Jeff Ma on The House Advantage

Jeff Ma wrote a book called "The House Advantage: Playing the Odds to Win Big in Business."

It is not about LeBron James. It's about the math he learned at M.I.T. and how he learned to apply it to beat casinos at blackjack in college, and then later advising pro sports teams and in starting the business that he recently sold to Yahoo.

We made an appointment to talk about his book this week. When the time came, I dialed the number and he picked up the phone. Remember, we're due to talk about his business book. But, instantly and inevitably, we launched into an in-depth discussion of ... LeBron James.

Ma finds James disappointing. For seven years, Ma coached the M.I.T. water polo team. He is very proud that though they were perennial underdogs they played well enough to matter in the NCAA while he was there. He says that if he had left M.I.T. to coach some better team, any success he would have had would have been cheapened. In that vein, he just really wanted James to stick in Cleveland, to prove he could get the job done in the place where he started. By leaving, said Ma, James had revealed something about his character.

At this point I interrupted Ma, to point out that Ma left too! After seven years, just like James. That M.I.T. water polo team he so loved ... Ma ditched them for a financial services job in Chicago. Did that reveal something about Ma's character? Or is it just that given better options, reasonable people will often take them? Would only a flawed person decide to leave Cleveland?

I was building up a big head of steam, even laying into Dan Gilbert's letter and the like, when I realized the line had gone cold. No more Jeff Ma on the phone.

He hadn't hung up on me.


Turns out it was just a mobile-phone issue. The conversation rolled on. We talked about how he won the TrueHoop Stat Geek Smackdown. And we even talked about his book, and how by thinking creatively, starting with a good system for counting cards in casinos can get you sitting at a table with Jerry West as "the logo" diagrams hoops plays with salt shakers and mustard containers.

There's a tremendous passage in the book when Ma and his business partner resolve to build the credibility of their company, then called ProTrade (later it became Citizen Sports) by getting sports luminaries to endorse their advanced statistical work. In basketball, they targeted West, and were able to set up a meeting in Memphis through their investor Jeffrey Moorad.

Then, as they sat down to talk, West declared "I hate statistics."

Ma admits he had half a mind to change the topic to Memphis barbecue, and then leave gracefully. But instead they didn't battle West's point, and instead explained things like how assists that lead to dunks ought to be valued more than assists that lead to jumpers, how rebounding a missed free throw is not as valuable as other rebounds, and how blocks are not just a measure of blocks but also a sign of athletic ability, timing and coordination.

When Jerry West calls

By the end of the first meeting, West had called his scouts to tell them to stop counting all rebounds and assists the same. He had also agreed to give ProTrade an important vote of confidence. Ma says that a week or two later, back home in the Bay Area, Ma's cell phone rang with an unrecognized number. Here we pick up my phone conversation with Ma:

He's like Hey Jeff, it's Jerry West calling. And I was like "okay."

He was asking me something. I don't even remember what it was because I was so out of my mind that Jerry West was calling me. But he asked me some question about if it was possible to model a certain situation a certain way, and wanted to make sure I got the notes he'd sent, or see if I had any questions.

A part of me really wanted to get involved and embrace Jerry West, but a part of me didn't want to bother him.

A month later, he was in L.A., and this is an awesome story that's never been in print. Jerry West comes to pick us up. It's me, my business partner Mike and our CEO at the time. And we fly down to LAX to meet up with him. He's like, "Oh I'm going to pick you guys up." We're like, "Oh, that's so nice, he's going to send us a car." And he's like, "No, I'm going to pick you up."

So he shows up and we're like "Where are you?" and he's like "I'm in this Maybach."

And we're like, "How are we all going to fit in a Maybach?"

And then he goes, "I'm driving the Maybach."

You know what a Maybach is, right?

He's driving the Maybach. And he picks us up. Talk about a surreal moment! You're getting into a Maybach that Jerry West is driving.

It turned out that the owner of the Grizzlies had given it to him as a present, and he had driven it around for a few days in Memphis, and thought he looked so ridiculous in it, that he gave it back. And then Jerry's wife basically bought it back from the owner and basically gave it to Jerry as a birthday present.

And then he just decided to leave it in L.A.

That story is just too Jerry.

The guy is a great great guy. So genuine. The guy is literally salt of the earth. Once we got past the whole "I hate statistics" thing.

I think it was a direct quote.

There were two guys that he could not stand. One was Iverson, because he needed like 35 shots to score 30 points. And the other guy was Shareef Abdur-Rahim. He was like the guy can fill a stat sheet but I can tell you that guy's never going to win games.

We went to the Ritz in Marina Del Ray and went and sat there and kind of explained some stuff to him, and then he was like diagramming some basketball plays for us using like salt shakers and mustard containers and things like that. It was honestly a surreal experience. Of all the people I met in those days I have to say that Jerry was just such a great, genuine guy.

I think the thing that's interesting about this whole idea of the stats movement, is that the people that you would absolutely not ever put in the stats category, but clearly have had success in the NBA ... I think they fall into two categories. I think they either haven't been enlightened or exposed to it, but are open. If they're open, you can help them make better decisions. Then there are people who are just really opposed to it. I think there are very few people, who weren't just lucky to have success, who don't have an appreciation of how good statistics could help them make better decisions.

