Statistics for Financially Savvy Towns

imageWe are several years into a statistical revolution in the world of sports. Leading the charge is Bill James, who started the sabermetics movement and created a variety of new analytical tools to objectively measure success in baseball. While traditional baseball used statistics like batting average, runs, and runs batted in, Bill James was busy with runs created, win shares, and the Pythagorean winning percentage. Among those who put James’ statistics into action was Billy Beane, the general manager of the Oakland Athletics.  Featured in the book and film “Moneyball”, Beane was able to find the undervalued statistics that correlated to winning in order to make the small-market Oakland Athletics competitive year in and year out with the financial giants of the game. As an example, in 2002 Beane’s Oakland Athletics and the New York Yankees both led the Major Leagues with 103 wins, but while the Yankees spent $125 million on player salaries, Oakland spent $41 million.  Coach Brad Stevens was able to use the same principles in the world of basketball, taking the small-time Butler Bulldogs to back to back NCAA national championships, in part by diving deep into the statistics of what player combinations maximized performance. So here we see clear evidence that by playing smarter, by diving into the numbers, those with the odds stacked against them can compete with the best in the business.

So what’s the equivalent for cities? Are there similar statistics and numbers that can help small places compete with the major-market teams?

Below are two amazing talks, one from Joe Minicozzi (Urban3) and the other from Charles Marohn (Strong Towns), which really are on the cutting edge of answering this question. In the first video, recognizing that space is a scarce resource for cities, Minicozzi makes the point that cities are paying too much attention to a development’s assessment when they should be looking at the value per acre. In doing such an analysis, he finds in town after town that traditional downtowns vastly outperform big box style development, and further, cities can achieve a greater return on their investment by making strategic investments in the downtown area.

If Minicozzi argues the offensive side (revenue collection), than Charles Marohn presents the defensive perspective. Here he talks about how cities are getting themselves into financial trouble by not doing the proper analysis of their infrastructure costs and maintenance in comparison to the surrounding area tax revenue.  In fact, the same infrastructure can financially make or break a city based on the surrounding development.

If small towns and cities want to compete with the major players they’re going to have to play smart, paying attention to the undervalued statistics that make a big difference. For strapped city governments the work of Minicozzi and Marohn provides a great starting point!

4 thoughts on “Statistics for Financially Savvy Towns

  1. Justin, spot on. Austin is a great city, but has some (very) big issues to address. While Austin wins award after award about economic growth, Marohn’s analysis would reveal hidden liabilities Austin faces. We have to understand these principles.

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