Welcome to the MoneyNeverSleeps newsletter! Thanks to the 181 new fans who signed up for the newsletter this week.
If you’re reading this but haven’t subscribed, now’s the time to join!
You see, beauty isn't a rush
It's a process, sometimes it's slow
Yeah, I mean there's beauty in everything, ya know
You just gotta recognize it
- ‘Beauty’ by Fabolous
Anyone that knows myself and Pete know about our shared love of hip-hop and US sports. It is expected for Pete given that he is American and grew up with baseball, basketball, American football, etc.
It’s less expected with me but I was fortunate that I had a number of close relatives living in the US when I was younger, who would come home once or twice a year bearing sports gifts. My first trip to New York, when I was about 12, was to attend my uncle’s wedding and included my first NFL game (Baltimore Ravens @ New York Giants in the old Giants Stadium).
My mum played basketball when I was a child and that got me hooked on the NBA. I also grew up in the height of Michael Jordan’s powers and when the NBA really became a global phenomenon.
Another thing we have in common is a shared interest of innovation and new ideas, especially when they are in industries/sectors that haven’t seen this kind of innovation. Little surprise that we are both very passionate about the Fintech space and also that one of our favourite books is ‘Moneyball’.
In that vein, let’s talk about innovation and basketball.
Enter Sam Hinkie.
On May 10, 2013 the Philadelphia 76’ers appointed Sam Hinkie as General Manager (GM) of the organisation.
Hinkie wasn’t like the typical basketball General Manager.
Not only had he not played professional basketball, he hadn’t even played basketball in college. He wasn’t a traditional “basketball guy.”
After graduating from the University of Oklahoma in 2000 (as one of the top students in the country), Hinkie worked in consulting for Bain and had a stint with Bain in Australia, before going on to get his MBA at Stanford University.
From there, Hinkie joined the Houston Rockets as Special Assistant to the General Manager.
Hinkie was promoted to vice-president two years later, the youngest vice-president in the NBA at the time.
In 2007, the Rockets brought in a new GM, Daryl Morey.
Morey is the founder of the MIT Sloan Sports Analytics Conference, the largest student-run conference in the world, attracting students from over 170 different schools and representatives from over 80 professional sports teams in the MLB, NBA, NFL, NHL, MLS, and Premier League. The conference has become the premier venue for sports analytics discussion.
From day one, Morey and Hinkie set out to turn the Rockets into an organisation built around applying statistics and analytical thinking to create a sustainable advantage in a league in which most decisions were made by “basketball guys”.
In 2013, Hinkie got the chance to become the GM of the Philadelphia 76ers, where he undertook one of the most ambitious experiments in NBA history: The Process.
The 76ers, at the time, were nothing special. They had finished the previous NBA season with 34 wins and 48 losses. Worse than their record was the fact that the team had no real skill players, a poor roster and no hope of turning things around. They were pretty bad but not bad enough to score a high draft pick and a chance to land a superstar.
In the NBA, the same 82 games are up for grabs every year for every team.
To get more wins, you’re going to have to take them from someone else. The NBA is a zero sum sport where the only way to be successful is to steal wins from your competitors.
In order to do so, coming from a poor record and position, the 76ers had to do something different. They had to be contrarian.
Hinkie started down the path he had meant to go down: at the 2013 Draft, Hinkie traded away the only All-Star on the 76ers roster, Jrue Holiday, in exchange for a rookie player coming off a serious knee injury, and a future draft pick.
This trade was a symbol of Hinkie’s approach over the next three years, an approach which became known by players and fans as “The Process.”
The goal was long term success whilst acknowledging that this would mean short term pain - terrible today for the chance to be excellent in the future.
