June 7, 2009 |
Russell Sears says:
My knowledge of baseball is shallow. I played only two years in a little league as a kid. I was on a small town team in Glencoe, OK my 5th and 6th grade years. The only years I was still able to compete and start in three sports teams (Basketball Baseball and Track). I played second base, led the team with walks and on base percentage, steals and fewest errors for an infielder. So, much of my knowledge is rudimentary. However, as a dedicated athlete and coach in distance running, I recognize many of the lessons carry over from most sports to investing/trading and a investor/trader's life.
Here is my list with some explanation to at least one way it relates to an investor/trader if it was not obvious.
1. To get an edge, rely on statistics, not folklore or gut response (See Michael Lewis's Moneyball).
2. To make a solid hit you must shift your weight at the right time. Good traders move their weight in and out of the trade.
3. Plan on shifting your weight in the direction you want the ball to go before the pitch/market or you end-up chasing the pitch/market fouling to the left. Or on offense you take action. Plan where you are headed. Risks analysis can help determine where you want to play, is there more opportunity in being too early or more risks. Or will the opportunity still be there if you are a little late.
4. Don’t expect the opponent to give you the same hit twice. Don’t chase returns. Expect the markets to react to your success.
5. Changes of pitcher occur everyday and a team that was easily beaten one day is completely different the next. Don’t expect every day to be the same easy win or tough loss, despite yesterday’s scorecard.
6. Your placement in the outfield will determine your ability to cover the most area. Remember it is easier to run forward / be more aggressive than it is to back-up. On defense you react, position yourself accordingly. It often is easier to get into a trade than out of one, (think real estate). Allow yourself more time to get into a trade than selling out of one. It easy to find a willing seller as even in a hot market the net buyers are often flipping trades. But it can quickly turn into a dead market. And conversely a short trader can be hard to move quick enough, though right in the general direction.
7. Pay attention to the strike zone before your turn to bat. Different umps will shift it and the pitcher will know where the corners and edges are. They will also know where the ump is being conservative or liberal. Keep track of the rule changes around the edges. See current FASB rules for example.
8. Patience and opportunity cost move inversely as the count moves against you. The best learn to deal with this pressure. (See Ted Williams)
9. As the runner moves around the bases the positions placement and responsibilities shift with him. Know the economic cycle where the opportunities pop-up and disappear. Know where you are most vulnerable.
10. Backing up other teammates limits losses associated with many errors. Double check trades before execution.
11. Keep the ball in front of you. Have limits to losses. Don’t get too far behind on a trade.
12. Keep your eyes on the ball. Don’t ignore a trade.
13. A student of the game knows when and where an error is likely to occur. Learn from past mistakes, others' as well as your own.
14. Standing firm while a fast ball is coming at you is not instinctive. But a inside slider is even scarier. Instincts need to be channeled properly. Risk premium or the opportunity in risks is often not instinctive.
15. Identifying the pitch's path is hardest part to hitting. Identifying shifts in the market is often hardest part of trading.
16. Quick simple planned communication keeps teammates from running into each other when the balls in play. Same communication helps firms govern their traders.
17. Everybody loves the game when the sky is blue, but the season is won in all weather. Everybody wants to be an “investor” in the good times, but many of the best lessons, the ones that can make investor’s career, occur in the hard times.
18. The concession prices are a lesson in supply and demand. Demand often trumps relative value. Bubbles and panics often occur by demand ramp-ups and then collapse. Because there is no clear 7th inning stretch for a trader or posted game schedule. Be very careful how many hot dogs you place on the grill even though demands high and how much inventory you will carry despite the labor day fire sale of hot dogs.
19. Fan loyalty proves that being number 1 is not necessary for success. Hubris of striving to be the “best” can poison many a career, stock or management team.
20. Minor league games can be fun for the whole family. Small investments are great for teaching kids the principles of investing.
21. Next time at the ballpark count the generational divergent groups (eg Father/Son) ;sharing with the next generation of fans keeps the excitement in the game. Sharing with an older generation keeps the relationship fresh.
