Turbotodd

Yuchun Lee is vice president, Enterprise Marketing Management (EMM), in the Industry Solutions division, IBM Software Group. EMM is comprised of Coremetrics and Unica technologies, providing the foundation for solutions to help companies automate, manage, and accelerate core business processes across marketing and demand generation.

My partner-in-crime, Scott Laningham, sat down to chat with IBM VP and general manager, Unica co-founder, and former MIT card-counting guru, Yuchun Lee, about the opportunities presented by “smarter commerce” for companies everywhere at the IBM Smarter Commerce Global Summit.

In his keynote earlier this week, Lee explained that IBM now has a “more comprehensive suite for relevant and personalized offers, and an enhanced social media metrics capability” in the form of Unica Marketing Automation Tool v. 8.6, a capability that clients around the globe have been clamoring for.

The social buildout also incorporates enterprise analytics, tag management, and full mobile and social market capabilities that tie more closely together the marketing automation experience with the social realm.

Lee also explained in his keynote that many organizations must adjust their marketing cultures to fully capitalize on the Generation C culture.  They must build organizations that balance analytics and creative talents (easier said than done!), work with IT rather than around IT, and break down marketing siloes — digital and traditional marketing must consolidate and collaborate.

Words of wisdom from a former world-renowned blackjack player, and now, market thought leader in the realm of social/Web metrics and marketing automation.

IBM announced its intent to acquire Varicent Software Inc. earlier today, a recognized leader in sales performance management software. Varicent Software strengthens IBM's "smarter analytics" solutions and addesses a growing opportunity in sales performance management. IBM's performance management solutions help customers outperform by seeing, predicting, and shaping business outcomes across finance, operations, customer relations and now sales organizations.

IBM just announced a definitive agreement to acquire Varicent Software Incorporated, a leading provider of analytics software for compensation and sales performance management.

Varicent is a privately held company, with headquarters in Toronto, Canada. Financial terms were not disclosed.

Varicent software automates and analyzes the collection and reporting of sales data across finance, sales, human resources and IT departments to gain efficiencies, uncover trends andimprove sales performance.

This acquisition accelerates IBM’s “smarter analytics” capabilities across line of business operations in all industries, and will be combined with IBM’s existing software offerings that are delivered to clients through on-premise or cloud computing models.

With growing volumes of data, companies are increasingly looking for ways to automate and gain faster, more accurate intelligence on sales and financial management data in order to increase competitiveness.

According to Gartner, organizations that adopt compensation management solutions can expect to reduce errors by more than 90 percent and reduce processing times by more than 40 percent.

Varicent’s software automates and integrates all aspects of sales, client and financial performance management across the enterprise, which is traditionally a labor intensive process. Unlike traditional tools, Varicent provides a single management system that relies on a sophisticated calculation engine to model and analyze the effectiveness of incentive spend.

The software allows clients such as banks, insurance companies, retailers, information technology and telecommunications providers to more accurately determine compensation, streamline territory assignments, manage quotas, and report and analyze sales activities.  The software also strengthens audit and compliance readiness and provides transparency for all aspects of incentive compensation.

Varicent was founded in 2003 and has more than 180 customers using its software, including Starwood Hotels, Covidien, Dex One, Manpower, Hertz, Office Depot and Farmers, among many others.

IBM will combine Varicent with its R&D and prior acquisitions including Algorithmics, Clarity Systems, OpenPages, Cognos and SPSS, to expand IBM capabilities in business analytics and optimization across finance, sales, and customer service operations.

These acquisitions are part of IBM’s larger focus on analytics, which spans hardware, software, services and research. IBM has established the world’s deepest portfolio of analytics solutions, business and industry expertise.

This includes almost 9,000 dedicated business analytics and optimization consultants and 400 researchers. IBM secures hundreds of patents a year in analytics, and continues to expand its ecosystem, which consists of more than 27,000 IBM business partners. IBM has also created eight global analytics solution centers in Berlin, Beijing, Dallas, London, New York, Tokyo, Washington and Zurich.

