Sam Hinkie – Data, Decisions, and Basketball

**Patrick O'Shaughnessy** (0:04)
Hello, and welcome everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_1** (0:24)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management.
All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (0:49)
I came across this week's guest thanks to the overlap of three passions of mine, data-informed investing, value creation, and basketball. Sam Hinkie worked for more than a decade in the NBA with the Houston Rockets and then most recently served as president and general manager of the Philadelphia 76ers. He helped launch Basketball's analytics movement when he joined the Rockets in 2005 and is known for unique trade structuring and a keen focus on acquiring undervalued players. Today, he's also an investor and an advisor to a limited number of young companies in which he feels his experience can improve outcomes.
At one point in our conversation, Sam mentions that he tracked success via future financial outcomes, much like we would in the investing world, so I did some research and found many interesting stats about the Sixers surrounding Sam's tenure. When he took over the franchise, it was 24th in ESPN's franchise rankings. Today, it is 4th. This is the result of an impressive crop of young talent, players like All-Star Joel Embiid and Ben Simmons, which resulted in large part from unconventional decisions that Sam and his team made. While I'm sure these estimates are imperfect, Forbes estimated the Sixers' value at about $418 million when Sam took over, and $1.2 billion just a few months ago. NBA teams in general have grown in value, so a lot of that appreciation is the equivalent of market beta, but given that the 76ers had the top percentage growth number more recently of any team in the league, some of it is Alpha 2 While we can't parse the exact amount, it seems his unique approach to building a team clearly created some large amount of current franchise equity value. If watching Ben Simmons and crew is any indication, it looks like dividends from those decisions will compound for many years to come.
While basketball was where Sam plied his talents in the past, his approach is much more elemental. It is about finding great people, using data, and structuring decisions that create the possibility of huge returns, be they financial or otherwise.
I don't know what Sam will do next, be it investing in companies, running one, or taking over another team, but I know that it will be fun to watch. Please enjoy this unique episode with Sam Hinkie.
It would be fun to kind of rebuild a bit your framework just for thinking about, really, I think of this as your framework for investing, really. We already talked about things like duration, having a very long view. There's things that you've written about innovation, having a contrarian mindset, having respect for sort of the place that you're working within. So maybe we could start talking about some of these concepts. Anything else on the long view, on the more nuanced side, obviously, probably having a longer view puts you in a lower competition environment, because few people actually walk that walk. But anything, any other thoughts about, as you think about business, investing, really anything on the advantages of having a long view and how to structurally do that?

**Sam Hinkie** (3:25)
Yeah, I mean, I think you're just trying to get to sort of an inner scorecard kind of system where you're judging yourself and letting a set of other people that you respect judge how you're going about something.
I think some of this is just temperament-wise. I'm wired this way to think about the long term, to think about what I want to do X years down the path or what will matter, but I also think about it because it's actually what matters. It doesn't matter what happens the next two months or six months or something. What matters is what happens over the next two years or six years or 20 years or 60 One story I remember, we were having a meeting, a good meeting when I was at the Sixers and something came up about one of my colleagues. We were talking about, we shouldn't take any shortcuts here or there and we should stick to this. And this was kind of in the middle of what we were doing. And he said, we don't want to wake up three or four years from now and regret this. And I interrupted and I said 30 or 40