How Daryl Morey used behavioral economics to revolutionize the art of NBA draft picks.

How Daryl Morey Used Behavioral Economics to Revolutionize the Art of NBA Draft Picks

How Daryl Morey Used Behavioral Economics to Revolutionize the Art of NBA Draft Picks

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Dec. 6 2016 9:01 AM

Basketball’s Nerd King

How Daryl Morey used behavioral economics to revolutionize the art of NBA draft picks.

Daryl Morey, general manager of the Houston Rockets speaks during a press conference announcing the signing of Jeremy Lin at Toyota Center on July 19, 2012 in Houston, Texas.
Daryl Morey, general manager of the Houston Rockets, announcing the signing of Jeremy Lin at Toyota Center on July 19, 2012, in Houston.

Bob Levey/Getty Images

Reprinted from The Undoing Project: A Friendship That Changed Our Minds. Copyright © 2017 by Michael Lewis. With permission of the publisher, W.W. Norton & Company, Inc. All rights reserved

You never knew what a kid in the interview room might say to jolt you out of your slumber and back to your senses and force you to pay attention. And once you were paying attention, you naturally placed far greater weight on whatever he had just said than you probably should: The most memorable moments in job interviews for the National Basketball Association were hard to consign to some appropriately sized com­partment in the brain. In certain cases it was as if the players were trying to screw up your ability to judge them. For instance, when the Houston Rockets interviewer asked one player if he could pass a drug test, the guy had gone wide-eyed and grabbed the table and said, “You mean today!!!???” There was the college player who’d been arrested on charges (subsequently dropped) of domestic vio­lence, and whose agent claimed it had been a simple misunder­standing. When they’d asked the player about it he’d explained, chillingly, that he’d grown weary of his girlfriend’s “bitching, so I just put my hands around her neck and I squeezed. ’Cause I needed her to shut up.” There was Kenneth Faried, the power for­ward out of Morehead State. When he showed up for his interview they’d asked him, “Do you prefer to be called Kenneth or Kenny?” “Manimal,” Faried said. He wanted to be called Manimal. What did you do with that? Roughly three out of every four of the black American players who came for NBA interviews—or at least came for interviews with the NBA’s Houston Rockets—had never really known their father. “It’s not uncommon, when you ask these guys who their biggest male influence was, for them to say, ‘My mom,’ ” said the Rockets’ director of player personnel, Jimmy Paulis. “One said, ‘Obama.’ ”

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Then there was Sean Williams. Back in 2007, Sean Williams, 6-foot-10, was an off-the-charts player who had been suspended from his Boston College team the first two of his three seasons after being arrested for possession of marijuana (a charge that was later dropped). He’d played only 15 games his sophomore year and still blocked 75 shots; the fans referred to his college games as The Sean Williams Block Party. Sean Williams looked like a big-time NBA player and was expected to be a first-round pick—in part because everyone assumed that his ability to get through his junior year without being suspended meant that he’d gotten his marijuana use under control. Before the 2007 NBA draft, he’d flown to Houston, at his agent’s request, to practice his interview­ing skills. The agent cut the Rockets a deal: Williams would talk to the Rockets and the Rockets alone, and the Rockets would offer the agent tips about how to make Sean Williams more persua­sive in a job interview. It actually went pretty well, until they got onto the topic of marijuana. “So you got caught smoking weed your freshman and sophomore years,” said the Rockets interviewer. “What happened your junior year?” Williams just shook his head and said, “They stopped testing me. And if you’re not going to test me, I’m gonna smoke!”

After that, Williams’s agent decided it was best for Sean Williams not to grant any more interviews. He still got himself drafted in the first round by the New Jersey Nets, and made brief appearances in 137 NBA games before leaving to play in Turkey.

Millions of dollars were at stake—NBA players were, on average, by far the highest-paid athletes in all of team sports. The future success of the Houston Rockets was on the line. These young people were hurling information about themselves at you that was meant to help you to make an employment decision. But a lot of times it was hard to know what to do with it.

Rockets interviewer: What do you know about the Houston Rockets?
Player: I know you are in Houston.
Rockets interviewer: Which foot did you hurt?
Player: I have been telling people my right foot.
Player: Coach and I did not see eye to eye.
Rockets interviewer: On what?
Player: Playing time.
Rockets interviewer: What else?
Player: He was shorter.
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Ten years of grilling extremely tall people had reinforced in Daryl Morey, the general manager of the Houston Rockets, the sense that he should resist the power of any face-to-face inter­action with some other person to influence his judgment. Job interviews were magic shows. He needed to fight whatever he felt during them—especially if he and everyone else in the room felt charmed. Extremely tall people had an unusual capacity to charm. “There’s a lot of charming bigs,” said Morey. “I don’t know if it’s like the fat kid on the playground or what.” The trouble wasn’t the charm but what the charm might mask: addictions, personality disorders, injuries, a deep disinterest in hard work. The bigs could bring you to tears with their story about their love of the game and the hardship they had overcome to play it. “They all have a story,” said Morey. “I could tell you a story about every guy.” And when the story was about perseverance in the face of incredible adversity, as it often was, it was hard not to grow attached to it. It was hard not to use it to create in your mind a clear picture of future NBA success.

But Daryl Morey believed—if he believed in anything—in taking a statistically based approach to decision making. And the most important decision he made was whom to allow onto his bas­ketball team. “Your mind needs to be in a constant state of defense against all this crap that is trying to mislead you,” he said. “We’re always trying to figure out what’s a trick and what’s real. Are we seeing a hologram? Is this an illusion?” These interviews belonged on the list of the crap trying to mislead you. “Here’s the biggest reason I want to be in every interview,” said Morey. “If we pick him, and he has some horrible problem and the owner asks, ‘What did he say in the interview when you asked him that question?’ and I go, ‘I never actually spoke to him before we gave him 1.5 million dollars,’ I get fired.”