The acquisition is subject to customary closing conditions and is expected to close in the second quarter of 2012. With the closing of this acquisition, it is expected that all of Varicent’s employees will join IBM’s Software Group.

Okay, so the first golf major of the year is over, and Bubba Watson has his first major and first green jacket.

Now what?

Well, pour moi, it’s time to get back down to business.

It’s been an eventful week thus far in the tech world, and it’s only Tuesday.

First, of course, there was the Facebook acquisition of Instagram for a cool $1 billion (in cash and stock).  According to reports I read, they could’ve bought what’s left of Kodak 12 times over for that amount.

If you’re not familiar with Instagram, it’s been a (until last week, when an Android version was introduced) free iPhone photo sharing app, one that allows you to apply cool digital filters and then share the pic on a variety of social networking services (including Twitter, and, of course, Facebook).  Instagram’s leading feature that made it so attractive was its insanely fast growth — it’s less than two years old and already has over 30 million registered users (including me!).

Only time will tell as to whether A) Facebook will screw Instagram up and B) whether or not this was a smart deal.

Wired’s Epicenter blog seems to think so, explaining that its acquisition per cost per user was only $28 per user, as opposed to the median of $92 per user across the span of a wide variety of Internet acquisitions since the dot com boom.

And with only 13 employees, the payout per employee hovers close to $80M per user!.  Compare that to the closest runner up, Google’s acquisition of YouTube at $24M.

My take: The air is definitely thinning up here on Mount Internet Olympus, but I’ll not call a bubble foul just yet.

We also heard about the beginnings of Yahoo’s reorg, AOL’s patent sale to Microsoft for $1 billion, AT&T’s divestiture of Yellow Pages for $1 billion (what IS it with that $1 billion figure?  Pretty soon those billions add up to real money!).

Even HP got into the tech-heavy news game, announcing its “Converged Cloud” initiative.

But the big enterprise tech news of the week shall be shared by IBM tomorrow in a major Webcast announcement.

Our own Steve Mills (among others) starts to open the kimono about IBM’s expert integrated systems in the following video:

But you can hear firsthand all the details of this major announcement by IBM by registering for tomorrow’s (Wednesday, April 11^th) live webcast, at 2:00 EST, 1:00 Central, and 11:00 Pacific.

Simply visit www.ibm.com/expert to get registered in advance!

Boy, there’s lots of stuff going on this first week of January 2012.

News stuff.  Business stuff.  Economics stuff.  Even politic stuff, which I’ve already addressed in the form of the Iowa Caucuses twice this week.

So here’s some of the business news that seemed worthy of highlighting:

U.S.car sales ended with a strong year, and a particularly strong December.  Chrysler’s sales rose 26% for the year, Ford’s 11%, and GM’s 13%.

“You Push The Button, We Do The Rest.” Eastman Kodak is on the verge of filing for bankruptcy protection. Reports suggest they’re trying to stay afloat by selling off parts of their patent portfolio, but Chapter 11 looms in the distant. I feel a new song brewing: “Di-gi-tal smoked the silver-halide…”

Yahoo’s got a new boss.  But is the new boss the same as the old boss? EBay exec Scott Thompson, which currently runs eBay’s PayPal group, has been hired to bring Yahoo out of its financial blues.  My recommendation: The way out is through the data, Sensei.

Netflix is makin’ content with the owner of the Bada Bada Bing!  Steven Van Zandt comes back to Gangster life in “Lily Hammer,” this time as a NYC mobster relocated to Lillehammer, Norway. Get it? Lily…Hammer?  I’m guilty as charged, I watched the Web preview and laughed my tush off. Tune in Feb 6.

Beautiful music is being made, bought and sold online, more than ever.  Nielsen SoundScan reports sales of complete albums reached 330.6 million last year, with a majority of music now being sold and distributed online (vs. Physical distribution via CDs, etc.). British R&B artist Adele led the way, with her “21” selling some 5.82 million copies. So, please, don’t stop the music!

