And where prices are set by negotiation, science has generally made fewer inroads. Loan prices are the result of negotiation between business clients and the bank’s relationship managers (RMs). But advanced pricing techniques are being adopted by an ever-expanding variety of businesses. The “dynamic pricing” of airline flights and hotel rooms is probably the most familiar example. With advances in the ability to collect, store, and rapidly analyze data, many businesses have made great improvements. From sports to advertising to policing, we are seeing a shift from gut feel to statistical science. In recent decades, many decisions that were once left to the judgment of experienced practitioners are now informed by analytics. This is but one example of a general trend. The statistical techniques employed by Beane have since become standard in baseball. Despite its small budget, Oakland enjoyed a record run of 20 victories in 2002, following this change in approach. This allows the team to buy players who are undervalued by baseball insiders and sell players who are overvalued. In the movie Moneyball, Billy Beane, the coach of the Oakland Athletics baseball team, transforms the way Oakland trades players, replacing the judgment of experienced scouts with statistical analyses of players’ performance.
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