And so, in the winter of 2015, Morey, along with five mem­bers of his staff, sat in a conference room in Houston, Texas, waiting for another giant. The interview room contained nothing worth seeing. A conference table, some chairs, windows obscured by blinds. On the table rested a lone coffee mug, left by mistake, with a logo—National Sarcasm Society: Like We Need Your Sup­port. The giant was . . . well, none of the men knew all that much about him except that he was still only 19 years old, and that he was huge even by the standards of professional basketball. He’d been discovered five years earlier in a village in Punjab by some agent or talent scout—or so they’d been told. He was then 14 years old, 7 feet tall, and barefoot—or, at any rate, wearing shoes so tattered they revealed his feet.

They’d wondered about that. The kid’s family must have been so poor that they couldn’t afford to buy him shoes. Or maybe they’d decided it was pointless to buy shoes for feet that grew so rapidly. Or maybe the whole thing was a fiction invented by an agent. Either way, what lingered in the mind was the image: a 7-foot-tall, 14-year-old-boy, barefoot in the streets of India. They didn’t know how the boy had found his way out of the Indian village. Somebody, probably an agent, had arranged for him to travel to the United States to learn how to speak English and play basketball.

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To the NBA he was a complete unknown. There was no video of the guy playing organized basketball. He hadn’t played, so far as the Rockets could determine. He hadn’t participated in the NBA Draft Combine, the formal audition for amateur players. It was only just that morning that the Rockets had been permitted to take his measurements. His feet were size 22, and his hands, from fingertip to wrist, were 11 ½ inches, the biggest hands the staff had ever measured. Shoeless, he stood 7-foot-2 and weighed 300 pounds, and his agent claimed he was still growing. He’d spent the past five years in southwest Florida learning basketball—most recently at IMG, a sports academy built to turn amateurs into professionals. Although no one they knew had seen him play, the few people who had laid eyes on him were still talking about it. Robert Upshaw, for instance. Upshaw was a thick 7-foot center who had been dismissed from his team at the University of Washington and was now audi­tioning for NBA teams. A few days earlier, in the Dallas Maver­icks gym, he’d worked out with the Indian giant. Hearing from the Rockets scouts that he might be about to do it again, Upshaw’s eyes went wide and his face lit up and he said, “The dude is the biggest human being I’ve ever seen. And he can shoot the three-ball! It’s crazy.”

* * *

Back in 2006, when he was hired to run the Houston Rockets and figure out who should play pro basketball and who should not, Daryl Morey had been the first of his kind: the basketball nerd king. His job was to replace one form of decision making, which relied upon the intuition of basketball experts, with another, which relied mainly on the analysis of data. He had no serious basketball-playing experience and no interest in passing himself off as a jock or a basketball insider. He’d always been just the way he was, a person who was happier counting than feeling his way through life. As a kid he’d cultivated an interest in using data to make predictions until it became a ruling obsession. “That always seemed the coolest thing to me,” he said. “How do you use num­bers to predict things? It was like a cool way to use numbers to be better than other people. And I really liked being better than other people.” He built forecasting models the way other kids built model airplanes. “It was always sports I was trying to predict. I didn’t know what else to apply it to—what, am I going to forecast my grades?”

His interest in sports and statistics had led him, at the age of 16, to pick up a book called The Bill James Historical Base­ball Abstract. Bill James was then busy popularizing an approach, rooted in statistical reasoning, to thinking about baseball. With some help from the Oakland Athletics, that approach would trig­ger a revolution that ended with nerds running, or helping to run, virtually every team in Major League Baseball. In 1988, when he stumbled upon James’ book in a Barnes & Noble, Morey had no way of knowing that people with a gift for using numbers to pre­dict things would overrun professional sports management and everyplace else high-stakes decisions were being made—or that basketball would be, in effect, waiting for him to grow up. He sim­ply suspected that the established experts maybe didn’t know as much as everyone thought they did.

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That particular suspicion had been born the year before, 1987, after Sports Illustrated splashed his favorite baseball team, the Cleveland Indians, on its cover and picked them to win the World Series. “I was like, ‘This Is It!!!! The Indians have sucked for years. Now we’re going to win the World Series!’ ” The Indians finished that season with the worst record in the major leagues: How did that happen? “The guys they had said were going to be so good were so bad,” recalled Morey. “And that was the moment when I thought: Maybe the experts don’t know what they’re talking about.”

Then he discovered Bill James and decided that, like Bill James, he might use numbers to make better predictions than the experts. If he could predict the future performance of professional athletes, he could build winning sports teams, and if he could build winning sports teams . . . well, that’s where Daryl Morey’s mind came to rest. All he wanted to do in life was to build win­ning sports teams. The question was: Who’d let him do it? In col­lege he’d sent dozens of letters to professional sports franchises in the hope of being offered some menial job. He received not a single reply. “I didn’t have, like, any way to penetrate organized sports,” he said. “So I decided at that point that I had to be rich. If I was rich I could just buy a team and run it.”

His parents were middle-class Midwesterners. He didn’t even know any rich people. He was also a distinctly unmotivated student at Northwestern University. He nevertheless set out to make enough money to buy a professional sports team, so that he might make the decisions about who would be on it. “Every week he’d take a sheet of paper and write on top, ‘My Goals,’” recalls his then-girlfriend, Ellen, now his wife. “The biggest life goal was, ‘I’m going to someday own a professional sports team.’” “I went to business school,” said Morey, “because I thought that’s where you had to go if you wanted to get rich.” Upon leaving business school, in 2000, he interviewed with consulting firms until he found one that got paid in the shares of the companies it advised. The firm was advising Internet companies during the Internet bubble: That sounded, at the time, like a way to get rich quick. Then the bubble burst and all the shares were worthless. “It turns out it was the worst decision ever,” said Morey.

