Winning The Loser’s Game

[Jarrell Campbell]

Ihad the opportunity recently to read Charley Ellis's Winning The Loser's Game. This is an investment classic and should be required reading for anyone who is either picking their own stocks or trying to pick a winning actively managed mutual fund manager. If you're already convinced that using index funds is a better idea than either of those, you're not going to get much out of this book, other than some reinforcement of your views, a better ability to stay the course in a downturn, and a lot of great quotes. However, this book is Bill McNabb's (CEO of Vanguard) favorite investment book for a reason and is often referred to by other Boglehead authors. It was first published in 1998, but the sixth edition, published in 2013, reads like it was just written, and includes lots of references to the Global Financial Crisis and events that have occurred since.

A small boat sailor can do little to change the wind or tide but can do a lot by selecting the right course, keeping sales well trimmed and by knowing what he and his boat can do in heavy weather and watching for the signs to avoid serious storms. Similarly, the investor can work with the markets to achieve his or her realistic objectives, but must not take on more risk of heavy weather or possible market movements beyond his capacity to sustain commitments until the market storms have passed.

For most investment managers, portfolio management is neither an art nor a science. It is instead an unusual problem in engineering, determining the most reliable and efficient way to reach a specified goal, given a set of policy constraints, and working within a remarkably uncertain, probabilistic, and always changing world of partial information and misinformation, all filtered through the inexact screen of human interpretation.

If you must play the market to satisfy an emotional itch, recognize that you are gambling on your ability to beat the pros. So limit the amounts you play with to the same amounts you would gamble with the pros at Las Vegas. (keep accurate records of your results and you'll soon persuade yourself to quit.)

Given that I've read dozens and dozens of similar books, it is very rare that I truly learn more than one or two new things about personal finance or investing while reading them. The law of diminishing returns and all that. The thing I never really knew before reading this book was an additional benefit of donating tax-deferred accounts to charity at your death. Not only do you get to avoid the income taxes (Uncle Sam's portion) and the estate taxes due on that money, but you get the additional decrease in the size of your estate by donating Uncle Sam's portion of that account. I had never really considered that before. So if you have an estate tax problem, give the heirs the Roth and the taxable account, and give the tax-deferred accounts to charity. I'll probably never have that issue, but some of you will.

Charley Ellis is a big fan of the 100% stock portfolio. While it is most likely that a 100% stock portfolio will be the highest performing portfolio, behavioral issues prevent that from being the highest performing portfolio for most individuals. I think he could have spent a little more time discussing the merits of bonds in the book. It reads a little too much like Stocks For The Long Run in that respect.

The book summarizes the most important information on the blog and contains material not found on the site at all. Straighten out your financial life today! Also available on Audible!

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Simon Ramo was a pioneer in the development of the microwave, intercontinental ballistic missiles (ICBM), and guided air-to-air rockets. He and his company, TRW, went on to do almost all of the general contracting for the early US Space Program. Much of his work was the reason why the USA passed the Russians in the space race. USAF General Bernard Schriever, head of the ICBM program, described Ramo as "the architect of the Thor, Atlas, and Titan" rockets. We can see he was a remarkably smart person. Simon Ramo was also an athlete who enjoyed tennis.

In 1970 Ramo came out with a book on tennis strategy, Extraordinary Tennis For The Ordinary Player. Seeing the game through his engineering lens, he identified that there were really 2 games of tennis.

I love finance. I work in personal finance as a financial advisor and CFP (Certified Financial Planner). Money makes people emotional and often very competitive. People like winning. How on earth though does the average Joe beat Wall Street? I\u2019m in a compliance-driven industry so I\u2019ll save that for another day.

In 1975 Charles Ellis wrote a piece on investing that went on to win the Graham & Dodd Award of Excellence. It was called The Loser\u2019s Game and was based on prior work from a remarkable man, Simon Ramo.

Simon Ramo was a pioneer in the development of the microwave, intercontinental ballistic missiles (ICBM), and guided air-to-air rockets. He and his company, TRW, went on to do almost all of the general contracting for the early US Space Program. Much of his work was the reason why the USA passed the Russians in the space race. USAF General Bernard Schriever, head of the ICBM program, described Ramo as \\\"the architect of the Thor, Atlas, and Titan\\\" rockets. We can see he was a remarkably smart person. Simon Ramo was also an athlete who enjoyed tennis.

Meanwhile, amateur tennis is almost entirely different. Great serves, long rallies, and brilliant shots aren\u2019t commonplace. More often than not, you\u2019ll see double faults, balls hit into the net, and balls hit out of bounds.

A Loser\u2019s Game is a game in which the ultimate outcome is determined by the actions of the loser. Victory is due to losing fewer points in unforced errors than your opponent. At the end of the day, professionals and experts win points while amateurs lose points.

Keep it simple - Simplicity and concentration are undervalued. Most lose their way to winning by wandering in a maze of details. In football terms, \u2018the best strategy in the world won\u2019t pay off without skillful blocking and tackling.\u2019

Salience and satisfaction are important factors in determining the comparisons that people make. We hypothesized that people make salient comparisons first, and then make satisfying comparisons only if salient comparisons leave them unsatisfied. This hypothesis suggests an asymmetry between winning and losing. For winners, comparison with a salient alternative (i.e., losing) brings satisfaction. Therefore, winners should be sensitive only to the relative value of their outcomes. For losers, comparison with a salient alternative (i.e., winning) brings little satisfaction. Therefore, losers should be drawn to compare outcomes with additional standards, which should make them sensitive to both relative and absolute values of their outcomes. In Experiment 1, participants won one of two cash prizes on a scratch-off ticket. Winners were sensitive to the relative value of their prizes, whereas losers were sensitive to both the relative and the absolute values of their prizes. In Experiment 2, losers were sensitive to the absolute value of their prize only when they had sufficient cognitive resources to engage in effortful comparison.

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An activity profile of competitive 3 2-min novice-level amateur boxing was created based on video footage and postbout blood [La] in 32 male boxers (mean SD) age 19.3 1.4 y, body mass 62.6 4.1 kg. Winners landed 18 11 more punches than losers by applying more lead-hand punches in round 1 (34.2 10.9 vs 26.5 9.4), total punches to the head (121.3 10.2 vs 96.0 9.8), and block and counterpunch combinations (2.8 1.1 vs. 0.1 0.2) over all 3 rounds and punching combinations (44.3 6.4 vs 28.8 6.7) in rounds 1 and 3 (all P Not only did this vital Democratic voting bloc help put Alsobrooks over the top, but Black women in public office or aspiring to public office in Maryland feel seen and empowered like never before. And you can be sure this will redound to future vital political contests in the state. Alsobrooks may be on the verge of blowing down one of the biggest doors in politics. Others will walk right through.

Anyone who doubted that the Democratic state senator from Anne Arundel County and the likely future U.S. House member from the 3rd District was anything but a political thoroughbred must surely be convinced now. She is nothing if not a tenacious, focused, resolute campaigner who takes care of her political base and knows how to expand it, winning 35% of the vote in a 22-candidate field. And we can all say we knew her way back when.

Did the state attorney general owe U.S. Rep. David Trone (D-6th) some loyalty for all the political and financial help Trone has given him through the years? Sure. But did it make sense for Brown to endorse Trone over Alsobrooks, with whom he always had a close relationship, in the Democratic primary for Senate? That seems like a miscalculation, at a minimum. Brown is closer to the end of his political career than he is to the beginning, and his endorsement of Trone may not hurt him all that much politically. But surely he succeeded in burning a few bridges unnecessarily.

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