Hi Guys,
It is not what you think. No, in this instance MTA is not Metropolitan Transit Authority; it is not the nonstop subway system made famous in the Kingston Trio’s song of the same name. In this case, MTA means Most Trusted Advisor.
In the end, I propose that you identify your MTA by trying a tournament structure as used in the National college basketball playoffs. Your Final Four MTA group should be populated by the financial wizards who you would most like to share a dinner, question them on financial matters, and likely accept their composite recommendations.
In this tournament, you get to pick your contestant field, your Final Four, and finally, for closure, your ultimate champion. Time constraints should be abandoned to not limit the scope of your contestant field. Assume you have access to all historical figures.
Note that I have modeled the tournament like the March Madness basketball tournament conducted by the NCAA annually. In that tournament, 64 candidate teams are selected for the competition. Since you are organizing the event, you choose the size of your field, and you specify the winning criteria.
If a complex tournament structure is not to your liking, compile a short list of only the Final Four and vote for your champion. Using gut instincts often produces reliable results. Daniel Kahneman, Jonah Lehrer, and Jason Zweig make the case for reflexive (speedy, intuitive, survival) approaches in “Thinking, Fast and Slow” , “How We Decide”, and “Your Money and Your Brain”, respectively.
But when confronted with unfamiliar and/or complex circumstances that generate tension and strain caused by data overload, your reflective (slow, thinking, logical) brain automatically jumps into the pool to rescue the decision process.
Perhaps another approach to prepare and resolve your personal MTA decision tree would be to assemble an inclusive candidate list, and serially order it from the “most trusted” to the “least trusted”. Remember, this is primarily a mental drill to develop decision criteria. Napoleon Bonaparte was a grand scale planner and reputedly an innovative investor. I included him in my listing.
My recommended method is to construct a tournament matrix that copies the March Madness pattern; a head-to-head, single elimination series of contests. This scheme is called “Bracketology”. It has been applied in arenas far removed from the sporting world with some success. At the very least, it stimulates discussion and controversy. As each individual decision for advancement is made, it forces the decision maker to identify the reasons that support his like-or-don’t-like arguments. It will help to crystallize and focus attention on what the participant feels is important. It provides some order under chaotic decision conditions. This matrix format adds yet another device to the decision maker’s tool kit.
How to contribute to this survey? The submittal requires two mandatory inputs; an additional third input is optional. The mandatory inputs are your choices for the Final Four and the single MTA, the champion. The optional input is a short paragraph that explains the rationale for your selections.
Please respond. If enough replies are posted, I will summarize the MTA winners later.
The Bracketology concept applied to financial matters is not my idea. I discovered its flexibility and benefits after securing a copy of Mark Reiter’s and Richard Sandomir’s book “The Final Four of Everything”. They apply this one-on-one technique to 150 diverse subject categories that range from history and politics, to food and drink, and to Yogi Berra sayings. This can be a fun exercise.
After a few days, I will add my opinions to whatever replies have accumulated. I don’t want to contaminate your independent opinions at this juncture. I have completed the exercise.
I plan to deploy a 32-unit Bracketology approach in my response. But I did not position my 32 candidates in a random fashion. I elected to organize my contenders into four distinct groupings. Importantly, the four major advisor groupings were: (1) money managers, (2) financial wizards, (3) economic thinkers, and (4) financial writers and historians. For example, Peter Lynch, George Soros, Adam Smith, and Peter Bernstein were included as candidates in separate categories, respectively. Within each group, the first round match-ups were randomly chosen.
Once mind is put to this task, there is no trouble filling all entry slots. The matrix could easily have been expanded to 64 without compromising quality. Dependent upon your commitment to this task, you get to choose whatever number of entries satisfies your imaginative set of MTA heroes.
I arranged my bracket match-ups so that the groups only compete against members of the same group until the Final Four shootout. In that way, I’m assured that my Final Four will have a representative from each primary financial discipline. That will guarantee a diverse perspective and stimulating debate. I always favor a balanced approach. That allows the old adage that “the sum is greater than the parts” to fully engage.