The American worker is getting back to work.  Less folks filed for unemployment benefits in the United States last week, even as the private sector added a smokin’ 325,000 jobs in December, according to ADP’s monthly hiring report. Still, unemployment was expected to tick up to 8.7% for the month of December, especially with continued weakness in manufacturing and construction.

Mark Cuban and Jason Calacanis in the same room? Well, maybe not in the same room, but they have helped social CRM startup Nimble raise $1M in funding. Nimble CEO views Nimble as a “combination Hootsuite, Yammer, and Salesforce,” allowing Nimble users to authenticate into Twitter, Facebook, LinkedIn, and Google and ultimately connect contacts, calendars, and communications.  Sign me up — just so long as I don’t have to appear in a reality TV show with Cuban.

Okay, that’s enough for now.  I have to go make some money for the IBM company.

The IBM "5 in 5" is based on market and societal trends as well as emerging technologies from IBM’s research labs around the world that can make these transformations possible.

Before I get to the business news of the day, let me send a hearty congratulations to U.K. golfer Ian Poulter, who won the Australian Masters yesterday and outgunned Aussie’s own Geoff Ogilvy, who was attempting to take the tourney on his boyhood course.

Poulter was two strokes behind Ogilvy heading into the final round and closed with a 4-under 67 on a very windy Victoria Golf Club.

Nice win, Poulter.  Poulter should have plenty of Aussie dollars to head out for a little X-mas shopping, and perhaps he’d like to invite English striker Darren Bent to join him for a little shopping.

Bent was busted on the sidelines of Sunday’s game against Liverpool for doing a little online shopping (his team was losing), even though he was out for the day due to injury.  Otherwise, Bent is Villa’s leading scorer, to which I say, “A goal a day helps keep the Xmas cash register away!

But enough of sport.  It’s time to get serious.  And IBM’s latest “IBM 5 in 5,” a list of innovations that have the potential to change the way people work, live and interact during the next five years, has arrived just in time for the holidays.

We’ll take them one at a time.

Watch the 5-minute video above for a quick fly-by of IBM’s 2011 “5 in 5″ innovations.

1. People power will come to life.  

No, we don’t mean protests in the streets of Egypt or Libya, although that is certainly a worthwhile sort of people power.  We’re talking about real people power, anything that moves or produces heat and which has the potential to create energy that can be captured.

Walking. Jogging. Bicycling. The heat from your computer. Even the water flowing through your pipes.

Advances in renewable energy technology will allow individuals to collect this kinetic energy, which now goes to waste, and use it to help power our homes, offices and cities.

Imagine attaching small devices to the spokes on your bicycle wheels that recharge batteries as you pedal along.

You will have the satisfaction of not only getting to where you want to go, but at the same time powering some of the lights in your home.

Created energy comes in all shapes and forms and from anything around us. IBM scientists inIreland are looking at ways to understand and minimize the environmental impact of converting ocean wave energy into electricity.

2. You will never need a password again.

I’m paying special and close attention to this one.  I have so many IDs and passwords I don’t know when I’m coming or going, and my new favorite pastime is emailing web sites to request they send me an email reminder or password reset.

In this “5,” your biological makeup is the key to your individual identity, and soon, it will become the key to safeguarding it.

So to speak.  No, you will no longer need to create, track or remember multiple passwords for various log-ins.

Imagine you will be able to walk up to an ATM machine to securely withdraw money by simply speaking your name or looking into a tiny sensor that can recognize the unique patterns in the retina of your eye.

Or by doing the same, you can check your account balance on your mobile phone or tablet.

Each person has a unique biological identity and behind all that is data. Biometric data — facial definitions, retinal scans and voice files — will be composited through software to build your DNA unique online password.

Referred to as multi-factor biometrics, smarter systems will be able to use this information in real-time to make sure whenever someone is attempting to access your information, it matches your unique biometric profile and the attempt is authorized.

To be trusted, such systems should enable you to opt in or out of whatever information you choose to provide.