22. There are many crazy fans and media experts out there that think they know every move a team and player should make. Many simply wish they could play. Ignore the Monday morning quarterbacks advice. Most of the media and the advice people feel compelled to give those succeeding is worthless or down right dangerous. (See the “magazine cover” effect for a bear market.)
23. But accept the critic’s concern as a compliment. For many this is the only compliment they can give. Contrarian thinking or buying when others are selling too much and selling when others are buying too much is the basis of trading, expect to swim against the tide sometimes. These critics think anecdotal evidence in hindsight proves they know more than you, but trust a good record keeping/scoring system more than the backdated critic.
24. Joining the club: That knowledge, experience or friends inside the clubhouse may get you a job. That intelligence may get you a well paying one. But that a unique talent is highly scouted and is priceless. This carries over in most careers, perhaps one reason why athletes often make good investment professionals.
25. If you are up to bat, it doesn’t matter what position you came from.
26. Those that get the most players on base often win. Home runs are nice but singles are the game changers.
27. A walk gets you on base same as a close single without the risks. This is stressed in the lower leagues. A good eye for business opportunities can beat the market. In main stream, the number of “rich” entrepreneurs out ranks the rich traders.
28. Run hard for first base no matter how easy an out it appears you hit into. Errors happen, only those still trying get to turn the error into opportunity.
29. Individuals pursuing their own individual success can work as a cooperative team. Form your team so that everybody wins.
30. Occasionally, the manager must step in to tell a batter to take one for the team: Bunt, to advance the runner on base. Team players know that long term success outweigh short term personal gains. Pick teammates that know how to bunt.
31. Don’t let the opponent know what your signals are. Hide your limits and stop losses until you pull the trigger.
32. The pitcher and catchers signals are sacred information. Don’t deal with firms that let others know your trades or allow front running of any form.
33. Scouting like due diligence should dig for the observed facts, not simply rely on their reputation. See Madoff or any of the other sellers of bogus reputations.
34. Know the difference between playing to win and looking to next season. The new talent brought up is out to prove themselves. Don’t underestimate their hunger. The big established and the small hungry players have their niche.
35. People tend to be afraid of cultures they don’t know, race has little to do with an individual’s success. (See Jackie Robinson). Global funds can diversify your portfolio.
36. However, cultures that support the game have the most individuals hitting the big times. While globalization can be good, not every country has the same culture to support capitalism. (See the freedom index and long term returns).
37. The pitcher has to have the most control of any of the players. They should be the most organized and controlled. Traders need the most governance and control.
38. The fastball pitcher needs the most rest, lest the fewest innings with shortest careers. Save your emotional energy for when it is needed.
39. Injuries and life happens. Being willing to take yourself out of the game a few days can prevent a season or career ending blow-up. Listen to the advice of a good sports doctor/risks manager on this one.
40. The clean-up pitcher may not get the glory of the win, but can save many a game, and often prolong his career with his knowledge. The support crews are critical.
41. Don’t make enemies with the umps. Don’t make enemies with the regulators no matter how unfair the rule.
42. Respect the home team’s advantage. Investing in local companies you know well can be profitable. Likewise commodity markets often have their natural experts .
43. Don’t call attention to yourself off the field. Too much conspicuous consumption makes you a target.
44. Listen to your mentors, the coaches, the voices of experience, follow the successful.
45. Give respect to those that played before you and the other players.
46. Win or loss, shake hands after the game. The opponent is only “the opponent” on the field. Off the field he is most likely a kindred spirit.
47. Sometimes the best competition is the friendly competition of a teamate. As irons sharpens iron, friendship sharpen individuals
48. Pride and self-respect can motive and drive you through difficult and seemingly impossible situations. (see Lou Gehrig)
49. Tragic situations can be turned into triumph. The unfair harsh blows in life can make you bitter or better.
50. Hubris and narcissism may fool others into respecting you, but will be your downfall.
51. Steroids, banned substances: there will be those that cheat and seemingly get away with it. But often lost in the broadcast are the majority of the players that did not cheat and still achieved greatness. There will always be cheaters, but the generalization against the whole is not to be believed. Don’t tolerate this attitude with your investment advisors.
