The Money game
An important thing to know about investing.
Hi.
Reading time: About 5 minutes
The stock market is what everybody perceives as a money making machine, where all the ‘finance bros’ make all their money.
Now in the markets most people are mediocre investors.
See the distribution curve:
Most of the people participating will be average performers, which is they achieve returns better than AAA bonds but worse than indexes. The high performers are the ones which we call ‘alphas’. They are the Buffett, Munger, Jhunjhunwala, Pabrai , Howard Marks, Druckenmiller, etc. of the world. The low performers of the world are the people who get into reckless trading looking for short term profits or entering into spaces they don’t understand at all. These people end up losing money.
So in this curve most of us will be in the average performance section. Every single person wants to be in the high performance section. But that is a topic which we can speak about another time.
Today let’s look into the high performers. After all those are the people who we want to learn from right?
Every single one of the high performers have their own strategies of compounding their money. Buffett prefers companies which are great quality available at fair prices. Simons who has generated an average of 66% yearly practices a different approach.
Now if you want to learn all of these approaches it is up to you. But every investor has their own style which suits their intellect and personality. As an average investor your job would be to navigate the markets according to your aptitude and which style suits you best.
Again this is not what I want to speak about. Sorry for beating around the bush.
There is one thing which is common between all the high performers.
Their obsession is not in making money but it is in playing the game. Now it is a little funny because the game is to make money, but for them it is a medium of keeping score. It’s not like they don’t care about making money. Of course every person needs money. But their obsession in life is not to become the richest person to spend all their money it is to continuously win at stock picking.
Think about this,
Buffett has not bought a new house since he was around 30. He has a very simple lifestyle in Omaha. He can buy anything in the world. Why would he bother picking stocks when he is 90?
It’s simple. He loves the game. He cannot leave it. For him Berkshire Hathaway is passion. He tap dances his way to work. He’s been in the stock markets since he was 12 years old.
Most of these high performers who have outperformed indexes are financially free. Which is to say that they have enough money to decide how they want to spend their time.
The only thing that keeps them going is the fact that they love to do what they do. This falls back to the importance of the inner scorecard. These people truly like doing what they do. They don’t do it for money or social validation. Given a choice of leaving it and doing whatever they want they choose to continue to do what they have been doing, because it what they want.
Imagine me giving you that option right now. Most people would stop what they are doing. They would travel the world and go start fulfilling their hobbies.
Neckar Value (Frederick Gieschen) wrote,
The best are completely immersed and obsessed with winning. They really can’t help themselves. Many never truly retire from the markets. They are often obsessed with other games as well:
“Ever since I was a kid, I liked playing games, whether it is chess, bridge, backgammon, poker, or sports. I don’t know a single great trader who doesn’t share the same trait. If doing this was about the money, I would have quit a long time ago.” — Paul Tudor Jones
It’s essential that you figure out your motivation. Is it intrinsic or have you become enchanted by the outcomes you’ve observed? When Stanley Druckenmiller was asked about what he looked for in money managers, he responded with “number one, passion.”
“This business is so invigorating to certain individuals, they’re going to work 24/7, and you’re competing against them. If you’re with people doing it for the money, you’re going to get run over.” — Stanley Druckenmiller
Remember: these are the kinds of people you compete with.
I don’t think you can choose to be like this. For better or worse, you’re either hooked or not.
What if you’re not as passionate? Accept who you are and investigate what you are passionate about. Allow yourself to be curious. As it relates to investing, find a strategy that doesn’t require the same intensity. Ben Graham pioneered the practice of security analysis and yet he, a deeply curious intellectual, pursued a deep value strategy that allowed him plenty of time for his other pursuits.
“The most successful students are those that truly love what they are doing. Don’t go into this to make money.” Joel Greenblatt
“Good investors are data driven and enjoy the game. These are people doing what they love doing. It really is a game, a game they love.” Warren Buffett
That’s it!
Thank you for reading,
Samvit.
"Their obsession is not in making money but it is in playing the game"
"The only thing that keeps them going is the fact that they love to do what they do."
- Great quotes and an important life lesson