3. Mind reading is longer science fiction.

Hey, get out of my head!  I see what you’re trying to do!  It won’t work…well, maybe…it…won’t.

But maybe it will!

From Houdini to Skywalker to X-Men, mind reading has merely been “wishful thinking” for science fiction fans for decades, but their wish may soon come true.

IBM scientists are among those researching how to link your brain to your devices, such as a computer or a smartphone. If you just need to think about calling someone, it happens.

Or you can control the cursor on a computer screen just by thinking about where you want to move it.

Scientists in the field of bioinformatics have designed headsets with advanced sensors to read electrical brain activity that can recognize facial expressions, excitement and concentration levels, and thoughts of a person without them physically taking any actions.

Within 5 years, we will begin to see early applications of this technology in the gaming and entertainment industry.

Furthermore, doctors could use the technology to test brain patterns, possibly even assist in rehabilitation from strokes and to help in understanding brain disorders, such as autism. .

4. The digital divide will cease to exist.

You’ve heard of the digital divide?  Well, get ready to see that divide get split in half…or even divided into infinity.

In our global society, growth and wealth of economies are increasingly decided by the level of access to information.

And in five years, the gap between information haves and have-nots will narrow considerably due to advances in mobile technology.

There are 7 billion people inhabiting the world today. In five years there will be 5.6 billion mobile devices sold – which means 80% of the current global population would each have a mobile device.

As it becomes cheaper to own a mobile phone, people without a lot of spending power will be able to do much more than they can today.

For example, in India, using speech technology and mobile devices, IBM enabled rural villagers who were illiterate to pass along information through recorded messages on their phones.

With access to information that was not there before, villagers could check weather reports for help them decide when to fertilize crops, know when doctors were coming into town, and find the best prices for their crops or merchandise.

Growing communities will be able to use mobile technology to provide access to essential information and better serve people with new solutions and business models such as mobile commerce and remote healthcare.

5. Junk mail will become priority mail.

Do you remember the original spam, the one that led to the Internet terminology?  It was a reference to a 1970s Monty Python sketch set in a case where nearly every item on the menu included Spam canned luncheon meet.

As the waiter recited the Spam-filled menu, a chorus of Viking patrons downs out all conversations iwth a song repeating “Spam…Spam….Spam…”  You get the picture?

Now, think about how often we’re flooded with advertisements we consider to be irrelevant or unwanted. It may not be that way for long.

In five years, unsolicited advertisements may feel so personalized and relevant it may seem spam is dead. At the same time, spam filters will be so precise you’ll never be bothered by unwanted sales pitches again.

Imagine if tickets to your favorite band are put on hold for you the moment they became available, and for the one night of the week that is free on your calendar.

Through alerts direct to you, you’ll be able to purchase tickets instantly from your mobile device. Or imagine being notified that a snow storm is about to affect your travel plans and you might want to re-route your flight?

IBM is developing technology that uses real-time analytics to make sense and integrate data from across all the facets of your life such as your social networks and online preferences to present and recommend information that is only useful to you.

From news, to sports, to politics, you’ll trust the technology will know what you want, so you can decide what to do with it.

Greetings from Bonefish Cay in the south Atlantic.  Think Nassau, Bahamas, fly NNW on a prop plane for an hour, land in Marsh Harbour, then take about a 10-minute boat ride.

Turbo is currently on vacation on Bonefish Cay in the Abaco Island chain in the Bahamas. However, despite being on a near-deserted island, he's not without satellite Internet and TV technology, and in terms of NCAA football, the English Premiere League, and Facebook, he's hardly missed a beat.

I’m staying with old friends, and I won’t rub in how remote and islandy this place is.  I came down for a week to visit, do a little scuba diving, maybe play a little golf, and generally speaking, just chill out.

But the winds haven’t exactly been cooperating — it’s been averaging 14-20MPH gusts since I arrived, and the temp has been in the low-to-mid 70s, so despite one trip into the water to search for some conch for dinner, we’ve mostly stayed out of the water.