From his stint as a consultant he learned something valu­able, however. It seemed to him that a big part of a consultant’s job was to feign total certainty about uncertain things. In a job inter­view with McKinsey, they told him that he was not certain enough in his opinions. “And I said it was because I wasn’t certain. And they said, ‘We’re billing clients five hundred grand a year, so you have to be sure of what you are saying.’” The consulting firm that eventually hired him was forever asking him to exhibit confidence when, in his view, confidence was a sign of fraudulence. They’d asked him to forecast the price of oil for clients, for instance. “And then we would go to our clients and tell them we could predict the price of oil. No one can predict the price of oil. It was basically nonsense.”

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A lot of what people did and said when they “predicted” things, Morey now realized, was phony: pretending to know things rather than actually knowing things. There were a great many interest­ing questions in the world to which the only honest answer was, “It’s impossible to know for sure.” “What will the price of oil be in ten years?” was such a question. That didn’t mean you gave up trying to find an answer; you just couched that answer in proba­bilistic terms.

Later, when basketball scouts came to him looking for jobs, the trait he looked for was some awareness that they were seeking answers to questions with no certain answers—that they were inherently fallible. “I always ask them, ‘Who did you miss?’ ” he said. Which future superstar had they written off, or which future bust had they fallen in love with? “If they don’t give me a good one, I’m like, ‘Fuck ’em.’ ”

By a stroke of luck, the consulting firm Morey worked for was asked to perform some analysis for a group trying to buy the Boston Red Sox. When that group failed in its bid to buy a professional baseball team, it went out and bought a professional basketball team, the Boston Celtics. In 2001 they asked Morey to quit his job consulting and come to work for the Celtics, where “they gave me the most difficult problems to figure out.” He helped hire new management, then helped to figure out how to price tick­ets, and, finally, inevitably, was asked to work on the problem of whom to select in the NBA draft. “How will that nineteen-year-­old perform in the NBA?” was like “Where will the price of oil be in ten years?” A perfect answer didn’t exist, but statistics could get you to some answer that was at least a bit better than simply guessing.

Morey already had a crude statistical model to evaluate ama­teur players. He’d built it on his own, just for fun. In 2003 the Celtics had encouraged him to use it to pick a player at the tail end of the draft—the 56th pick, when the players seldom amount to anything. And thus Brandon Hunter, an obscure power forward out of Ohio University, became the first player picked by an equa­tion. (Hunter actually started for the Celtics for a season and went on to a successful career in Europe.)

Two years later Morey got a call from a headhunter who sait that the Houston Rockets were looking for a new general manager. “She said they were looking for a Moneyball type,” recalled Morey.

The Rockets’ owner, Leslie Alexander, had grown frustrated with the gut instincts of his basketball experts. “The decision mak­ing wasn’t that good,” Alexander said. “It wasn’t precise. We now have all this data. And we have computers that can analyze that data. And I wanted to use that data in a progressive way. When I hired Daryl, it was because I wanted somebody that was doing more than just looking at players in the normal way. I mean, I’m not even sure we’re playing the game the right way.” The more the players got paid, the more costly to him the sloppy decisions. He thought that Morey’s analytical approach might give him an edge in the market for high-priced talent, and he was sufficiently indifferent to public opinion to give it a whirl. (“Who cares what other people think?” says Alexander. “It’s not their team.”) In his own job interview, Morey was reassured by Alexander’s social fearlessness, and the spirit in which he operated. “He asked me, ‘What religion are you?’ I remember thinking, I don’t think you’re supposed to ask me that. I answered it vaguely, and I think I was saying my family were Episcopalians and Lutherans when he stops me and says, ‘Just tell me you don’t believe any of that shit.’”

Alexander’s indifference to public opinion turned out to come in handy. Learning that a thirty-three-year-old geek had been hired to run the Houston Rockets, fans and basketball insiders were at best bemused and at worst hostile. The local Houston radio guys instantly gave him a nickname: Deep Blue. “There’s an intense feeling among basketball people that I don’t belong,” said Morey. “They remain silent during periods of success and pop up when they sense weakness.” In his decade in charge, the Rockets have had the third-best record of the thirty teams in the NBA, behind the San Antonio Spurs and the Dallas Mav­ericks, and have appeared in the playoffs more than all but four teams. They’ve never had a losing season. The people most upset by Morey’s presence had no choice at times but to go after him in moments of strength. In the spring of 2015, as the Rockets, with the second-best record in the NBA, headed into the Western Conference Finals against the Golden State Warriors, the former NBA All-Star and current TV analyst Charles Barkley went off on a four-minute tirade about Morey during what was meant to be a halftime analysis of a game. “… I’m not worried about Daryl Morey. He’s one of those idiots who believe in analytics. … I’ve always believed analytics was crap. … Listen, I wouldn’t know Daryl Morey if he walked in this room right now. … The NBA is about talent. All these guys who run these organizations who talk about analytics, they have one thing in common: They’re a bunch of guys who ain’t never played the game, and they never got the girls in high school and they just want to get in the game.”

There’d been a lot more stuff just like that. People who didn’t know Daryl Morey assumed that because he had set out to intellectualize basketball he must also be a know-it-all. In his approach to the world he was exactly the opposite. He had a dif­fidence about him—an understanding of how hard it is to know anything for sure. The closest he came to certainty was in his approach to making decisions. He never simply went with his first thought. He suggested a new definition of the nerd: a person who knows his own mind well enough to mistrust it.

