Invest Like The Best
Episode 88 Data, Decisions, and Basketball
Invest Like The Best

Episode 88: Data, Decisions, and Basketball

Data, Decisions, and Basketball

Sam Hinkie worked for more than a decade in the NBA with the Houston Rockets, and then most recently as the President and GM of the Philadelphia 76ers. We cover data analytics, Sam's philosophy on recruiting, and his framework for making long term decisions.

[00:03:24] – (First Question) Advantages of having a long view and how to structurally harness one

[00:06:08] – Using technology to foster an innovative culture

[00:10:16] – Favorite example of applied innovation from Sam’s career

[00:11:34] – Most fun aspect of doing data analytics early on the Houston Rockets

[00:13:38] – Is there anything more important than courage in asymmetric outcomes

[00:14:29] – How does Sam know when to let the art of decision-making finish where the data started

[00:16:29] – Pros and cons of a contrarian mindset

[00:17:26] – Where he wanted to apply his knowledge in sports when first getting out of school and how his thinking is best applied in the current sports landscape

[00:21:39] – How does he think about trying to find the equivalent of mispriced assets in the NBA

[00:23:12] – Where tradition can be an impediment to innovation

[00:25:07] – What did the team and workflow of the team look like in the front office

[00:27:03] – The measure of truth in a sports complex

[00:29:10] – What were the early factors coming out of the data that helped to shape NBA teams

[00:30:42] – Best tactics for hiring

[00:33:59] – Process of recruiting spectacular people

[00:35:39] – Thoughts on fostering a good marriage

[00:37:57] – Picking your kids' traits in your spouse

[00:40:45] – What kind of markers does he look for when evaluating long term investment ideas

[00:42:44] – His interest in machine learning

[00:45:55] – What’s more exciting, the actual advances in machine learning or the applications that can be imagined as a result

[00:48:11] – How he got started teaching negotiations and some of the points he makes in that class

[00:49:16] – Effective techniques for negotiating

[00:50:03] – Is negotiating contentious, do you need empathy

[00:50:41] – A Rorschach test of Sam based on his reading of Lessons of History (book)

[00:53:01] – Biggest risk Sam took in his career

[00:54:37] – Biggest risks Sam took while with the 76ers

[00:58:09] – Do people undervalue asymmetric outcomes in the NBA

[01:00:11] – The players Sam has enjoyed watching over the years

[01:02:45] – Why Robert Caro is a favorite author of his

[01:04:30] – Kindest thing anyone has done for Sam

Data, Decisions, and Basketball

Introduction

Patrick
I came across this week's guest, thanks to the overlap of three passions of mine data informed investing, value creation and basketball. Sam Hinkie worked for more than a decade in the NBA with the Houston Rockets and then most recently served as president and general manager of the Philadelphia 76ers. He helped launch basketball's analytics movement when he joined The Rockets in 2005 and is known for unique trade structuring and a keen focus on acquiring undervalued players. Today, he's also an investor and an advisor to a limited number of young companies in which he feels his experience can improve outcomes. At one point in our conversation, Sam mentioned that he tracked success by a future financial outcomes, much like we would in the investing world. So I did some research and found many interesting stats about the Sixers surrounding Sam's tenure.

When he took over the franchise, it was 24th in ESPN franchise rankings. Today, it is fourth. This is the result of an impressive crop of young talent players like all-star Joel Embiid and Ben Simmons, which resulted in large part from unconventional decisions that Sam and his team made. While I'm sure these estimates are imperfect, Forbes estimated the Sixers value at about $418 million when Sam took over and $1.2 billion just a few months ago. Now NBA teams in general have grown in value, so a lot of that appreciation is the equivalent of market beta. But given that the 76ers had the top percentage growth number more recently of any team in the league, some of it is alpha too.

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