Speaking of water, the island has to produce its own fresh water, so I got my first ever gander at a desalination system. The primary device is an SK HC 5,000 desalinizer, which produces 5,000 gallons of fresh water from sea water per day.  That averages out to around 210 gallons per hour.

The primary power source here is a Northern Lights 125KW diesel generator, which sends current out to 4 different inverted battery banks, to several houses located here on the island.

The Internet access here is provided by HughesNet, so as not to be completely cut off from the world.  Hey, just because I’m on vacation doesn’t mean I completely gave up my ability to communicate with other humans!  And anyhow, how was I going to post all those cool pics on Facebook if I didn’t have some form of Interwebs!

So here’s how this Hughes thing works: You send a request from a Web page that the Hughes satellite dish devices sends to a satellite that’s situated about 22,000 miles up in space.

According to Hughes, at that altitude, the satellite’s period of rotation (24 hours) matches the earth’s, and the satellite always remains in the same spot over the earth. Because Internet via satellite is now so technologically advanced, this distance hardly makes a difference, even with rural Internet connections.

Next, the satellite contacts the Hughes Network Operations Center (NOC), which locates the specific Website you have requested.

Finally, the Website beams the information back along the same path to the NOC, then to the satellite, and then to your computer through the HughesNet dish and modem.

What I’ve discovered is that even though the signal travels a great distance — when’s the last time you travelled 22,000 miles in a millisecond or two — there’s only a fraction of a second delay during the transmission.

Not unlike the delay you may have experienced when you using a cell phone.

And anyhow, you’re on an island, you shouldn’t be surfing the Internet anyhow.  And if you are, you should at least have a glass of rum and coke next to your computer.

Me, I’ve never had to lean on a satellite dish for Internet access for so long, but so far I’m sold…and hey, it beats sitting around talking to a volleyball named Wilson.

If you want to have a quick Walter Mitty moment, check out my takeoff from Nassau airport. This was in a 9 passenger Britten-Norman BN-2 Islander, which has a top speed of 170MPH and a range of 874 miles.

And it’s really, really loud.  Just how I like my prop planes while on vacation.

Now if you’ll excuse me, I have to go make sure the Dish network is ready to deliver up the Dallas Cowboys/Arizona Cardinals game.  It’s now windy AND raining on the island — oh thank heaven for high technology.

During my recent visit to Bangalore, I shot the attached video with my almost-new Canon S95 digital camera.  This was a meeting we were having with our new “social intelligence” team there, a crack team of young, but very bright, social media listening superstars.

For far too long, I’ve been putting off learning how to use iMovie, but now that I have my handy MacBook Air 11″, complete with 128GB SSD drive and 4GB RAM, I decided it was time to put the Air, and myself, through the video test.  

To demonstrate how easy it is to learn how to use iMovie, I walked into the tool this afternoon with virtually no real experience to speak of, and arrived at the product below about 2 hours later.  Watch out, Spielberg and Scorcese, the Turbo knows (well, almost) how to produce a video now!

Thanks to the great team in Bangalore for patiently smiling into the camera as we made introductions to our WW team who were situated back in the States during this meeting. 

Greetings.  I meant to say in my post from earlier today a big congratulations to the U.S. Team which held on to golf’s President’s Cup after a week of turbulent golf down under at Royal Melbourne in Melbourne, Australia.

Lotusphere 2012 will be held January 15-19, 2012, in Orlando, Florida, and will feature the two-day "Connect" event for those looking to go deep and long on social business.

Despite the controversy around U.S. Captain Freddy Couples “captain’s choice” of Tiger Woods, who hasn’t exactly been at the top of his game of late, it was Woods who, two President’s Cups in a row, clinched the cup in a singles match Sunday against Aaron Baddeley.  Woods won 5 and 3.

Tiger Woods is back.  Yay for golf!

And as professional golf in the U.S. fades further into the sunset of winter, not to be fully awakened until early January, we do know what happens in Orlando, Florida, in mid-January: Lotusphere 2012, and this year’s sister event, “IBM Connect.”

