Summer 2023 Book Report: Moneyball By Michael Lewis
Michael Lewis’s Moneyball is a David vs. Goliath Story. I'd like to highlight how this can relate to your life: The book shows how to win an unfair game and exploit hacks and glitches in any system with unique thinking.
The book starts off talking about the Oakland A’s history. In the late 1980s and early 1990s the A’s had one of the highest payroll and went to the World Series 3 times in a row. But then they got a new owner near the late 1990s/ early 2000s got two new owners who ran a very tight budget and due to this they had the second lowest payroll.
When they hired Billy Beane, this was a very smart choice. Billy Beane was a really good baseball player projected to do really well in the big leagues. But for some reason, he was a bust. The reason for this was due to his philosophy, what will people think of me when I strike out. The A’s then hired him as a scout, he may have lost his baseball talent but never his fighting spirit. He slowly climbs his way through the ranks and eventually becomes the GM of the A’s.
Then it focuses on the A”s draft and how they have to find undervalued players because all their good players drafted earlier will go to the big teams, so they find people who are overweight but are still really good, or have a pitch that no one respects except the A’s. They then get 13 out of the 20 players they wanted in the draft.
After this the book goes on to talk about how they lost their 3 main players to the big teams, and how 2 of them could be patched up and have the same season as before, but 1, Jason Giambi would be a problem. So Billy Beane and Paul Podesta try to find players and when they find the right players to fill in for Giambi the expected season is about the same win-loss record.
Then a chapter talks about how the A”s mold a mediocre veteran player into a stud. The player’s name is Scott Hattenberg. The A’s recognize his hidden talent, knowing when to swing , when to not, and having no fear of striking out. The A’s expose this talent and he becomes really good .
The book talks about when the A’s need a trade, how convincing Billy Beane is. With their strategy, find undervalued players that the teams we’re trading with don’t care and they find Chad Bradford, a pitcher with a very unique, unreadable style that you can’t predict. His knuckles scraped the ground when pitches, but the white Sox didn’t care for that style and the A’ s pounced for the trade.
At the end of the book, Michael Lewis goes on to explain how the A’s strategy was no longer a secret and the Boston Red Sox adapted to this by hiring someone like Paul Podesta. The Red Sox didn’t give the trades they used to before realizing how underrated their players were. Billy Beane was then going to go to the Red Sox, but at the last moment said no and stayed with the A's.
Time Value of Money 5/27/2024
You’ve won the lottery! Your cash prize is $1 billion. But, before you can claim it, the government wants a piece of the action. They give you two options. You can either claim your prize right now, and get taxed $250 million or you can wait for 5 years and get your money tax-free and become a billionaire. Some people can’t resist the money and will want to take it right away. Some might be patient enough and wait 5 years to claim it all. How do you determine which is the better decision?
The principle of the time value of money helps figure out the better option. Assuming a 7.5% interest rate, taking the money now is a better idea. This concept states that the value of a dollar now will be worth more than a dollar in the future. Before we break down the question, let me explain a few terms. Inflation is the increase in price of goods and services or in other words the decrease of the value of money as time goes on. The present value of money is what the value of money is right now, the future value of money is the future value of money after a certain time period.
Going back to the question, there are formulas to calculate the present value of money to the future value of money and vice versa. For example, in this question, we need to convert the future value of 1 billion dollars into the present value. This is called discounting. The formula for this is PV = FV / (1 + r) ^ n. PV stands for present value, FV stands for Future value, which in our case is 1 billion dollars, r stands for the annual interest rate which is 7.5% or 0.075, and n stands for the number of periods/years which is 5. Using the formula, we get a present value of $696,558,632.35. The other option was a tax of $250 million resulting in a total of $750 million. With $750 million being greater than $696,558,632.35, Option A (taking the money right now) would be the wiser option. Also, if you get the money right away you can do things like invest it earlier, which can be powerful especially with compound interest. If you want to learn more about compound interest, take a look at my first post.
The time value of money is used frequently in today’s world. For example, it can help figure out what the future growth of a company’s earnings could be worth today. Let’s take Google’s Earnings Per Share projected growth. Let’s assume the US government offers a 7.5% interest rate for its 10-year bonds. In this scenario, I will be using a 10% interest rate as the discounting factor. This is because the US government is considered risk-free. While Google is a robust company, it isn’t risk-free like the US government. To account for this incremental risk, I will be using a 10% interest rate as the discounting factor. In December 2023, Google’s Earnings Per Share was $7.32. Their Projected Earnings Per Share for December 2027 is $14.38 as per Wall Street. Applying the formula with the 10% discounting factor, the present value is 9.82$. This helps us account for inflation and figure out how much Google’s future earnings (in December 2027) is worth today.
Thank you for reading this post. I hope you learned something new today. Have a great Memorial Day!
The principle of the time value of money helps figure out the better option. Assuming a 7.5% interest rate, taking the money now is a better idea. This concept states that the value of a dollar now will be worth more than a dollar in the future. Before we break down the question, let me explain a few terms. Inflation is the increase in price of goods and services or in other words the decrease of the value of money as time goes on. The present value of money is what the value of money is right now, the future value of money is the future value of money after a certain time period.
Going back to the question, there are formulas to calculate the present value of money to the future value of money and vice versa. For example, in this question, we need to convert the future value of 1 billion dollars into the present value. This is called discounting. The formula for this is PV = FV / (1 + r) ^ n. PV stands for present value, FV stands for Future value, which in our case is 1 billion dollars, r stands for the annual interest rate which is 7.5% or 0.075, and n stands for the number of periods/years which is 5. Using the formula, we get a present value of $696,558,632.35. The other option was a tax of $250 million resulting in a total of $750 million. With $750 million being greater than $696,558,632.35, Option A (taking the money right now) would be the wiser option. Also, if you get the money right away you can do things like invest it earlier, which can be powerful especially with compound interest. If you want to learn more about compound interest, take a look at my first post.
The time value of money is used frequently in today’s world. For example, it can help figure out what the future growth of a company’s earnings could be worth today. Let’s take Google’s Earnings Per Share projected growth. Let’s assume the US government offers a 7.5% interest rate for its 10-year bonds. In this scenario, I will be using a 10% interest rate as the discounting factor. This is because the US government is considered risk-free. While Google is a robust company, it isn’t risk-free like the US government. To account for this incremental risk, I will be using a 10% interest rate as the discounting factor. In December 2023, Google’s Earnings Per Share was $7.32. Their Projected Earnings Per Share for December 2027 is $14.38 as per Wall Street. Applying the formula with the 10% discounting factor, the present value is 9.82$. This helps us account for inflation and figure out how much Google’s future earnings (in December 2027) is worth today.
Thank you for reading this post. I hope you learned something new today. Have a great Memorial Day!