With March Madness™ underway, we thought it might be an opportune time to talk about how sports teams make purchasing decisions they hope will help them win on the court, on the field, and with the fans.
Some of the biggest dollars spent in sports are on players’ contracts – with a lot of focus on the perceived value of the newest players with the most impressive stats. The thinking is, that investing in the fastest, strongest players will create the fastest, strongest team.
The surprising finding? That thinking is completely wrong.
If you compute the surplus a player provides to his team – meaning how good his performance is – minus how much you have to pay him, what we found is these second-round picks are actually more valuable than that first pick.
That’s right. According to research by economist Richard Thaler, picking the players with the best stats does not actually create a winning team. The same can be said for purchasing the latest and greatest IT equipment or upgrading every few years.
From sports teams to the IT team, considerable time and effort is spent deciding if the purchase is a smart decision. In an IT environment, resources can be scarce and budgets can be tight so it’s imperative that IT Managers, CTOs, and CFOs feel like the purchases they are making are the correct choices.
So why – despite the best of intentions – do sports teams and IT teams choose wrong? How does this happen? And didn’t anyone watch Moneyball?!
Perceived Value vs. Needed Value
There’s a reason people love the story of a career quarterback. It’s because even though he’s not typically the youngest player on the field, a quarterback can be a reliable asset long after first taking the field. Think of the first round draft of Alex Smith vs. Aaron Rodgers (pick 1 vs. pick 24). Smith was a starter for the 49ers, while Rodgers was backup to Brett Favre on the Green Bay Packers. The results? Even though Smith had youth and dazzling stats on his side, the investment in his skills did not equal the investment in keeping the older Favre as the starter (and having the younger Rodgers play only when needed). Smith was ultimately traded and Favre went on to win several Super Bowls. And when the time came, the fully trained Rodgers was able to take Favre’s place and lead the Packers to yet another Super Bowl win.
In a data center, the franchise quarterback is your legacy equipment. It’s not the latest, but it doesn’t need to be. And if it needs replacing there’s no reason to spend money upgrading it to the newest, sleekest thing on the market. Luckily, unlike athletes, older servers with proven performance records actually go down (not up) in price. So although they may appear less valuable from a list price perspective, used equipment is the exact player your team may need.
Thinking the Newest Is the Best
In the NCAA’s March Madness™, some of the most memorable seasons are the ones with the most interesting outcomes. One of the most classic playoff storylines is the match-up between the team with with “one-and-done players” and the “Cinderella team.” One-and-done teams are typically composed of young, super-talented players with fantastic stats who get drafted into the NBA while they’re still in college. They’re fresher, faster, and widely considered to have the most potential.
Cinderella teams are the complete opposite. They’re composed of older players – juniors and seniors – who have been playing with each other for years. They may not be the quickest but they have consistently played well together for years, building equity in playing as a team. They’re perfect to have as a college team because they won’t need to be traded or reinvested in every year as the latest flash-in-the-pan player exits and the next comes in.
To an untrained eye, the most obvious winning pick would be a team of players with standout records, not an established team with a more seasoned lineup. But that choice isn’t always right. Quite often, it’s wrong.
In fact, the most engaging stories are when the more seasoned players are able to win a game over the one-and-done players (like North Carolina State vs. Houston in 1983). They’re the stories with players who – despite their age and less flashy stats – are able to get the job done and win championships against the youngest and shiniest players. Newer – even with all of the extra attributes like the best three-point record for the year or most steals – doesn’t always mean better. Often the most versatile team is composed of both new and seasoned players. Winning is about playing smart with your older assets as well as knowing when and how much to invest in fresh assets that you can add to your existing lineup.
The same can be said for the hardware in a data center. With servers lasting several times longer than the traditional 3-5 year OEM forced upgrade cycle suggests, there’s no need to bench legacy hardware – it can still work efficiently and create a win by saving you time and money in investing in unnecessary upgrades. Now that’s a Cinderella story for you!
Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn't be to buy players, your goal should be to buy wins.
–Peter Brand, Moneyball
Unfortunately, despite the data and proof, NFL coaches still spend far too much money on that first draft pick, people value the wrong stats in baseball, many people still bet on the team with the fastest, flashiest players in March Madness™, and customers choose to upgrade hardware without thinking about how they could train it to work for them longer and reinvest in areas like security or software instead.
We love helping our customers win at IT Moneyball against the better-funded OEM teams. But ultimately the choice of what to buy is yours. We just think your goal should be to buy wins.