For those not in the know from years past, Lotusphere 2012 is a five-day technical conference that covers a broad array of topics focused on social business, ranging from strategy and best practices, adoption and deployment, to capabilities and solutions. As usual, there will be the familiar session tracks, labs, and the Solutions Showcase.  And of course, yours truly, along with my developerWorks livecasting guru Scott Laningham, will be in attendance conducting interviews and covering the event tidings for the blogosphere.

But, there’s more.  This year, the larger event will also be hosting an “event within the event,” in the form of “Connect 2012,” a two-day social business conference that will provide a venue for company leaders and IBM experts to share strategies, challenges, and best practices (not to mention a few Twitter IDs) for exploiting pervasive social technologies to achieve tangible advances in company performance.

So, if you have a few business leaders that you’re still trying to get on the social cluetrain, IBM Connect could be just what the doctor ordered — make sure you get them the invite info.

Here’s a breakdown of the topline “tick tock” for Lotusphere and IBM Connect 2012:

• Business Partner Development Day (Sunday, January 15)
• Connect 2012 (Monday and Tuesday, January 16-17)
• Lotusphere 2012 (Monday-Thursday, January 15-19)

Here’s a link to everything you’ll need to know to register and make sure that Lotus Knows you’re planning to attend Lotusphere and Connect 2012.  Until December 2, 2011, Lotusphere registration is a mere $1,995 (U.S.), but goes up to $2,295 on December 3rd (Connect 2012 is $995 U.S.)

So register while there are still seats available, and know I’ll be sharing more details as we get closer to the two events.

R9WC85CVV7EV

Michael Lewis, journalist and author of several best-selling books, including Moneyball, his 2003 tome that revealed how a small market baseball team could compete with the big teams by using empirical statistical data from baseball to predict future player performance.

Billy Beane is a former Major League Baseball player and the current general manager and minority owner of the Oakland Athletics. He was the first major league manager to put "sabermetrics" into practice.

At the recent IBM Information on Demand 2011 event in Las Vegas, Nevada, one of the key themes of the event was the idea of putting business analytics into practice to help improve business outcomes.  No one was better prepared to address this topic than Michael Lewis, author of best-selling books Moneyball, The Big Short, Boomerang, and others, or Billy Beane, general manager of the Oakland A’s baseball team and the first major league manager to utilize “sabermetrics,” or statistical historical data about baseball player performance, to take a smaller market team with less money to spend on players to the post-season several years in a row.  I sat down with the two of them backstage at the Mandalay Bay Events Center just prior to their keynote presentation for several thousand IOD attendees, and following is the result of that interview.

Todd Watson: One of the key themes of the IOD event has been “turning insight into action,” and that seems to be a theme prevalent in some of your books — most notably Moneyball and The Big Short. I’m curious, in terms of baseball managers who are using sabermetrics to make more informed decisions, I’m really interested in how you got turned on to that topic and also just how that came to be and what inspired you to write the book?

Michael Lewis: It was really simple. I was living in Billy’s [Beane] backyard in Berkeley so I was paying attention to the A’s. I didn’t know…I wasn’t a baseball fanatic, but I did know there was this payroll issue and I got interested in that.

I got interested in that in the first place, because at first I thought I was going to write a piece about the A’s. I think it was when Jose Canseco got this giant deal, and he was being paid something like $8 million, and the right fielder and left fielder was being paid something like $150,000, and I wanted to know if the outfielders were pissed!

And, how they felt when those Jose Canseco dropped a fly ball. (Laughter) And I was going to come out and write about that, and then I started thinking about it, and I realized there were these huge discrepancies from team to team. And then I wondered, so how does the whole team feel about being poor???

Todd Watson: As a long time Rangers fan I can sympathize…

Michael Lewis: But I didn’t do anything about it. And then the As had a sensational year in 2001. They were clearly the force in baseball, although they didn’t win the World Series, and I thought this is really weird, they’re playing against four times the sum of money and they are as good or better. How does that happen? And I knew someone who knew Billy, who set me up to go see him.