One of the first things Morey did after he arrived in Houston—and, to him, the most important—was to install his statistical model for predicting the future performance of basketball players. The model was also a tool for the acquisition of basketball knowl­edge. “Knowledge is literally prediction,” said Morey. “Knowledge is anything that increases your ability to predict the outcome. Lit­erally everything you do you’re trying to predict the right thing. Most people just do it subconsciously.” A model allowed you to explore the attributes in an amateur basketball player that led to professional success, and determine how much weight should be given to each. Once you had a database of thousands of former players, you could search for more general correlations between their performance in college and their professional careers. Obviously their performance statistics told you something about them. But which ones? You might believe—many then did—that the most important thing a basketball player did was to score points. That opinion could now be tested: Did an ability to score points in college predict NBA success? No, was the short answer. From early versions of his model, Morey knew that the traditional counting statistics—points, rebounds, and assists per game—could be wildly misleading. It was possible for a player to score a lot of points and hurt his team, just as it was possible for a player to score very little and be a huge asset. “Just having the model, without any human opinion at all, forces you to ask the right questions,” said Morey. “Why is someone ranked so high by scouts when the model has him ranked low? Why is someone ranked so low by scouts when the model has him ranked high?”

He didn’t think of his model as “the right answer” so much as “a better answer.” Nor was he so naive as to think that the model would pick players all by itself. The model obviously needed to be checked and watched—mainly because there was information that the model wouldn’t be privy to. If the player had broken his neck the night before the NBA draft, for instance, it would be nice to know. But if you had asked Daryl Morey in 2006 to choose between his model and a roomful of basketball scouts, he’d have taken his model.

That counted as original, in 2006. Morey could see that no one else was using a model to judge basketball players—no one had bothered to acquire the information needed by any model. To get any stats at all, he’d had to send people to the offices of the National Collegiate Athletic Association (NCAA), in Indianapolis, to photocopy box scores of every college game over the past twenty years, then enter all that data by hand into his system. Any theory about basketball players had to be tested on a database of players. They now had a twenty-year history of college players. The new database allowed you to compare players to similar players from the past, and see if there were any general lessons to be learned.

A lot of what the Houston Rockets did sounds simple and obvious now: In spirit, it is the same approach taken by algorith­mic Wall Street traders, U.S. presidential campaign managers, and every company trying to use what you do on the Internet to predict what you might buy or look at. There was nothing simple or obvious about it in 2006. There was much information Morey’s model needed that simply was not available. The Rockets began to gather their own original data by measuring things on a bas­ketball court that had previously gone unmeasured. Instead of knowing the number of rebounds a player had, for instance, they began to count the number of genuine opportunities for rebounds he’d had and, of those, how many he had snagged. They tracked the scoring in the game when a given player was on the court, compared to when he was on the bench. Points and rebounds and steals per game were not very useful; but points and rebounds and steals per minute had value. Scoring 15 points a game obvi­ously meant less if you had played the entire game than if you had played half of it. It was also possible to back out from the box scores the pace at which various college teams played—how often they went up and down the court. Adjusting a college player’s stats for his team’s pace of play was telling. Points and rebounds meant one thing when the team took 150 shots a game and some­thing different when it took just 75. Just adjusting for pace gave you a clearer picture of what any given player had accomplished than the conventional view did.

The Rockets collected data on basketball players that hadn’t ever been collected before, and not just basketball data. They gathered information on the players’ lives and looked for patterns in it. Did it help a player to have two parents in his life? Was it an advantage to be left-handed? Did players with strong college coaches tend to do better in the NBA? Did it help if a player had a former NBA player in his lineage? Did it matter if he had trans­ferred from junior college? If his college coach played zone defense? If he had played multiple positions in college? Did it matter how much weight a player could bench-press? “Almost everything we looked at was nonpredictive,” says Morey. But not everything. Rebounds per minute were useful in predicting the future success of big guys. Steals per minute told you something about the small ones. It didn’t matter so much how tall a player was as how high he could reach with his hands—his length rather than his height.

The model’s first road test came in 2007. (The Rockets had traded their picks in 2006.) Here was the chance to test a dispas­sionate, unsentimental, evidence-based approach against the felt experience of an entire industry. That year, the Rockets held the 26th and the 31st picks in the NBA draft. According to Morey’s model, the odds of getting a good NBA player with those picks were, respectively, 8 percent and 5 percent. The chance of getting a starter was roughly one in a hundred. They selected Aaron Brooks and Carl Landry, both of whom became NBA starters. It was an incred­ibly rich haul. “That lulled us to sleep,” said Morey. He knew that his model was, at best, only slightly less flawed than the human beings who had rendered the judgments about job applicants since time began. He knew that he suffered from a serious dearth of good data. “You have some information—but often from a single year in college. And even that has problems with it. Apart from it’s a differ­ent game, with different coaches, different levels of competition—the players are twenty years old. They don’t know who they are. So how are we supposed to?” He knew all this and yet he thought maybe they had figured something out. Then came 2008.

That year the Rockets had the 25th pick in the draft and used it to pick a big guy from the University of Memphis named Joey Dorsey. In his job interview, Dorsey had been funny and lik­able and charming—he’d said when he was done playing basketball he intended to explore a second career as a porn star. After he was drafted, Dorsey was sent to Santa Cruz to play in an exhibition game against other newly drafted players. Morey went to go see him. “The first game I watch he looks terrible,” said Morey. “And I’m like, ‘Fuck!!!!’” Joey Dorsey was so bad that Daryl Morey could not believe he was watching the guy he’d drafted. Perhaps, Morey thought, he wasn’t taking the exhibition seriously. “I meet with him. We have a two-hour lunch.” Morey gave Dorsey a long talk about the impor­tance of playing with intensity, and making a good impression, and so on. “I think he’s going to come out the next game with his hair on fire. And he comes out and sucks the next game, too.” Fairly quickly, Morey saw he had a bigger problem than Joey Dorsey. The problem was his model. “Joey Dorsey was a model superstar. The model said that he was like a can’t-miss. His signal was super, super high.”

