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Jared Hamilton
From: Jared Hamilton
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Dale Pollak

Dale Pollak Chairman Founder

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Yesterday I had the privilege of spending time with Michael Lewis, the author of Liar’s Poker, Blind Side, Moneyball, and other fascinating books about business, sports and life. It was Lewis’s book Moneyball that inspired me to start vAuto. In Moneyball, Lewis describes how Billy Bean, General Manager of the Oakland A’s, managed to beat almost every opposing team, including the Yankees, with relatively unknown and low-paid ball players. The key to his success was building a team based on new measurements and metrics that he found more relevant in predicting success than those that had been traditionally used by major league baseball. My first book, Velocity: From the Front Line to the Bottom Line, launched the velocity movement to rethink and revise the metrics of used vehicle management based on the principles of supply, demand and price sensitivity. Although there were fundamental changes to the used car marketplace that triggered the need for new metrics (unlike in baseball where the game remained essentially the same), similar to baseball, the new metrics were and are often more relevant than those that had traditionally been accepted in driving success. At first the new velocity metrics were met with skepticism and doubt. However, the extraordinary success of a few early adopters caught the attention of the industry. Today, making decisions about what to stock, how much to pay and how to price with precise knowledge of the vehicle’s supply, demand and price sensitivity has moved to the forefront of industry recognition. Yet, there are still many that cling to the past ways of doing business. I asked Michael Lewis why it takes so long for new methods and metrics to be embraced. Lewis explained that it is a mistake to underestimate the monetary, personal and psychological investment that people and organizations make in maintaining the status quo. He pointed out that it took decades for major league baseball franchises to adopt parts, if not all of Billy Bean’s “sabermetrics” of player evaluation. He also pointed out that the “fattest rewards” go to those that adopt early at the expense of those who do not - a lesson also learned in the used car business. Interestingly, we also spent time discussing Lewis’s next book, The Big Short, which will be published in March of 2010. The Big Short reexamines Lewis’s Wall Street days at Salomon Brothers, which was the subject of Liar’s Poker. The Big Short describes the disdain that the old school instinct traders had for the wave of MIT and Harvard Business School graduates entering investment banking in the 1980s. Who was right and who was wrong when the old school instinct traders called foul on the über complex security instruments being ginned up by the new breed of young Wall Street bankers? According to Lewis, the old school traders couldn’t do the math to understand derivatives, let alone spell the word. However, if math and logic supported the new financial derivative instruments, why did the financial market train eventually explode and come off the track? Lewis stated the answer can be found in understanding the difference between the pretense of using mathematical models versus using the models in conjunction with the necessary financial incentives to ensure that they are properly and responsibly executed. This discussion reminded me of the multitude of supposedly data-driven software solutions that are now being marketed to the used car industry. As on Wall Street, there is a difference between “checking the box” on using data-driven software versus effectively utilizing accurate market based metrics and measurements. Perhaps we can again learn from Lewis’s analyses of problems and solutions.

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