I thought I was just going to write this little magazine piece, maybe. And when I went to go see him, the answer was so interesting, I just kept listening for a couple of months.

Billy Beane: And I just kept talking.

Michael Lewis: You just kept talking. Because there was so much to talk about. I mean the idea that the market for baseball players didn’t work, or was inefficient some way, had vast implications for all sorts of other things. But I’ve never written a sports book. So it took me a while to get my mind around the idea that I would, and how to do it. That’s kind of how it started

Todd Watson: Okay. And Billy, I’m curious for you… I’ve seen the movie and I’ve read the book and I understand what happens in Hollywood movies, but I’m curious was there some kind of cultural aversion at first, a resistance amongst your staff, to move in this direction?

Billy Beane: Yeah, I mean even in my own upbringing through the business it was somewhat traditional as well. Until I worked under a guy named Sandy Alderson who never played the game, who was a Harvard law graduate, and who was a former Marine who taught himself the game through books. So that was my first exposure.

So I sort of straddle both sides, which was a benefit to some extent. So yes, there was certainly some resistance internally, but anytime there is mathematics involved there’s going to be a certain amount of resistance. I think 99% of us have some resistance because going back to seventh grade, and when are we going to use this [math], and now you’re seeing somebody use it!

But from our standpoint, it was really out of necessity, and, we had a blank canvas. We had a fertile place to do it because we really didn’t have the pressures of a Boston or New York, and if we failed, we were probably going to finish wherever we were, anyway. So for us it was no risk, high reward.

And the other thing was, we had spent a number of years previously looking at this, and there was more evidence…The great thing about math is there something logical to it, so once we had faith in it among a small group of us, we did really feel like we weren’t taking a risk. You know, it didn’t seem risky to us. That’s what everyone asks all the time, and quite frankly, we were wondering why doesn’t anybody else get this?!

Todd Watson: So once the book got out the secret was out. How did you stay competitive then?

Billy Beane: Well, you know there was some momentum going on, and there was this other line of young executives who were taking a similar way to Sandy, and who read outside sources for information and looked at it in a rational way. So, now you’re starting to get a movement…if there’s anything I think the book did, I think it accelerated it by putting it [sabermetrics] out there for everybody. It was gonna happen anyways.

Also the parallel with technology helped it take off — access to information was all over the web because it was being gathered. You know, whereas before Bill James was doing it — and he used to print basically these tight little pamphlets – and even some of the stuff that we were originally using was somewhat, not literally, but was somewhat manual, related to how information is gathered today.

I think the parallel with technology also helped it take off, because it just gave it access to more people out there who were sort of running their own models as well. So, there was just more and more evidence that there was something to this.

Todd Watson: So this question is some red meat for my baseball buddies. Is, in fact, on-base percentage a better metric now for a player’s contribution to advancing scoring than runs batted in (RBI)? And if so, could you talk a little bit about how you arrived at realizing that?

Billy Beane: Well, that’s interesting, I don’t think we’ve ever taken ownership of inventing anything. I mean, there were some academics there outside the industry…

Todd Watson: Sure. But it’s a different way of viewing the data, right?

Billy Beane: Yeah, I mean for us, simply put, it was what metric or statistic were we going to get the most value for the dollar because we had to be more efficient than the others! Quite frankly, the correlation between on-base percentage and winning was stronger than any other statistic, other than pitchers’ E.R.A. [Earned Run Average], which is almost equal.

That being said, pitchers, going back to the earliest part of the century — everyone knows you need pitching to win. Therefore, it was an expensive commodity. At the time, on-base percentage, or guys who got on base, were not being paid at the rate the statistic probably said they should. And there is a very strong correlation…well, like you said, on-base percentage is the one metric that has the strongest correlation with winning games.

For us, it was very linear, and it was very easy for us to put all our money in these guys. And, there were players we couldn’t acquire who had skills beyond that, but the fact is those were the Derek Jeters and Ken Griffey Jrs. who did everything. And for us, we focused on one to maximize their ability to hit or walk and get on base.