That same year, the model had dismissed as unworthy of serious consideration a freshman center at Texas A&M named DeAndre Jordan. Never mind that every other team in the NBA, using more conventional scouting tools, passed him over at least once, or that Jordan wasn’t taken until 35th pick of the draft, by the Los Angeles Clippers. As quickly as Joey Dorsey established himself as a bust, DeAndre Jordan established himself as a domi­nant NBA center and the second-best player in the entire draft class after Russell Westbrook.

This sort of thing happened every year to some NBA team, and usually to all of them. Every year there were great players the scouts missed, and every year highly regarded players went bust. Morey didn’t think his model was perfect, but he also couldn’t believe that it could be so drastically wrong. Knowledge was prediction: If you couldn’t predict such a glaringly obvious thing as the failure of Joey Dorsey or the success of DeAndre Jordan, how much did you know? His entire life had been shaped by this single, tantalizing idea: He could use numbers to make better predictions. The plausibility of that idea was now in question. “I’d missed something,” said Morey. “What I missed were the limitations of the model.”

His first mistake, he decided, was to have paid insufficient attention to Joey Dorsey’s age. “He was insanely old,” says Morey. “He was twenty-four years old when we drafted him.” Dorsey’s col­lege career was impressive because he was so much older than the people he played against. He’d been, in effect, beating up on little kids. Raising the weight the model placed on a player’s age flagged Dorsey as a weak NBA prospect; more tellingly, it improved the model’s judgments about nearly all of the players in the database. For that matter, Morey realized, there existed an entire class of college basketball player who played far better against weak opponents than against strong ones. Basketball bullies. The model could account for that, too, by assigning greater weight to games played against strong opponents than against weak ones. That also improved the model.

Morey could see—or thought he could see—how the model had been fooled by Joey Dorsey. Its blindness to the value of DeAndre Jordan was far more troubling. The kid had played a single year of college basketball, not very effectively. It turned out that he had been a sensational high school player, had hated his college coach, and didn’t even want to be in school. How could any model predict the future of a player who had intentionally failed? It was impossible to see Jordan’s future in his college stats, and, at the time, there were no useful high school basketball statistics. So long as it relied almost exclusively on performance statistics, the model would always miss DeAndre Jordan. The only way to see him, it seemed, was with the eyes of an old-fashioned basketball expert. As it happens, Jordan had grown up in Houston under the eyes of Rockets scouts, and one of those scouts had wanted to draft him on the strength of what appeared to him undeniable physical talent. One of his scouts had seen what his model had missed!

Morey—being Morey—had actually tested whether there were any patterns in the predictions made by his staff. He’d hired most of them and thought they were great, and yet there was no evidence any one of them was any better than the other, or the market, at predicting who would make it in the NBA and who would not. If there was any such thing as a basketball expert who could identify future NBA talent, he hadn’t found him. He cer­tainly didn’t think that he was one. “Weighting my personal intu­ition more heavily did not cross my mind,” he said. “I trust my gut very low. I just think there’s a lot of evidence that gut instincts aren’t very good.”

In the end, he decided that the Rockets needed to reduce to data, and subject to analysis, a lot of stuff that had never before been seriously analyzed: physical traits. They needed to know not just how high a player jumped but how quickly he left the earth—how fast his muscles took him into the air. They needed to mea­sure not just the speed of the player but the quickness of his first two steps. That is, they needed to be even more geeky than they already were. “When things go wrong, that’s what people do,” said Morey. “They go back to the habits that succeeded in the past. My thing was: Let’s go back to first principles. If these physical tools are going to matter, let’s test them more rigorously than they’ve ever been tested before. The weights we placed on production in college had to go down, and the weights we placed on raw physical abilities had to go up.”

But once you started to talk about a guy’s body and what it might or might not be able to do on an NBA court, there was a limit to the usefulness of even the objective, measurable information. You needed, or seemed to need, experts to look at the tools in action and judge how well they would function playing a different game, against better competition. You needed scouts to rate a player’s ability to do the various things they knew were most important to do on a basketball court: shooting, finishing, getting to the rim, offensive rebounding, and so on. You needed experts. The limits of any model invited human judgment back into the decision-making process—whether it helped or not.

And thus began a process of Morey trying as hard as he’d ever tried at anything in his life to blend subjective human judgment with his model. The trick wasn’t just to build a better model. It was to listen both to it and to the scouts at the same time. “You have to figure out what the model is good and bad at, and what humans are good and bad at,” said Morey. Humans sometimes had access to information that the model did not, for instance. Models were bad at knowing that DeAndre Jordan sucked his freshman year in college because he wasn’t trying. Humans were bad at . . . well, that was the subject Daryl Morey now needed to study more directly.

Freshly exposed to the human mind, Morey couldn’t help but notice how strangely it operated. When it opened itself to information that might be useful in evaluating an amateur basketball player, it also opened itself to being fooled by the very illusions that had made the model such a valuable tool in the first place. For instance, in the 2007 draft there had been a player his model really liked: Marc Gasol. Gasol was twenty-two years old, a seven-foot-one center playing in Europe. The scouts had found a photograph of him shirtless. He was pudgy and baby-faced and had these jiggly pecs. The Rockets staff had given Marc Gasol a nickname: Man Boobs. Man Boobs this and Man Boobs that. “That was my first draft in charge and I wasn’t so brave,” said Morey. He allowed the general ridicule of Marc Gasol’s body to drown out his model’s optimism about Gasol’s basketball future, and so instead of arguing with his staff, he watched the Mem­phis Grizzlies take Gasol with the 48th pick of the draft. The odds of getting an All-Star with the 48th pick in the draft were well below one in a hundred. The 48th pick of the draft basically never even yielded a useful NBA bench player, but already Marc Gasol was proving to be a giant exception. (Gasol became a two-time All-Star in 2012 and 2015 and, by Houston’s reckoning, the third-best pick made by the entire NBA over the past decade, after Kevin Durant and Blake Griffin.) The label they’d stuck on him clearly had affected how they valued him: names mattered. “I made a new rule right then,” said Morey. “I banned nicknames.”

