Apr

10

It has always seemed to me that one of the worst and most frequent causes of defeat in basketball is showboating. After being ahead two games ago by 17 points at the end of the third quarter, the Knicks managed to lose to Atlanta. The loss came after a 3 point shot by Novak that the whole bench jumped up to cheer about to Novak's Gallinari like smile of triumph and joy. I say that too many games are lost when one team has a large lead to bear consistent with randomness or lack of serial correlation which some Kahneman like biased researchers playing to the crowd have posited for bastketball. A main cause is showboating but the general problem of letting up is relevant also. "Never let up" is a great motto for market players and basketball players. I tried to insulate myself from this in squash by pretending that the score was reversed against me when I got a good lead in squash. I tried to hold my opponents to straight game losses and under double digits when I played. And to a remarkable extent I was successful at it. I don't ever remember losing a match when I had a big lead, and I remember all my losses. I wish I were as good at not letting up or winning in the markets as I was at squash. I am not one tenth as good. What is the remedy for letting up and showboating in the market? I would say the answer must be quantified. What's the expectation when the market is up by x or more with just y hours to the close. What happens after a inordinate move with a bar? That's a start.

A coach unlike the terrible and ineffective D'Antoni who was such a source of the Knicks losing records, and now that he has been fired is receiving such loving and adulatory treatment by the press, in a syndrome of "don't say bad things about the man who died" was actually encouraging of the showboating. Which coaches are good at rooting out showboating, and good at maintaining leads? What can we learn from them? How could it be applied to markets?

On another front, a reader writes in response to Tim Melvin's great piece about baseball that baseball is dying in the US as the blacks abandoned it for basketball and the kids now abandon it for soccer. He says the baseball diamonds are empty. Is this statement true? Are there any profitable activities based upon that idea? I wonder if it can be generalized to buying stocks that the kids are interested in as opposed to what adults like. My kids are very adept at picking stocks.

T.K Marks adds: 

The showboating tedium would appear to be not limited to basketball, but rather a pervasive plague that cuts across all sports. Golf may be the last refuge of sporting decorum. Same for Wimbledon.

Some years ago NFl coach Marty Schottenheimer referred to this trend as the "SportsCenter mentality." Everybody wants to be an ESPN highlight. As such, the objective in many football circles is no longer to wrap one's arms around the ballcarrier to better ensure making the tackle but rather to lead with the shoulder and try to knock the guy into the next zip code. The problem is they're going after a moving target and shoulders however brawny can't grab. Arms can.

"…In 1998, when the Kansas City Chiefs were penalized 15 times in a game, many for taunting, showboating, late hits and every act of unsportsmanlike conduct, their disgusted head coach, Marty Schottenheimer, explained, "It's the 'SportsCenter' mentality."

A cultural anthropologist might say that the devolution of decorum that we see on playing fields is a reflection of shifting social mores that increasingly accommodate an anything-goes, me-me-me collective mindset. It's the ascendance of flamboyance over fundamentals.

It's not a trend that is limited to sports. A friend's mother is an English professor. She once shared with me an observation she had made of her students: Nobody could spell anymore. Even seemed to be oblivious to the 'i before e' thing. Rather, they all went for shock value in their compositions. The implication being that spelling was insufficiently postmodern in their eyes, I guess.

P.S. I may have to re-visit that golf as a redoubt of manners notion. As I type I'm watching The Masters on tv and Tiger Woods just hit an errant shot. He kicked his club, demonstrably pouted, cussed. The whole fairway intemperance package.

Kurt Specht writes:

Fortunately, Tiger is the rare exception and nearly all involved with professional golf do maintain civil decorum. He has been an arrogant ignoramus for many years.

Jay Pasch adds: 

This is a gold mine for a trader, and for the bullish chartist to invert the chart once in a while in order to see what the other side has in mind…

An anonymous contributor writes in: 

Perhaps the markets equivalent to showboating is market arbitrage, because both have a way of snatching defeat from an apparent victory. Both show disrespect for those on the other side of your performance. Both imply that you are the smartest most talented and your approach is the only side worth considering. The other side is either stupid, without hope of duplicating you or blind to the easy win.

Sometime the common sense of "no free lunch" will help those vulnerable to hubris reject something presented with the actual word "arbitrage". However, if you are vulnerable to hubris of omniscience (including science is complete and has all the answers) or manifest destiny (mystical chosen favor) you still are prone to believe the con man pitching your talent, position and place. You want models or world views that confirm you are right rather than confront where you need improvement. You do not want to look for the true risk reward trade off.

The reason both showboating and "arbitrage" are so dangerous is: it disarms one to the risks, so that you become blind to the risk outside your vantage point. It dismisses the risks that you are the one wrong or the sucker at the table that you are being hustled (see AIG or subprime CDO counterparties to the too big to bring to justice). It makes others hold you in the same contempt you show to the weaker hand… and makes you a target for the bigger fish. It invokes envy. It causes you to seek affirmation rather than constructive criticism, making you prey for those with flowery words. It rejects coaching especially from those "beneath" you. It assumes you have arrived and need not evolve.

Risk is constantly evolving. If there was an underlying attitude that caused the crisis it was that AAA credit was not vulnerable to this evolution. 

Russ Sears writes: 

Vic, one need not worry too much about baseball's future if one visits small towns in Oklahoma and Texas. What the blacks may have abandoned, the hispanics have filled in. There will still be those most hungry for success ready to fill the city kids place.

35 years ago, in 6th grade, I lived in Glencoe, OK, a town so small that I could walk from one side to the other in 5 minutes. I played 3 sports, baseball, basketball and track. The biggest building was the school gym. The stands would be half full for a 6th grade baseball game. The population would more than double when the high school teams played since the county folks and the visiting team's fans also swarmed the stands on a Friday night.

I went back to visit a couple years ago. The dirt track was now trailer classrooms. The whole town had turned into a trailer park,  perhaps tripling the population from 1970s. Glencoe is now the "new" poor, those outside the mainstream media view but growing, looking and waiting for their chance. The town is run down, the houses from the 70s all are run down and trailers surround them, even on the smallest lots. Besides the trailers, the school building are all from the 70s.

However, the baseball diamond is much bigger and better than before. The stands and concession building are much bigger also. I imagine them full on a Friday night in May.

I would suggest that in addition to trusting the stock picks of your kids, you ask farmers and others who travel all over the country their local picks. Ask those where the money is flowing what they see.


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