In life, there's a lot of people that are happy to be there, because they happened to get lucky. Those are the people who are much more resistant to people using statistics and data to make decisions.

You sitting there with Jerry West and the salt shakers and the mustard containers ... this is where this field will develop, right? The statistical mind meeting the basketball mind. The more you're speaking the same language, the more useful your statistics are going to be, it seems.

I think that's kind of the key.

When I first met Bill Walsh, we had developed this football system that was supposed to measure success on any NFL play. If you're first-and-ten and you gain five yards, is that a success or is that a failure? We kind of graded out the plays and the people in the plays based on that. We came up with a statistical system based on four years of NFL data looking at every play, a team's winning, and we could tell you how you did on this down and how that affected your team's chances of scoring.

But we needed a way to validate that. We went to Coach Walsh so he could help validate us. So we asked him some very simple questions. So, on first-and-ten, what's a success? He said well, four yards is probably not a success, five yards probably is. Somewhere in between.

Our numbers showed that four-and-a-half yards was the threshold.

Then on second down he says well, I think you need to gain at least half a yard. And that's exactly what our numbers showed also.

What we learned from that, and I would never use this quote because it's very self-promoting, but he once said to our CEO: "I have no idea how he gets it, but he's in my brain." And he was talking about me. That was kind of like the biggest compliment that he could ever give me, because that's all I was trying to do.

There are people out there like Jerry West and Bill Walsh who can make really good decisions without a spreadsheet behind them. But there are only a few of them. And so the goal is to create a mathematical system or methodology to use data and information that can make as good a decision as Walsh and West made, in a more structured and regimented way, so anyone can make them.

So what you're saying is absolutely true. The goal is to take what's between Bill Walsh's ears and put it in a spreadsheet, so people can actually understand what it all means.

You talk in the book about how, when you were playing blackjack, sometimes you'd identify particular opportunities. For instance, there was a casino in Puerto Rico where the way they shuffled the cards, and let players cut them, provided particular opportunities for card counting. Is there similar low-hanging fruit right now in the NBA?

Simple things. I don't know if you say my article on Huffington Post about the two-for-one. (Ed: Ma suggests at the end of quarters, teams shoot with about 33 seconds left, which effectively gives them a free possession at the buzzer.) The Lakers largely ignore the two-for-one. I haven't looked at a season's worth of data, but I don't understand how an NBA team can ignore the two-for-one. Obviously, for the Lakers, it worked fine for them, but that's because they have a ton of talent. It's such an obvious thing. The fact that some teams don't do it ... it seems so strange.

It's not like that's even something that contradicts what coaches believe. A lot of coaches have always done it. It's just logical. It's this practical strategy that numbers help bear out as a good way to do things.

Early in the book you talk about how people struggle to understand variance. Basically, that you can have a really good strategy that will still get you bad results sometimes.

We're too emotional. There's this thing I talk about in my book called the availability heuristic. It's basically like this thing that says we tend to place a higher probability on things that we remember or can envision. The highest percentage of people that have flood insurance are people that know someone who has been in a flood before. It's not people who have the highest probability of being in a flood. It's people who know someone. They believe they have a higher chance of being in a flood, because they can imagine it.

Another example of this: Look at who is predicted to win the NBA title at the beginning of every season. It's almost always a team that has just won a title, or close.

Of course!

And when the Celtics made their big move a couple of years ago, almost nobody predicted that, because nobody had seen that.

Right. It's definitely true. Even players getting drafted. Think about how people view John Wall. Part of the reason he's seen as likely to succeed is Derrick Rose. People see Rose's success and say hey this is a John Calipari guard. Strong. Not a great shooter. But developing. Good passer.

We do that. It's a big natural tendency. But if you recognize that, there's an opportunity.

I have to ask you about Miami now. How do you think they're going to do? What's your gut?

I don't have a spreadsheet on it. And people who say they have a spreadsheet on it are full of crap. This is one of those things. And it's funny you ask me your gut. Because I have this whole chapter on gut vs. regular thinking and how you make decisions, and I don't really believe in gut.

But I think gut is where you face a situation where you know you don't have enough data to model it, so you have to go on the idea of thin slicing, or some smaller dataset.

What's the most similar situation to this? I guess the Celtics, right? Three superstars on the same team. Are they similar players? You wouldn't have known right away that Ray Allen and Paul Pierce were going to be able to play together. So I think there were some similarities. But does Miami have Rajon Rondo and Kendrick Perkins also?

Do they all fit into roles well enough? The biggest issue is that none of the Celtics really need the ball in their hands, and it seems to be that LeBron and Dwyane both need to have the ball in their hands.

I guess my gut would say that they're going to do pretty well. The East is now ridiculous. With the Bulls, the Celtics, the Magic -- everyone's forgetting about the Magic, and for a period in the playoffs everyone was saying that was the best team in the NBA. There are a lot of teams that could emerge.

I'm worried that for my Celtics, this was their year. Their last hurrah. And next year it's not going to end so well for them. But who knows? But I think the Heat will be pretty good.

Who do you think is going to win the East?

I guess we've seen that the Magic, in the playoffs, can get shut down.

I guess the Heat. If you force the answer out of me, I guess I have to say the Heat.