* * *

All of a sudden he was right back in the mess he and his model had been hired to eliminate. If he could never completely remove the human mind from his decision-making process, Daryl Morey had at least to be alive to its vulnerabilities. He now saw these everywhere he turned. One example: Before the draft, the Rockets would bring a player in with other players and put him through his paces on the court. How could you deny yourself the chance to watch him play? But while it was interesting for his talent evaluators to see a player in action, it was also, Morey began to realize, risky. A great shooter might have an off day; a great rebounder might get pushed around. If you were going to let everyone watch and judge, you also had to teach them not to place too much weight on what they were see­ing. (Then why were they watching in the first place?) If a guy was a 90 percent free-throw shooter in college, for instance, it really didn’t matter if he missed six free throws in a row during the private workout.

Morey leaned on his staff to pay attention to the workouts but not allow whatever they saw to replace what they knew to be true. Still, a lot of people found it very hard to ignore the evi­dence of their own eyes. A few found the effort almost painful, as if they were being strapped to the mast to listen to the Sirens’ song. One day a scout came to Morey and said, “Daryl, I’ve done this long enough. I think we should stop having these workouts. Please, just stop doing them.” Morey said, “Just try to keep what you are seeing in perspective. Just weight it really low.” “And he says, ‘Daryl, I just can’t do it.’ It’s like a guy addicted to crack,” Morey said. “He can’t even get near it without it hurting him.”

Soon Morey noticed something else: A scout watching a player tended to form a near-instant impression, around which all other data tended to organize itself. “Confirmation bias,” he’d heard this called. The human mind was just bad at seeing things it did not expect to see, and a bit too eager to see what it expected to see. “Confirmation bias is the most insidious because you don’t even realize it is happening,” he said. A scout would settle on an opinion about a player and then arrange the evidence to support that opinion. “The classic thing,” said Morey, “and this happens all the time with guys: If you don’t like a prospect, you say he has no position. If you like him, you say he’s multipositional. If you like a player, you compare his body to someone good. If you don’t like him, you compare him to someone who sucks.” Whatever prejudice a person brought to the business of selecting amateur players he tended to preserve, even when it served him badly, because he was always looking to have that prejudice confirmed. The problem was magnified by the tendency of talent evaluators—Morey included—to favor players who reminded them of their younger selves. “My playing career is so irrelevant to my career,” he said. “And still I like guys who beat the shit out of people and cheat the rules and are nasty. Bill Laimbeer types. Because that’s how I played.” You saw someone who reminded you of you, and then you looked for the reasons why you liked him.

The mere fact that a player physically resembled some currently successful player could be misleading. A decade ago a six-foot-two-inch, light-skinned, mixed-race guy who had gone unnoticed by major colleges in high school and so played for some obscure tiny college, and whose main talent was long-range shooting, would have had no obvious appeal. The type didn’t exist in the NBA—at least not as a raging success. Then Stephen Curry came along and set the NBA on fire, led the Golden State Warriors to an NBA championship, and was everyone’s most valuable player. Suddenly—just like that—all these sharp-shooting mixed-race guards were turning up for NBA job interviews and claim­ing that their game was a lot like Stephen Curry’s; and they were more likely to get drafted because of the resemblance. “For five years after we drafted Aaron Brooks, we saw so many kids who compared themselves to Aaron. Because there are so many little guards.” Morey’s solution was to forbid all intraracial comparison. “We’ve said, ‘If you want to compare this player to another player, you can only do it if they are a different race.’” If the player in question was African American, for instance, the talent evaluator was only allowed to argue that “he is like so-and-so” if so-and-so was white or Asian or Hispanic or Inuit or anything other than black. A funny thing happened when you forced people to cross racial lines in their minds: They ceased to see analogies. Their minds resisted the leap. “You just don’t see it,” said Morey.

During the 2011 NBA lockout, when a dispute between players and owners caused the whole league to shut down for several months, Morey enrolled in an executive education course at Harvard Business School and took a class in behavioral economics. He’d heard of the discipline (“I’m not an idiot”) but had never studied it. At the start of the first class, the professor asked him and everyone else in the class to write down the last two digits of their cell phone on a sheet of paper. Then she asked the class to write down their best estimate of the number of African countries in the United Nations. Then she collected all the papers and showed them that the peo­ple whose cell phone numbers were higher offered systematically higher estimates of African countries in the United Nations. Then she took another example and said, “I’m going to do it again. I’m about to anchor you. Here. See if you aren’t screwed up.” Everyone had been warned; everyone’s minds remained screwed up. Simply knowing about a bias wasn’t sufficient to overcome it: The thought of that made Daryl Morey uneasy.

When the NBA returned to work he made yet another unset­tling discovery. Just before the draft, the Toronto Raptors called and offered to trade their high first-round draft pick for Houston’s backup point guard, Kyle Lowry. Morey talked about it with his staff, and they were on the brink of not doing the deal when one of the Rockets executives said, “You know, if we had the pick we’re thinking of trading for and they offered Lowry for it, we wouldn’t even consider it as a possibility.” They stopped and analyzed the situation more closely: The expected value of the draft pick exceeded, by a large margin, the value they placed on the player they’d be giv­ing up for it. The mere fact that they owned Kyle Lowry appeared to have distorted their judgment about him. (They made the trade, and then used the draft pick as the biggest chit in a deal to land a superstar, James Harden.) Looking back over the previous five years, they now saw that they’d systematically overvalued their own players whenever another team tried to trade for them. Especially when offered the chance to trade one of their NBA players for another team’s draft picks, they’d refused deals they should have done. Why? They hadn’t done it consciously.

