Monday, October 3, 2011

Management By Wishful Thinking #163: Kurkjian's Krazy Kwack-Up



Making a prediction on significant events that have significant unknowns that
play into the outcome, and you're likely to be made a fool. Beyond Baseball you
see this a lot, most often in the corporate world, more often than not in
corporate social structures where the system doesn't hold people accountable.


Virtually all organizations need to apply analysis to strategy. The most
transparent billion-dollar endeavor is Baseball, so Baseball makes for some
pretty clear examples of strategic planning and allocating resources from the
results.


Major league baseball teams, with rare exceptions, use advance scouts to
capture and analyze data about upcoming opponents. The scouts summarize this
into information that their team uses to plan for immediate series, as well as
keep it archived as part of a baseline of information for later tussles.


For teams that are likely to make it into the playoffs, this effort starts
being more critical around mid-September. In most years, it's becoming obvious
which opponents are the most likely. This'll sound like a big "duh",
but playoff-bound (or still-playoff hopeful) teams have access to a limited pool
of skilled advance scouts, so allocate them to the games/teams stochastically:
They neither choose a single-most likely opponent and put all their resources
into one (a deterministic approach), nor do they allocate an equal fraction to
every single team that hasn't yet been eliminated (a random approach). With
their stochastic approach, they are most likely to pay some attention to
all possible opponents, but invest proportionally more in scouting most likely
opponents (tweaked by how much they've been playing against them recently and
have on hand immediate intel) . 


Well, yes, that is a big "duh", but in the corporate world,
this tends not to work as elegantly. There's an entire field of study on this,
and some useful, applicable research, such as the paper "Detecting Regime
Shifts: The Psychology of Under- and Over-Reaction" by Cade Massey &
George Wu, available here.
Over- and under-investment in allocating analysis is a daunting problem
in corporate social structures, because of Angus'
First Law of Organizational Behavior
: in general in corporate
systems, accumulated leadership tends to be individuals who diminish
accountability (something Baseball can't allow).


If the probabilities are murky because there are a lot of uncertainties
operating or if the events are based on a small number of binary outcomes, or
both (for example, any October best of 5- or 7-game baseball series; think, for
example, of the 1995
Cleveland Indians
, the strongest team of the previous 20 years, getting
shredded in the Series that year by a perfectly-fine-but-not-exceptional
Atlanta Braves team
) corporate analysts tend to "freeze up". The
risk becomes high of choosing incorrectly, and more often than not in the
corporate world, leadership's cognition will devolve into MBWT (Management By
Wishful Thinking) as an energy-conservation tack -- that is, why invest a lot of
intellectual effort when the outcome is uncertain -- just go with your gut...and
your gut is driven by hopes and wishes.


KURKJIAN'S KRAPPY KOGNITION

You won't see a lot of this in Baseball management. But there was a
howler last week when, thanks to fate and relentless baseball practice, both the
American League's and National League's wild card teams, and therefore all four
playoff set-ups, were in flux going into the 162nd (last) game of the season. So
there's a great example of it around Baseball.


One of the most experienced and bright Baseball pundits, ESPN's Tim
Kurkjian, talked about going into the last day of the regular season
, with
the extraordinarily strong finish of the Tampa Bay Devil Rays  (behind by 9
wins for the wild card with 26 games to play) tied for the wild card with the
Boston Red Sox in the A.L., and the Struggling Atlanta Braves tied for the same
pseudo-honor with the surging St. Louis Cardinals. 


Neither league's wild card contenders were playing against each other, so the
results of four different games would decide the regular-season outcome. If in
either league both contenders had the same game outcome (a win or a
loss), they would have to play a one-game head-to-head tiebreaker, but if one
league contender lost while the other won, that would be the decider.


In all four games, the contender's opponent had zero "incentive" to
win, except as a spoiler, so Kurkjian's assumed they'd be easy pickings, that
all four contenders would win. And in the corporate world, or even in other
endeavors that are less competitive than Baseball, say the NFL, that might be
probable. In Baseball, though, Jocketty's Law applies: Whatever doesn't make
you stronger, kills you
.


Really, though, what the pundit was hoping for was that all four
contenders would win so there could be an additional day of intense,
winner-take-all baseball. Not a bad hope...it would have been fun, but the odds
were against it


The Red Sox faced their division's "doormat", the Baltimore
Orioles, so Kurkjian was probably as safe in choosing that outcome as in any of
the four contests. But there were two factors he chose to ignore: Baltimore was
playing at home where they had been 5-4 against the Sox during the season
(certainly not roadkill), and O's manager Buck Showalter's relentless
determination to squeeze every possible gain/win out of every moment/game. He
didn't exactly ignore a third factor, the Sox' 17-27 play since August 10th, but
he dismissed it as ephemeral. The O's refused to play dead, and came back in the
9th inning with some serious heroics.


Kurkjian didn't under-rate the quality of the Devil Rays' opponents, the New
York Yankees, but he did grossly underestimate two factors that affected the
Yanks' determination to win. First, the Gothamites were already in the playoffs,
meaning if they lost to the Devil Rays and the Tampa team faced them later in
the championship series, their opponent would have a psychological advantage,
perhaps not massive, but in a system where whatever doesn't make you stronger
kills you, not to be ignored. Second, the Yankees, from both a pride and profit
position, practically prefer playing the Red Sox (a legendary rivalry with both
richer revenues and blood lust at stake). So the Yankees weren't going to roll
over, even if they weren't going to compromise their playoff chances by
squandering their best starting pitcher or reliever in the effort. The Yankees
put away the Devil Rays early but Joe Maddon's relentless and loose squad came
back and won it in 12 innings.


In the National League games, he did the same, presuming the Braves' 11-19
record since August 24th was a short-lived swoon and that they would rise to the
occasion. The Braves were certainly an appealing and skilled team, but they were
playing the team with the best record in Baseball, the 101-61 Philadelphia
Phillies (and you don't get to 100 wins without playing every pitch for keeps).
The Phils, further, had the same incentive the Yankees had; the need to win for
psychological advantage in case the Braves would make it into the championship
series against them. The Phils wouldn't lie down and they beat the Braves in 13
innings.


It was certainly the most exciting last day of regular season baseball in my
lifetime, with four games that absolutely counted, three of which were decided
in the 9th or later inning.


But in his MBWT, the pundit ignored completely the Baseball precept he
absolutely has every reason to know and internalize: Jocketty's Law.


The next time you have to engage in strategic planning, don't fall into
Kurkjian Kraziness. Do what analysis you can do, and be prepared that
with a lot of competitive uncertainty, you could be wrong. Just because the
outcome is fuzzy, do not allow yourself to surrender to Management By Wishful
Thinking because it's much easier than serious analysis.

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