Hinkie often used a Jeff Bezos reference to justify the approach whereby Bezos says that if Amazon has a good quarter it’s because of work they did 3, 4, 5 years ago—not because they did a good job that quarter
This approach led Hinkie doing things that critics/other teams thought crazy and even wrong, including but not limited to:
Trading away good players to make the team worse in the short-term (commonly known as ‘tanking’ in sports terms) - which would increase the probability of the 76ers being allocated high draft picks in the future that could turn into franchise-changing superstars.
Building up a stockpile of draft picks, which Hinkie viewed as one of the most undervalued assets in the league, that could be used to trade up for higher draft picks
Signing quality but injured players who wouldn’t be able to play for entire seasons.
Drafting foreign players and allowing them to remain playing overseas - this allowed these players to continue to develop for years without counting as a player on the 76ers roster.
According to a November 2016 Sports Illustrated profile, Hinkie did the kind of stuff people talk about late at night after three beers, because theoretically it just might work, but no one actually does….then he set fire to the lifeboats.”
Hinkie had made it clear when he took over that there was a long way to go to make the 76ers successful and that things would be worse in the short term.
However, the 76ers during The Process were awful.
They set a league record of 28 straight losses during the 2014-2015 season.
They lost more games than any other team, and broke the NBA’s record for consecutive games lost.
The lowest point was the 2015-2016 season when the team won only 10 of 82 games, making it the second worst NBA team of all time.
This was all that the ownership could take. Midway through that season, the team hired a veteran general manager to oversee Hinkie. Although he wasn’t fired, Hinkie was moved to the side.
In April 2016, Hinkie stepped down.
His resignation letter to the 76’ers is an ode to long term thinking and sacrificing short term gratification for long term success.
He left before he got the chance to see his plan come to fruition.
From 2017 to 2020, the 76ers made the Playoffs each year, winning more than 50% of the regular season games and losing the semi-finals in 2019.
This run has been driven by a skilled roster of young players and lead by the emerging skills of Joel Embiid, one of the best players in the league. Hinkie drafted the 7-foot Cameroonian in 2014 even though he had a broken bone in his foot that would not allow him to play for six months.
In a nice circular conclusion to the story, in November 2020, the 76’ers announced their new President of Basketball Operations to be….Daryl Morey (who you may remember as the former GM of the Houston Rockets and who Sam Hinkie was second in command to for 8 years).
The Process continues…
Why Should You Care?
I suggest you read Sam Hinkie’s resignation letter to the 76’ers.
And then read it again, as it is a lesson in leadership, and long term thinking.
You are the founder.
You have started on a journey that you believe will end in success.
You have a long term plan in mind for how you will achieve this.
You have to be willing to fail.
You have to be willing to think long-term.
You have to be willing to be misunderstood for long periods of time.
Play the long game.
Stick to The Process.
Tell me why I’m wrong…
How do I describe ‘Left Field’? It’s a place to put the content (newsletters/articles, etc) that we have amassed over recent weeks or previous years that really make us think or change our thinking on a particular topic. All the content will offer an alternative view of some topic in financial services, technology or sport (or a combination of all three!)
This excellent piece from 2019 gives some insight into Uber’s market entry strategy and it’s attempts to avoid having drivers considered as employees in the UK by using UK case law - specifically case law that classified the drivers as similar to pole dancers. In this scenario, Uber were simply providing the drivers access to a space in which they could perform for money.
Anyway, I won’t give away too much. Enjoy the article and feel free to get in touch to discuss more!
MoneyNeverSleeps podcast episode from this week:
Cian Prendergast, founder and CEO of Ortus joins the show to share his story on the origins of Ortus in Ireland, sharing his story on how there’s a lot more to providing cloud and managed IT services to SMEs than what you’d expect, entrepreneurial leadership during a pandemic, surrounding yourself with brilliant people….and a past life of having every job under the clouds!
Podcast Recommendation: I highly recommend the podcast ‘Armchair Expert’ hosted by Dax Shepard. It has some fascinating interviews with celebrities & experts and celebrates the messiness of being human!
Want more MoneyNeverSleeps?