Morey thus became aware of what behavioral economists had labeled “the endowment effect.” To combat the endowment effect, he forced his scouts and his model to establish, going into the draft, the draft pick value of each of their own players.

The next season, before the trade deadline, Morey got up before his staff and listed on a whiteboard all the biases he feared might distort their judgment: the endowment effect, confirmation bias, and others. There was what people called “present bias”—the tendency, when making a decision, to undervalue the future in relation to the present. There was “hindsight bias”—which he thought of as the tendency for people to look at some outcome and assume it was predictable all along. The model was an antidote to these vagaries of human judgment, but, by 2012, the model seemed to be approaching a limit to the informational edge it would give the Rockets in valuing players. “Every year we talk about what to take out and what to put in the model,” said Morey. “And every year it gets a little more depressing.”

This job of running a professional basketball team had turned out to be a bit different than he had imagined, back when he was a kid. It was as if he had been assigned to take apart a fiendishly complicated alarm clock to see why it wasn’t working, only to discover that an important part of the clock was inside his own mind.

* * *

Morey and his staff had obviously seen a lot of big men. But in the winter of 2015, even they were shocked by the sight of the Indian who walked into their interview room. He was dressed simply in sweatpants and a lime-green Nike T-shirt, with a pair of dog tags dangling from his neck. That neck—like his hands, his feet, his head, and even his ears—was so cartoonishly immense that you found your eyes jumping from feature to feature and wondering if that specific body part broke a Guinness book record. The Rock­ets once employed a seven-foot-six-inch Chinese center named Yao Ming whose size provoked these weird reactions in others. People would see him and turn and run, or burst out laughing, or weep. From head to toe the Indian was a few inches shorter than Yao Ming, but in every other way he was bigger. After seeing his mea­surements, and finding it hard to believe anyone could grow so much in just nineteen years, Morey had asked his staff to dig out his birth certificate. The Indian’s agent had come back and said that the village in which he’d been born kept no birth records. Hearing this, Morey recalled what Dikembe Mutombo had once told him. Mutombo was a seven-foot-two-inch shot blocker who had come to the Rockets by way of Congo, with stops in between at five other NBA teams. He said that whenever some huge guy from overseas turned up claiming to be a lot younger than he looked, “You need to cut open his legs and count the rings.”

The Indian’s name was Satnam Singh. In all but his size he seemed young. He had the social uncertainty of an adolescent con­fused to find himself suddenly so far away from home. He smiled nervously and lowered himself into the chair at the head of the table.

“You doing all right?” said the Rockets interviewer.

“Yeah, I’m good good good.” It wasn’t a voice but a foghorn. So guttural it took a moment to work out what he’d said.

“We just want to get to know you a bit better,” said the interviewer.

“Tell us about your agent and why you selected him.”

Satnam Singh rambled on nervously for a couple of minutes. It was unclear whether anyone in the room followed what he said. They gathered that he’d basically been taken care of since he was fourteen by people who imagined an NBA career for him.

“Tell us about where you are from and your family?” the interviewer asked.

His father worked on a farm. His mother was a cook. “I came here, I can’t speak English,” he said. “I could not speak to anyone. It was very hard for me. Nothing. Zero.” As he struggled to relate the incredible story of his journey from his eight­ hundred-person Indian village to the front office of the Houston Rockets, his eyes searched the room for approval. The executives of the Houston Rockets were ciphers. Not unfriendly, but not giv­ing up anything, either.

“What would you say your basketball strengths are?” asked the interviewer. “What are you best at?”

The Rockets interviewer read from a script. Singh’s answers would be entered into the Rockets database, compared to the answers given by a thousand other players, and studied for patterns. They still clung to the hope that they might one day measure character, or at least get a sense how a poor kid would behave after he’d been handed millions of dollars and, usually, a seat on the bench. Would he keep working hard? Would he listen to coaches?

Morey hadn’t found anyone—inside or outside basketball—who could answer those questions, though there was no end to psychologists who pretended to be able to. The Rockets had hired a bunch of them. “It’s been horrible,” says Morey. “A horrible experience. Every year I think there’s got to be something there. Every year we find someone with a different approach. Every year it is totally pointless. And every year we try again. I’m starting to think psychologists are complete charlatans.” The last psychologist who showed up claiming to be able to predict behavior had essentially used the Myers-Briggs personality test—and then tried to per­suade Morey, after the fact, that he had warded off all manner of unseen problems. The way he’d gone on reminded Daryl Morey of a joke. “The guy walks around with a banana in his ear. And people are like, ‘Why do you have a banana in your ear?’ He says, ‘To keep the alligators away! There are no alligators! See?’”

The Indian giant said his strengths were his post-up game and his midrange shooting.

“Have you broken any team rules while at IMG?” asked the interviewer.

Singh was confused. He didn’t understand the question.

“No problems with the police?” Morey said helpfully.

“No fighting?” asked the interviewer.

Singh’s face cleared. “Never!” he exclaimed. “Never in my life. I’ve never tried. If I tried, somebody would die.”

The Rockets executives had been studying Singh’s body. One of them finally couldn’t contain himself. “Have you always been so tall?” he asked, going off script. “Or was there an age when you started to grow up faster?”

Singh explained that he was five foot nine at the age of eight and seven foot one at the age of fifteen. It ran in the family. His grandmother was six foot nine …

Morey stirred in his seat. He wanted to get back to ques­tions that might lead to predictions. He asked, “What have you improved the most at—what can you do well now that maybe you didn’t do as well two years ago?”

