In case you missed it, the latest Marks Memo (pdf) was released last Friday. It’s an homage to Yogi Berra specifically and sports generally. The comparison between sports and investing are used widely because it’s an analogy most of us can relate to on some level and the lessons learned tend to overlap.
Much like Buffett uses Ted Williams to explain his investment philosophy, Marks uses bits of Yogi, baseball, football, fantasy sports, and tennis to explain his.
He sums up the key lessons at the end, which I pulled out below. As always, I suggest reading the memo in full.
So there you have some of the key lessons from sports:
- For most participants, success is likely to lie more dependably in discipline, consistency and minimization of error, rather than in bold strokes – high batting average and an absence of strikeouts, not the occasional, sensational home run.
- But in order to be superior, a player has to do something different from others and has to have an appropriate level of confidence that he can succeed at it. Without conviction he won’t be able to act boldly and survive bouts of uncertainty and the inevitable slump.
- Because of the significant role played by randomness, a small sample of results is far from sure to be indicative of talent or decision-making ability.
- The goal for bettors is to see value in assets that others haven’t yet recognized and that isn’t reflected in prices.
- At first glance it seems effort and “common sense” will lead to success, but these often prove to be unavailing.
- In particular, it turns out that most people can’t see future outcomes much better than anyone else, but few are aware of this limitation.
- Before a would-be participant enters any game, he should assess his chances of winning and whether they justify the price to play.
These lessons can serve investors very well.
- Don’t Go for the Exacta – C. Asness
- On the hunt for the financial free lunch? Don’t. – Washington Post
- The Relentless Rules of Humble Arithmetic (pdf) – J. Bogle
- Are Share Buybacks Jeopardizing Future Growth? – McKinsey
- Back to the Future: A 100x Perspective – Daily Reckoning
- Benchmark Oddities – Investor Field Guide
- William Thorndike: “The Outsiders” (video) – Talks at Google
- Learning to Deal With the Impostor Syndrome – C. Richards
- Can You Get Smarter? – NY Times