If we did one thing really well, and that one thing had the strongest correlation to winning, we were going to be able to compete.

Todd Watson: So why hasn’t somebody really put this together…I mean baseball has a 100-something year history?

Billy Beane: Like I said, we were borrowers of an idea that had been around for years. Once again, I think it is part of any business culture that there is a traditional way of doing things. One of the beauties of data and statistics is that it’s the one rational way that you can challenge conventional wisdom, and somebody has to be there first to go all in.

Todd Watson: Michael, I wanted ask you one more question of you. I read The Big Short and I’ve read some of Boomerang, and I remember when the Iceland story first came out in Vanity Fair, which cracked me up, the idea that these fishermen suddenly became world bankers…

Michael Lewis: It didn’t crack them up!

Much laughter.

Todd Watson: Yeah, obviously the repercussions were not good for them. I’m just curious, then, if someone had taken an objective look at all of that data at the time surrounding the collateral debt obligations and some of the sub-prime stuff at the time, would that data have told us something was amiss?

Michael Lewis: Oh yes! The Big Short has the story. Michael Burry, the hedge fund manager in San Jose, did just that. But what he did…the subprime story is only partly a story of data, but in part it’s an illustration of data measuring the wrong thing.

Because what everybody did was just accept the measurements of the ratings agencies. Their measurement was AAA, and nobody looked at what that meant, or if that meant anything, and this investment manager looks at this pile of supposedly AAA-rated bonds and finds the individual loans and starts to measure them. And he starts to calculate what these loans are, what their loan-to-value ratios are, and the profile of the borrowers and all that, and when he did that, he saw it was a disaster, and not a question of if, but when.

So, the funny thing was, Wall Street, the big firms figured out, they could make a lot of money going with misleading information. That for the machine to keep working on Wall Street, they had to keep going with what a lot of them all knew was a false measurement taking place.

And they rated things as AAA so they could sell them. Because once you got that point you had a whole group of unthinking buyers who just accepted the stats – kind of in the same way that someone in baseball might used to say, “The guy hits .300, he must be really good.” — without thinking whether or not his hitting .300 leads to runs.

So it was a really kind of textbook case of first, people measuring the wrong things, and then, having measured the wrong things, figuring out how to make those things work for them narrowly. But it was a disaster for the system.

Todd Watson: So what are the lessons…I mean, we’re here at Information On Demand 2011 just to bring it back home to IBM and our customers. So what’s the lesson in it for our customers who are interested in using Big Data and some of these analytics capabilities effectively in their business?

Michael Lewis: It depends on the business. I think the Wall Street story is as illustrative as the Moneyball story…just be very careful what you measure, because the minute you start measuring the wrong thing it becomes a fetish.

You sort of like…organizations are sort of like greyhounds at a dog race. You set the mechanical rabbit on a track and go where the rabbit goes.  So you gotta be careful where you set the rabbit.

So that’s the…there’s nothing you can do beyond where it’s okay to have a culture that you can critique existing standards of measurements and existing value systems.

And that’s just a matter of keeping it in an intellectually open place. That’s the big challenge. Bosses don’t like that. It’s just disruptive to the hierarchy to be able to ask the kinds of questions you need to ask to keep yourself heading in the right direction, I think. Moneyball has some of that in it, measuring the wrong thing.

The other thing is just how much opportunity there is to measure new things. It’s amazing what happens when markets form around existing metrics. Take the stock market…price/earnings ratios…and forever it’s been sort of where value investors go to figure out if there’s value. It’s a stat that’s been around 60 or 70 years, and it’s pretty good. But is there a better way?

There’s nothing wrong with accepting if we’re doing things a certain way. Or asking some of the questions, if we weren’t doing it this way, would we invent some other way to do it, would we find some better way.

So I gotta ask you, your last name’s ‘Watson’?

Todd Watson: No relation to the computer or to the founder of IBM. In either case, I’d be on a yacht somewhere in the Caribbean.

Much laughter.  End of interview.