialist, my experiences in many company conference rooms over the past 25+ years, among other things, is that the proverbial 900 pound economic – competitive advantage ‘intangible asset’ elephant is always present, but, in most instances, goes unnoticed, unattended, under-used, under-protected, under-valued, and not clearly defined.

This makes it both frustrating and challenging to persuade c-suites, management teams, and boards about the importance of acknowledging, engaging, and exploiting their intangible assets in ways to elevate company value and create new-additional sources of revenue, sustainability, and competitiveadvantages.

Moneyball…

Several of my colleagues have written very good pieces in which they variously compared the 2011 film Moneyball to bringing change in business operational attitudes, particularly toward intangible assets.  Of course, as my colleagues eluded to in their respective pieces, and I as well, attempting to execute change, regardless of the environment, i.e., business, institutional, organizational, etc., is routinely met with various levels of resistance, hesitancy, and reluctance, and of course, ‘second guessing’.

That is, endeavoring to change ‘the way things have always been done’, i.e., established past practice, is all but sure to experience at least some resistance because those charged with carrying out what ever changes are being contemplated or advised frequently believe – argue past practice has worked fine!  So, as the adage goes, ‘if it’s not broken, why try to fix it’?  And here is where there are numerous commonalities and/or comparisons to the dialogue in the film ‘Moneyball’.

I suspect there are an abundance of management team members and c-suites who believe that occasionally change, away from past practice, is, simply stated, necessary, and should be executed.   One need not look far to see very public examples wherein change has produced extraordinary positives and, to be accurate, the occasional ‘sanfu’ as well.

I can think of few exchanges that characterize the intricacies of change so well as dialogue in the film ‘Moneyball’, in which Oakland A’s General Manager Billy Beane, played by Brad Pitt, and Peter Brand, Mr. Beane’s advisor and confidant, played by Jonah Hill, and the entire cadre of A’s player scouts and development staff are engaged in a discussion ostensibly regarding t the team’s player draft picks for the upcoming 2002 season.

The scene I am describing occurs in a conference room at the Oakland A’s stadium following their highly successful 2001 season.  However, several star players from the 2002 season, including Jason Giambi and Johnny Damon are no longer with the team having accepted lucrative free agent offers from two rival teams.

In this scene, seated at a long table are GM, Billy Beane, Peter Brand, and seven Oakland A’s scouts whose time honored responsibilities include  finding, assessing, and developing new (prospective) professional baseball players. Mr. Beane commences the meeting by expressing frustration, prompted in large part by counsel from his newly hired advisor, Peter Brand which questions the conventionality of the time honored methods baseball scouts apply to assessing and developing new talent.

‘We are going to be doing things differently’…

  • Mr. Beane:  We’re trying to solve a problem here, but you (referring to the scouts and player development staff seated at the table) are trying to solve the problem as you still see it, which is the same way MLB (Major League Baseball) has approached it for the past 120 years, that is, by finding ballplayers to replace ballplayers!  You want to find players to replace star player Jason Giambi and Johnny Damon, but, both are gone, their history!
  • Head scout:  I think we all know what the problem is Billy.  There is a lot of experience in this room and you need to let us do our job of replacing two key players who have been hired by other teams, Jason Giambi and Johnny Damon.
  • Mr. Beane: But, you are not looking at the real problem!
  • Head scout: No, we are very aware of the problem!
  • Mr. Beane: OK, so what’s the problem?
  • Head scout:  We have to replace two star players.
  • Mr. Beane:  NO!  The problem we are trying to solve here is that you scouts are sitting around talking the same old ‘body’ non-sense, like you’re selling blue jeans and looking for another Fabio!  We’ve got to think differently about how we find and assess prospective ballplayers, assemble a team, and put a team on the field for 161 games each season.
  • Head scout:  This all sounds like fortune cookie wisdom to me.
  • Mr. Beane:  NO!  It’s just logic!
  • Mr. Beane:  There is epidemic failure in the game of professional baseball. Baseball is medieval. Baseball teams are asking the wrong questions because they don’t understand what must really happen on a baseball field to win. This misunderstanding leads the people who run MLB teams to misjudge their players. People who run ball clubs think in terms of buying players!
  • Mr. Beane:  Our goal here should not be to buy players, instead, our goal should be to buy wins, and in order to buy wins a team needs to buy runs! So, what I see here is an imperfect understanding of where runs come from or how runs are generated!
  • Head Scout:  But baseball is not just about numbers, Billy. Google boy here (a disparaging reference to Peter Brand) just doesn’t know what we know.  He doesn’t have our experience, or our intuition.  These are ‘intangibles’ that only baseball people like us, who truly know the game understand.  You are simply discounting what baseball scouts and player development staff have done for the past 120 years.  So, we don’t care what you think Billy, because MLB thinks the way we think with our evaluative experience and our intuition.  This is not a game about statistics, it’s a game about people!
  • Mr. Beane:  We will find value in players which no one else sees!  Good players are routinely overlooked or dismissed for a variety of biased reasons, mostly because this is the way we’ve always done it! Are there really other players out there like Giambi and Damon?  NO!  So, what we can do is recreate Giambi and Damon in the aggregate!
  • Head scout:  Yes, but will they get on base?
  • Mr. Beane:  Do I really care how a ballplayer gets on base, whether it’s by a hit or a walk?  On-base percentage is what we’re looking for now!  This is the new direction of the Oakland A’s.  We are now card counters!
  • Mr. Beane:  The truth is, we can find 25 winning players because everyone else in baseball under values them.  So, if we approach the game the same way it’s been done for the past 120 years, then, we will lose on the field!  MLB teams must adapt or die!
  • Mr. Beane:  It’s a process…it’s a process…it’s a process!

Changing the status quo…

So, not unlike Billy Beane’s and Peter Brand’s desire to change ‘the way things have always been done’, intangible asset strategists and risk specialists are equally committed. The changes we wish to bring are to the time honored ways company management teams function, develop and launch new product and services and engage in and execute (global) transactions.

Of course, achieving this must be a bit more respectful that Billy Beane’s approach, but just as persuasively articulated through compelling and objective ’upside’ evidence that recognizing, developing, exploiting, and safeguarding intangibles will deliver returns, competitive advantages, growth, depth, and sustainability to a company.

In the case of intangible assets, the changes I advocate are rooted in the irreversible and global economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets! (Brookings Institution, Intangibles Project).

In other words, it’s simply no longer business as usual, regardless of management teams’ wishes or their dedication to past practice. This is what Oakland A’s manager Billy Beane and his advisor Peter Brand recognized well before any other MLB teams’ did, that is, there are different and more effective ways, that is to focus on buying wins by buying players who ‘get on base’, not just buying players with extraordinarily costly contracts.

What’s required…

So, be it a MLB team or a private sector business and regardless of size, sector, or revenue, each must adapt to new economic facts and operational realities, or be prepared to become a casualty that encompasses dwindling returns, reduced market space presence and competitiveness, high turnover, and perhaps most damaging of all, the permanent loss and/or undermining of a company’s most valuable assets, its intangibles!

Of course, this requires the managerial fortitude and vision to seek and acquire new understanding where (company) value and revenue originate and skill sets and metrics to safeguard those assets and monitor their value, materiality and risk.  So, today, and for the foreseeable future, profitability, growth, and sustainability are irreversibly linked to developing, assessing, and sustaining control, use, ownership and monitoring intangible assets’ contributory value!

As always, your comments are most welcome at [email protected]

 

 

 

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