52. Those cheating rob baseball for their own gain and develop a love/hate relationship to it. Those investors that have love/hate relationship with capitalism and the markets are not to be trusted.
53. Those prone to criticism think the road to success is lined with cheats. But often the temptation to cheat is greatest in the declining years after they tasted glory. Don’t let yourself succumb to the thinking that to stay in the game you too must cheat. Often the answer is to accept a less visible role at least for awhile. See excuses from fraudsters of why they started hiding losses .
54. Character is not necessary to have talent. But character often determines how far and how long the talent will last.
55. Until the last out is counted, there is always hope for a turn-around. But the manager should play the game to a realistic assessment of the situation.
56. Playing not to lose, can cause your collapse and give the opponent that hoped for turn-around. (See Met’s Red Sox World Series). The bigger risk is often playing too conservative, as if you already have won.
57. What you deliver to the team matters, not who your parents are which school you came from or who is rooting for you. True in trading and sports
58. Those from the humblest background are often the hungriest.
59. Hunger with expert guidance produces the stars time after time. Those with the true hunger will choose substance over style every time. Many small programs would do better to spend the money to improve their coaching than to improve their facilities. Facilities are to impress the visitors, not those with a true hunger.
60. Coaching programs that produce one great talent from scratch to the big leagues may be a random lighting strike. But coaching more than one great talent is validation the coach’s program towers above others in attracting that talent and ones coaching abilities. Look for mentors by those they have mentored. See Vic’s former traders successes.
61. Coaches can make a tremendous difference in a kid’s life, but the kid has to want the change. Those that really want it seek out the best coach/mentors.
62. Kids with pushy parents usually make terrible teammates. Don’t hire kids with pushy parents for your firm.
63. Pushy parents make the worst coaches. Avoid investing in nepotism, be it a private company, or an investment advisor. (see 3rd generation inherited company’s failure and major loss rates).
64. Maintaining a routine when you are in a slump can help.
65. But using that routine as an excuse to avoid necessary changes will bring you to ruin.
66. Besides strength training, a flexibility routine can help prevent slowly losing your edge to tightness and expand your range of motion. Repetition can limit some opposing muscles range of mortion. But to maximize that skill or other skills you often need to maximize the range. Recognize and prepare for a wide range of markets: a range bound market, versus bear or bull, versus momentum or decelerating markets
68. Batting practice is essential for most positions. As is throwing the ball and game of catch. Exercise specificity implies cross training takes more effort than training specific to your sport, position and motions. Markets trade differently learn to trade one market at a time.
69. Even though you may be the hero, and put in the hard work, you did not do it alone. The big leaguer honor their parents, and family.
70. Injuries and doubt will occur. Know when to ask for the help and support of others.
71. Be generous to those that supported you during your recover periods.
72. Losses happen. Take your share of the responsibility and learn from it.
73. There are core talents; you must inherently have to succeed. And there are skills that you can develop. Pick your field of play that matches your core talents. Dedicate your time to practicing to sharpen the skills and strengthening the core talents. There are many roles in investments pick one that suits your temperament and core strengths… not necessarily the most glamorous.
74. While there may always be another day and another game. Yet, the players themselves come and go…don’t squander the opportunity given you as a player. Opportunity cost is hidden to many investor, and financial employees .
75. Develop a love of the game. As these love turn into a love of life, you have succeeded no matter the outcome of the game.
76. Women have dramatically ruined many a man's career.
77. But many a woman have quietly supported motivated and made a man, by sacrificially believing in him before others.
78. However, the boisterous courage given by alcohol and other substances have also dramatically killed many a career.
79. Family and true friends have given many a kid the edge needed in the lean obscure years. Support your family’s efforts in capitalism.
80. True friend are those that will tell you what they think you need to hear, not just jump on the bandwagon of the rising star.
