Stephen J.K. Walters is a Professor of Economics at Loyola University Maryland and a fellow of the Institute for Applied Economics at The Johns Hopkins University. He also serves as Economic Advisor to the Baltimore Orioles major league baseball team and as a visiting fellow of the Maryland Public Policy Institute. His fields of expertise include urban economics, sports economics, and the economic analysis of law. He is the editor of Econversations (Pearson, 2013), and is currently at work on a book for Stanford University Press titled Boom Towns: Renewing the Urban American Dream.
GSABR: How did you get your start in baseball? How did your research in economics allow you to add value to a team?
SW: At mid-career, I got tired of writing dry articles for other academics and decided to do research in sports, which had always been a lot more fun to think about. Plus, the data in sports is far better than in most other industries and enables the study of some interesting topics in economics. I soon realized that my research could have practical value for teams, and started to send papers to General Managers with short, cryptic suggestions about how they could use the findings. One of those GMs, Dan Duquette, who was running the Red Sox at the time (which was pre-Moneyball), was most open to the idea of getting some advice from a professor, and we’ve been working together ever since. Most of that work consists of blending careful analysis about player productivity to decisions about player compensation and payroll allocation – what scouts sometimes call “putting a dollar on the muscle.”
GSABR: How accurately did Moneyball describe the culture shock in baseball as economics and analytics began to be implemented? What have you experienced that agrees with or contradicts the classic narratives in Moneyball?
SW: Ten years or so ago, the culture shock issue was more prominent. I can remember consulting with one GM (for a team I won’t mention) about a player contract, and being taken up a back stairway into his office so the “baseball people” wouldn’t know he was using an economist to advise him on… economics. These days, there’s much more openness to quantitative analysis, and simultaneously the quants are more appreciative of what the traditionalists do. With the Orioles, scouts who have come up through the ranks often ask about sabermetrics, and the statistical analysts go to scout school. Everyone wants to develop all the tools they can.
GSABR: MLB teams are relatively open about their use of analytics. Do you think that helps or hurts those teams compared to, for example, the very secretive analytical NBA teams?
SW: Most MLB teams admit they use analytics, but they’re still pretty secretive about how. No one wants the competition to know what methods they might be using. And that can be a bad thing: in academic work, peer review is essential to catch errors in the research process. If you’re guarding secrets, you risk acting on a belief that might be built on a faulty model or flawed data set.
GSABR: How is the quality of publicly available baseball research (i.e. FanGraphs, Hardball Times, BP, etc.) compared to what teams are acting upon? Which areas of the game are still uncertain and could provide a competitive advantage to those that discover new insights?
SW: There’s a lot of terrific research out there, but in consuming it fans (and teams) have to evaluate methods and data quality very carefully. One of the founding fathers of sabermetrics, Bill James, built the field in part because he noticed that a lot of cherished beliefs held by those baseball people seemed not to be supported by the data. Over the years, though, as he has revisited some of those topics, he has walked back a few of his assertions: obviously, a finding can be sensitive to the sample of data selected for a study, or the statistical method used. Replication and robustness tests don’t earn researchers much glory, but they’re absolutely essential to the process. So there’s probably a lot that statanalysts think they know that might not be true; students should feel as comfortable about re-evaluating stathead “wisdom” as James was in questioning the “lifers.” And there’s a huge amount of work that has not even really begun. We’ve made very little progress quantifying the contribution of managers and coaches to player performance, for example. It’s possible we’re mis-attributing a sizeable amount of their contribution to output to the players in their charge.
GSABR: How did the 2012 CBA alter front office strategies? For example, how has the international scouting spending limits influenced time and resources spent on scouting international players, if at all?
SW: Too soon to tell, really. So far, it’s clear that a few teams have tried to save money at the top of their draft in order to try to sign players who have fallen to later rounds because they’ve committed to play college ball, for example. But there’s no data yet on whether this is wise. And the new international regulations are in their infancy, and most teams haven’t really figured out all the implications for strategy yet. My guess is that the spending limits eventually will lead to higher salaries for the best scouts, as teams compete to maximize the probability that they “hit” on every draft pick or signing.
GSABR: Where do you see baseball operations going in the next few years? And what would you recommend students learn and experience to best position themselves to add value to a team?
SW: Every year there’s more and better data about what happens on the field, so there are some exciting possibilities about gauging defense, for example. With the amazing amount of data flowing in, students should make sure they not only have statistical skills, but acquire enough programming and database management tools to process all this information. But I think we might’ve hit diminishing returns on better quantifying player performance, and a lot of future work will involve figuring out how non-playing personnel (managers and coaches, as I’ve said earlier, but also doctors, trainers, scouts, analysts, etc.) add value to the organization, and how available resources should be efficiently allocated. For that, there’s no substitute for the “economic way of thinking.”
Special thanks to Steve Walters for his time and insight
Interview by Nik Oza, Georgetown Class of 2016
Follow Nik on twitter: @NikOza2
Follow GSABR on twitter: @GtownSports