Hi Guys,
Will major league baseball ever again see another .400 hitter? Ted Williams was the last such superstar and his singular hitting record dates back to 1941 when he batted .406 for the season.
My answer is that a .400 batting average over an entire Major League season it highly doubtful. Why?
Well the hitters have become physically more powerful and are better trained, but those advantages have been mitigated by similar improvements among the pitching profession. The one improvement mitigates the other, especially since the dispersion in overall talent has narrowed. In yesteryear, pitching staffs lacked sufficient depth. A superior hitter in the late innings enjoyed the advantage of facing a less stellar competitor. Today, that is not so with the well stocked and specialist bullpens assembled by most major league teams.
This outcome is nearly perfectly analogous to what’s happening in the active fund management community. Today’s money managers are all smarter, are far more numerous, and act to cancel each other out in terms of average over-performance. Excess market returns is a diminishing and elusive target.
Here is a quote from Warren Buffett’s ancient partner Charley Munger: “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent”.
He also said: “It’s the strong swimmers who drown”. That surely is a cautionary warning for those of us who consider ourselves competent swimmers in the marketplace’s roiling waters. Beware the behavioral trap of overconfidence.
Simon Ramo, who co-founded TRW (he was the “R”), was a dedicated tennis devotee who authored a book titled “Extraordinary Tennis for the Ordinary Player”. He defined two classes of players: the professional and the amateur. The professional won points; the amateur won by allowing his opponent to lose points. I own the book, it makes a pervasive case for us amateurs, and I have practiced that strategy for decades.
This too has a parallel to investing. Professional investors, with their 10 years and at least 10,000 hours of on-the-job experience coupled with the benefit of immediate feedback for learning purposes, are historically better investors than amateurs without these qualifications. Add a well financed research staff to the mix, and it is easy to accept that a professional investment team should outperform an amateur, at least before expenses. Academic findings support this viewpoint.
Avoiding grand mistakes and cost control are essential elements to successful investing. Here is a Link to a Farnam Street "Avoiding Stupidity is Easier than Seeking Brilliance" article that talks this same talk:
http://www.farnamstreetblog.com/2014/06/avoiding-stupidity/I expropriated many of the thoughts in this MFO posting from that fine article. Please give the source material a little of your valuable time.
Best Regards.
Comments
That's how I won at tennis -- and why my losing opponent always walked of the court fully convinced that he had lost to a lousy tennis player.