81. Practice and play hard. But allow yourself to rest and recover.
82. While beating the odds to make it to the majors does not necessarily make you an interesting, nice person. Yet, the unique qualities that lead to success often do.
83. Kid’s dreams are the foundation of the game. If you love the game nurture the dreams in every kid.
84. Learn from a kid’s dreams: how to give your best, despite the odds of being the best.
85. Learn from a kid’s dreams: Don’t be afraid to test your limits. But be realistic where the limits are.
86. Don’t let dreams of grandeur turn into delusion of grandeur.
87. Though almost all are as poor as mice for years and few ever realize their dream, almost all would not trade chasing their dreams for anything. Few regret chasing their dreams when they are young without obligations.
88. Many little leagues are coach and sponsored by those that chased their dreams. Most never came close to the big leagues. Give back to the community when you “make it”.
89. A good coach doesn’t let kids buy into the cheering fans propaganda. Out side the game they need the most practice of anytime. So inside the game they are the most prepared, and then will remind them of this during the game. Work hard, but have faith in yourself.
90. Most players have 5 minutes of playing time in 2 to 3 hours of down time. Even the pitcher has days off between games. Road trips and hours of repetition in practice. Learning Alertness in the midst of boredom, is lesson most traders can relate to.
91. At a certain point you look around and everybody is trying extremely hard, everybody is knowledgeable of the game. At first you learn trying harder won’t get you there. Next you learn working smarter won’t either. Finally you learn to exploit your particular niche. If you are going to make it in an extremely competitive field your niche strength will have to take you there.
92. But as a parent, coach or mentor, the kid has to come to this conclusion on their own. Because first they must learn to love the game, to give their all. Next they must learn to love themselves to learn to take care of their bodies and finally, they must learn to adapt to love life.
93. Most kids will not make it into the big leagues or even minor level. But most with a good coach and a decent attitude will grow from the experience. Many adults continue to play for the fun and exercise. Trading and making your own investment decisions have their own similar rewards of autonomy.
94. Learn where and when to accept criticism. Measure yourself against valid criteria, to learn what to improve.
95. While there are only 9 basic positions. The infinite stories that emerge from the many teams the various talents each have a rich life behind them.
96. Hustle in and out between innings. Starting with the right attitude makes work better.
97. Don’t hit into a double play. Don’t take the other side of a market after losing on one side for the day.
98. Intentional spiking, beaning the batter etc. may not be provable, but will get you kicked out of the game just the same. You cannot legislate morality. Still, everyone knows when you are being a jerk. Avoid those that think they deserve to be a jerk. 98. Pick a bat that is appropriate for your size. As a kid, you need to be honest with yourself on what the biggest size is that doesn’t slow you down. Don’t trade with too big a percentage or too much money, if it is causing you to slow your thinking and ability to execute.
99. If you are making the same mistake over and over ask a coach to help.
100[!]. The truly hungry players wanting most to improve, keep a diary of their
training and failures and accomplishments.
Finally, while not intentional on my part this repeat what Wooden already said. But it deserves repeating. Wooden’s “Pyramid of Success”
James Sogi writes:
The catcher and pitcher work with each other. The catcher has a different and better view of the batter and what he is doing and can feel the batters positions, mood and tactics. The catcher often signals to the pitcher a strategic call. The pitcher's aim is to the catcher's mitt which the batter cannot see. There is an interesting dynamic between the pitcher and catcher and batter. The ump stands in back and is a fourth level variable.
Baseball in general has an odd dynamic of one batter, and up to three, but typically fewer than three, runners against nine fielders. Seems the odds are stacked against at the get go but the advantage is systemically designed to switch back and forth from defense to offense. Again we see the switch coming after three outs, three bases, three strikes, three fielders, nine innings. Why threes?
Steve Leslie sends his lessons:
As they begin the regular season, the goal of every baseball team is to reach the playoffs. How a team reaches the playoffs reveals a relationship between baseball and markets. Maybe more lessons than one!
