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  • Dec 02, 09

    My CFA level 3 blog

  • Dec 16, 09

    Reading 13, Alpha Hunters and Beta Grazers.
    The author talks about a saying in investing where in investors generally play what is called a looser's game. This text describes the differences between a looser's game and a winner's game

    • Winner’s Games are those games whose outcome is largely determined by the actions of the winner. Loser’s Games are those games whose outcome is largely determined by the actions of the loser.
    • Amateur tennis is a loser’s game. Non-highly-trained players do not possess the skills to deliver excellent serves and returns with consistency. An attempt to try harder to deliver superior shots, compared to the opponent, will not meet with success, but double faults and shots that go out of bounds. Trying harder to make great shots will mean that you are giving the opponent points. The player is not only competing against the other player, but also against the inherent difficulties of the game. The more competitive the amateur tries to be, the more the inherent difficulties of the game will beat him down.

        

        The amateur who has not mastered the fundamentals of the game is far better off just trying to deliver a shot within the tennis court bounds than trying to outplay the opponent. Keep the ball in play and give the opponent the opportunity to mess up the shot. And, the harder the opponent tries, the more likely he will mess up!

        

        If you were playing a professional tennis player, the situation would change drastically. Professional tennis is a winner’s game. Professional tennis players have mastered the fundamentals of the game. You must not only master the fundamentals of the game to win, but you must also deliver superior shots. You must outplay your opponent to win. Returning the ball within court bounds is not enough. The opponent probably won’t mess up and might well force a shot you can’t return.

        

        In amateur tennis, having the opportunity to hit the ball is an opportunity for the opponent. In professional tennis, hitting the ball is an opportunity for the hitter. Professionals look upon having the serve as an advantage. Amateurs are better off the less contact they need to have with the ball!

        

        Loser’s games are the competitive person’s bane until the fundamentals of the game are mastered. When I was younger, I once lost about twenty-six tennis matches in a row to a friend. The further behind I felt, the more I tried to cream the ball and deliver a killer shot.

        

        I remember one shot actually being in bounds and drilling right through the fence behind the court. Wow! What Power! That was fun. What potential I had! Unfortunately, for that one shot, there were many more shots that hit the net, went out-of-bounds, or, in some other way, cost me a point. The more I tried to deliver superior play, the further behind I got. I had not mastered the fundamentals of the game. Nor, would I ever.

        

        Competitive people want to win. Often, they derive much of their sense of self-worth from winning. So, as the competitive person loses more and more, he will either try harder and harder to win, or else give up. That is a natural human tendency. With tennis, an individual who really wants to win will, in time, learn that by just easing up a bit, more games are won.

        

        Some people make excellent amateur tennis players. They learn just to keep the ball in play. Sometimes, they even feel they will be able to become a professional. Then, they find they are never able to beat the better, more professional players. They have been able to win consistently, despite never really mastering the fundamentals of the game and constantly pushing themselves to improve as player

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