There was a fascinating thread on Athletics Nation last week about whom the A’s might add to the starting rotation after ace Barry Zito heads off next spring to vastly bigger paychecks in L.A. or New York. (I promise, no more A’s posts for a while after this.) What struck me was not so much the content of the discussion–which centered on the possible return of former A’s ace Mark Mulder–but the language:
"Low risk/High reward!"
"Durability is a oversaturated market, I believe Beane is thinking. It just costs too much."
"I’m not totally convinced he’ll be undervalued enough in the marketplace to be affordable."
This is all straight out of Moneyball, Michael Lewis’s 2003 examination of how the A’s build winning teams on a tight budget. Lewis constructs his account around an efficient markets framework: A’s general manager Billy Beane saw a market inefficiency in how hitters were priced. Scouts and general managers overvalued perceived athleticism, and undervalued chubby guys who walked a lot. So the A’s signed guys, chubby or otherwise, who walked a lot. As I wrote in my Curious Capitalist blog a couple of weeks ago, this thesis–after getting lots of criticism from baseball types and even Steven "Freakonomics" Levitt–has recently received empirical backing from a study published in the Journal of Economic Perspectives. What’s even more impressive to me, though, is that all these A’s fans are now conversing in a language probably introduced to them by Lewis, the language of finance.
It’s not just A’s fans. The professors who post on The New Republic‘s Open University blog have been engaged in a debate about whether the Moneyball argument can be applied to academic hiring.
As someone who is writing a book that is at least tangentially related to these topics, I think there’s a lesson for me here. When people ask me what my book is about, I have a couple of answers. If they’ve been to business school, I usually say it’s about the rise and fall of the efficient market hypothesis and leave it that. If they haven’t, I try something along the lines of: It’s the intellectual history of an academic idea that changed the world of investing and then turned out to be at least partly wrong.
A few months ago, though, Michael Schrage followed up the what’s-the-book-about question with a much harder one. "What’s your thesis?" he asked. I said I’d get back to him.
I’ve taken a certain amount of (perverse?) pride in the fact that my book isn’t yet another Tipping Point/Wisdom of Crowds/Long Tail exercise in identifying a simple idea that purportedly explains almost everything. That genre’s getting a little tired (although it sure has been lucrative). But it’s not enough just to say that I’m telling a complex story rather than making a simple argument. I still need a thesis, an explicit intellectual framework that tells me as I go back through my 340 pages of manuscript what to throw out, what to leave in, and what to add more of. Sure, it’s Lewis’s storytelling that got so many people to buy Moneyball. But it’s his thesis, his intellectual framework, that has so lodged itself in the minds of A’s fans that they talk of undervaluation and market saturation and risk-reward tradeoffs when they talk of baseball.
So what’s the thesis of my book? Is it that markets are sort of efficient but not perfectly so, and that this distinction matters a lot in some situations and very little in others? Is it that social-science theories that make sense in the context in which they arise can seem utterly nonsensical when removed from that context? Is it that people find it terribly hard to give up a particular worldview, even in the face of masses of conflicting evidence? Is it that the test of a scientific theory is its usefulness, not its correctness?
All those play a role in the book. But none strikes me as the unifying idea. So what is? One common trait of the books named above is that they all take ideas from academia and use them to explore everyday life. My book is largely set on college campuses. The key might be to take a concept from outside academia and use it in explaining why these professors have behaved the way they have. Maybe it’s something as simple as common sense or judgment. More news later on this same station.
One thought on “In search of a thesis”
I think your thesis should somehow convey the idea that reading your book will be useful to the reader in understanding how the stock market works. Even if it means they learn how to avoid trouble, people really are looking for someone to tell them what to do. This might bring the academic ideas into focus.