Within the current structure of Major League baseball, there are two leagues: The American League and the National League. Inside each League, there are three divisions: The East, the Central, and the West. Four teams from each League reach the playoffs, including the winner of each division, plus the team with the best record from the remaining teams. A review of the 2008 season reveals some interesting facts that may be illuminating with regards to markets.
Looking first at the American League, the winners of each division were the Tampa Bay Rays in the East, the Chicago White Sox in the Central, and the Los Angeles Angels in the West. The Boston Red Sox qualified by virtue of the wild card.
The Angels had the best record in the American League, winning 100 games, achieving a .617 winning percentage. Of the playoff teams, the White Sox had the worst winning percentage, at .546, and qualified only by defeating the Minnesota Twins 1-0 in a one game playoff at the end of the season. Think about this: What dept the Twins from gaining a spot in the playoffs, after playing 162 games, was one single game, lost by one single run.
In the National League, the Philadelphia Phillies won the East division with 92 wins, thus overcoming division rivals the New York Mets, who wilted in the last two weeks of the season. The Central was captured by the Chicago Cubs with 97 wins. The West was represented by the Los Angeles Dodgers, who won but 84 games and finished just two games ahead of the Arizona Diamondbacks. The wild card team, with 90 wins, was the Milwaukee Brewers. The Dodgers, thus, finished barely above .500, yet made the playoffs, despite having just the 8th best record in the National League alone!
So, what lessons can be gleaned from these facts about the 2008 big league season? The first thing that stands out to me is that the difference between success and failure–as defined by the parameter of making the playoffs–can be razor thin. The difference can come down to one game, even a single run. A long regular season consists of 162 games, and every game–even every run, perhaps every individual play–carries a high level of significance. Baseball is a six month day-in and day-out grind, just to make it to the playoffs. Toss in Spring training plus playoffs and it is extended to eight months. If you're not playing a game, then you're travelling. If you're not travelling, then you're working out. It's a brutally tough road, requiring great commitment and substantial sacrifice.
The next point I see is that you can still make the playoffs despite being an average team. The Dodgers made it despite winning 13 less games than the Cubs. In other words, sometimes the path to success involves surviving a tough year, confident that good things can happen.
My third point is evidenced by the Mets. They were generally considered the front-runner in the NL East, but could not finish with any strength, so they missed the playoffs, letting down their avid fans. Front runners, as you see, sometimes get run over.
Fourth, the Cleveland Indians were expected by many to go to the World Series by virtue of their strong pitching, particularly C.C. Sabathia and Cliff Lee. After a dismal start to the season, Cleveland dealt Sabathia to the Milwaukee Brewers. In baseball and in markets, that which seems obvious to many may prove to be incorrect in the end.
Point five comes from the New York Yankees. The Yankee machine, with the largest payroll in baseball, a stable of minor league players, and one of the best run organizations in professional sports, still disappointed, and missed the playoffs. Likewise, there are great companies and great stocks, and they are not necessarily the same at the same time.
Finally, and probably most interesting, is that virtually nobody picked the Tampa Bay Rays to win the American League East or even make the playoffs, let alone progress to the World Series. The Rays had a long and storied history of being a terribly run franchise. Pre-season prognosticators place them behind perennial contenders the Yankees and Red Sox. Still, the Rays went all the way to the Series. Though they lost to the Phillies, this shows that there are always dark horses. A team can get hot and pull everything together for one magical season–or even for a particularly poignant part of that season–provided everyone gets on the same page and dedicates themselves to the same goal. Furthermore, it exemplifies the dictum that even experts sometimes miss the ugly duckling that will become the elegant swan, and that beaten down undiscovered stocks and markets can suddenly become big winners!
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- Older Archives
Resources & Links
- The Letters Prize
- Pre-2007 Victor Niederhoffer Posts
- Vic’s NYC Junto
- Reading List
- Programming in 60 Seconds
- The Objectivist Center
- Foundation for Economic Education
- Dick Sears' G.T. Index
- Pre-2007 Daily Speculations
- Laurel & Vics' Worldly Investor Articles