“I feel most badly on my mind. My mind.”

“Sorry, I mean basketball skills. Like on the floor.”

“Post game,” he said. He said other things but they were unintelligible.

“Who do you think you are most like in the NBA—similar in terms of game?” asked Morey.

“Jowman and Shkinoonee,” said Singh, without missing a beat.

A silence followed. Then Morey realized. “Oh, Yao Ming.” Another pause. “Who was the second one?”

“Shkinoonee.”

Someone made a guess: “Shaq?”

“Shaq, yes,” said Singh, relieved.

“Oh, Shaquille O’Neal,” said Morey, finally getting it.

“Yes, same body type and same post-up,” said Singh. Most players compared themselves to someone they actually looked like. Then again, there was no NBA player who looked like Satnam Singh. If he made it, he’d be the league’s first Indian.

“What do you got around your neck there?” Morey asked.

Singh grabbed his dog tags and stared down at his chest. “This is my family names,” he said, fingering one. Then he took the second dog tag and simply read what it said: “I miss my coaches. I love ball. Ball is my life.”

That he needed a dog tag to remind him wasn’t the best sign. A lot of big guys played just because they were big. Long ago some coach or parent had yanked them onto a basketball court, and social pressure kept them there. They were less likely than small players to work hard to improve, and more likely to take your money and fade away. It wasn’t that they were consciously deceitful; it was that the sort of big kid who had played basketball his entire life mainly to please others had become so practiced at telling people what they wanted to hear that he didn’t know his own heart.

At length, Singh left the interview room. “Have we found evidence he has played organized basketball anywhere?” Morey asked, once he was gone. You couldn’t control how you felt about the player after the interview, but you could use data to control the influence of those feelings. (Or could you?)

“They say he played at the IMG Academy in Florida.”

“I hate these kinds of bets,” said Morey. He’d watch Singh work out for thirty minutes, but his decision was already made. They had no data on him. Without data, there’s nothing to analyze. The Indian was DeAndre Jordan all over again; he was, like most of the problems you faced in life, a puzzle, with pieces miss­ing. The Houston Rockets would pass on him—and be shocked when the Dallas Mavericks took him in the second round of the NBA draft. Then again, you never knew.

And that was the problem: You never knew. In Morey’s ten years of using his statistical model with the Houston Rockets, the players he’d drafted, after accounting for the draft slot in which they’d been taken, had performed better than the players drafted by three-quarters of the other NBA teams. His approach had been sufficiently effective that other NBA teams were adopt­ing it. He could even pinpoint the moment when he felt, for the first time, imitated. It was during the 2012 draft, when the players were picked in almost the exact same order the Rockets ranked them. “It’s going straight down our list,” said Morey. “The league was seeing things the same way.”

And yet even Leslie Alexander, the only owner with both the inclination and the nerve to hire someone like him back in 2006, could grow frustrated with Daryl Morey’s probabilistic view of the world. “He will want certainty from me, and I have to tell him it ain’t coming,” said Morey. He’d set out to be a card counter at a casino blackjack table, but he could live the analogy only up to a point. Like a card counter, he was playing a game of chance. Like a card counter, he’d tilted the odds of that game slightly in his favor. Unlike a card counter—but a lot like someone making a life decision—he was allowed to play only a few hands. He drafted a few players a year. In a few hands, anything could happen, even with the odds in his favor.

At times Morey stopped to consider the forces that had made it possible for him—a total outsider who could offer his employer only slightly better odds of success—to run a professional basketball team. He hadn’t needed to get rich enough to buy one. Oddly enough, he hadn’t needed to change anything about himself. The world had changed to accommodate him. Attitudes toward decision-making had shifted so dramatically since he was a kid that he’d been invited into professional basketball to speed the change. The availability of ever-cheaper computing power and the rise of data analysis obviously had a lot to do with making the world more hospi­table to the approach Daryl Morey took to it. The change in the kind of person who got rich enough to buy a professional sports franchise also had helped. “The owners often made their money from disrupt­ing fields where most of the conventional wisdom is bullshit,” said Morey. These people tended to be keenly aware of the value of even slight informational advantages, and open to the idea of using data to gain those advantages. But this raised a bigger question: Why had so much conventional wisdom been bullshit? And not just in sports but across the whole society. Why had so many industries been ripe for disruption? Why was there so much to be undone?

It was curious, when you thought about it, that such a puta­tively competitive market as a market for highly paid athletes could be so inefficient in the first place. It was strange that when people bothered to measure what happened on the court, they had measured the wrong things so happily for so long. It was bizarre that it was even possible for a total outsider to walk into the game with an entirely new approach to valuing basketball players and see his approach adopted by much of the industry.

At the bottom of the transformation in decision-making in professional sports—but not only in professional sports—were ideas about the human mind, and how it functioned when it faced uncertain situations. These ideas had taken some time to seep into the culture, but now they were in the air we breathed. There was a new awareness of the sorts of systematic errors people might make—and so entire markets might make—if their judgments were left unchecked. There were reasons basketball experts could be blinded to the value of Marc Gasol by a single photograph of him, or would never see the next Shaquille O’Neal if he happened to be an Indian. “It was like a fish not knowing he is breathing water unless someone points it out,” Morey said of people’s awareness of their own mental processes. As it happens, someone had pointed it out.

Copyright 2016 by Michael Lewis. From The Undoing Project: A Friendship That Changed Our Minds, out now from W.W. Norton & Company. Reprinted with permission.

The Undoing Project: A Friendship that Changed Our Minds

Check out this great listen on Audible.com. Best-selling author Michael Lewis examines how a Nobel Prize-winning theory of the mind altered our perception of reality. Forty years ago, Israeli psychologists Daniel Kahneman and Amos Tversky wrote a series of breathtakingly original studies undoing ...