UH OH: The advanced maths techniques that are used in the quantitative algorithms that physicists started using on Wall Street and in hedge funds over a decade ago have hit the mainstream.
Now even sports teams are using quant algos to help make their players and teams better. And they, or at least the Nets, require former Wall Street traders like Milton Lee, who was recently interviewed by the WSJ, to design them.
We are coming off a 12 and 70 season. To build a championship team it’s going to take time and some luck.
Looks like the poor Nets require some drastic re-invention, so they’re looking to the recent advances that made Wall Street so much money… and maybe blew up the entire system.
“It’s like trying to decide whether to buy or sell IBM stock at a certain moment. There are so many different data points that go into making that decision.”
At least they hired a professional. The Wall Street Journal interviewed Lee, who used to trade for ING and the hedge fund SAC Capital, to find out how Wall Street-style quant formulas can help the Nets. He explains:
In basketball, there are so many plays that lead to plays. Coaches may assign a certain value to an assist that leads to the assist or offensive versus defensive rebounds. How you value them make up the secret sauce.
Lee only has couple of examples of the formulas. He doesn’t want to give away all the secrets:
- The “plus minus” formula: “It looks at how your team is doing while you are on the court. You may score 20 points, but if you were on the court while your team gave up 50 points, a box score won’t show that.”
- The scoring percentage + defensive efforts + where on the court they are most successful at hitting the net formula
He also says, of course, that the team uses “eyes, ears, and numbers,” not just numbers, but still.
This says something funny about the Nets, that they’re using somewhat still unproven Wall Street tactics to try to improve the team, but it also says something interesting about the proliferation of quant finance.
It’s everywhere now – on Wall Street, in horse betting, and now in the NBA.