The champion that emerges from the Final Four centerpiece encounters is not as critical as exposure to all four distinctive endgame viewpoints. Most likely, I would cobble together a portfolio that reflects the diverse perspectives from all four finalists.
Here’s an odd tidbit of the single elimination one-on-one tournament that you might find useful. The individual number of contests (games, decisions) that are required to achieve a champion in the single elimination tournament format is (N – 1). N is the total number of entries. So if the tournament has 32 entry units, 31 contests are needed to crown a champion.
That’s the basics of the Bracketology concept. All that remains is application of it by a statistically significant number of MFO members. The ball is now in your court. Please play. I recommend that you probe outside the box and permit your thinking to diverge before it converges. That technique encourages innovative solutions.
The purpose of this exercise is intended to provide both a fun and a learning experience. Try it.
Best Regards.
Comments
1. Jim Rickards: I think the way that Rickards blends geopolitics and finance is increasingly valuable and effective in today's financial markets. Clear, concise and unique in perspective (Rickards' specialty is "threat finance" and he deals with the DOD and other government agencies; he also worked with the military on a recent financial wargame.) His book, "Currency Wars" just came out last week (and is an excellent read.)
2. Meredith Whitney: Smart, unafraid to make bold calls and well, easy on the eyes.
3. David Einhorn: A manager who has presented a strong sense of ethics and continues to present himself in a straightforward manner, Einhorn continues to quietly (well, aside from the effect of his speeches on stocks like Green Mountain Coffee) go about an excellent career (iffy first half of 2011 aside.)
4. Jacob Rothschild: Has lead RIT Capital Partners (which I own) from a 3M pound in net asset value fund in 1961 to 1,984M pounds as of 3/31. Not to mention the stories he could likely tell, the connections and more. This would be my pick for someone similar to Soros.
Although I am saddened by the paucity of replies which negate any meaningful statistical analysis, I do extend my hardy thanks to those MFO members (one at this point) who did offer their Final Four. I appreciate your effort.
As promised in my original post, here is my 32-unit MTA (Most Trusted Advisors) listing, the Final Four from the virtual tournament, and the criteria that permitted these four to successfully navigate each round. The listing of candidates also depicts the first round duels which were picked randomly within each division.
In the Money Managers Division: (1) Peter Lynch faced (2) Warren Buffett, (3) Jesse Livermore faced (4) David Swensen, (5) Mohamed El-Erian faced (6) Nassim Taleb, and (7) Benjamin Graham faced
In the Financial Wizards Division: (9) George Soros faced (10) Napoleon Bonaparte, (11) Bernard Baruch faced (12) Barr Rosenberg, (13) Jack Welch faced (13) Charles Ellis, and (15) Andrew Lo faced (16) Robert Merton.
In the Economic Thinkers Division: (17) Adam Smith faced (18) Ludwig von Mises, (19) Alexis de Tocqueville faced (20) William Sharpe, (21) Paul Samuelson faced (22) John Maynard Keynes, and (23) Milton Friedman faced (24) Karl Marx.
Finally, in the Financial Writers and Historians Division: (25) Peter Bernstein faced (26) Tom Bulkowski, (27) Daniel Kahneman faced (28) Ayn Rand, (29) Jude Wanniski faced (30) Benoit Mandelbrot, and (31) Mark Skausen faced (32) Robert Shiller.
Just the list itself tells a story about the investor who compiled the MTA roll-call.
After three grueling rounds of hopefully consistent officiating, the Final Four emerged. By the way, the decision making took far less time than staffing the matrix slots. I suppose I was using my intuitive, reflexive brain in the decision process.
The Final Four are: Warren Buffett, Andrew Lo, John Maynard Keynes, and Daniel Kahneman. This is surely an elite group. These four would make engaging and combative dinner guests.
Warren Buffett survived because of his long term record of delivering excess returns; he generated positive Alpha for decades. He definitely has established himself as a super-investor with uncommon wisdom and commonsense. Nothing succeeds like success.
Andrew Lo is an educator who has successfully transitioned from the Halls of Ivy to Wall Street. He has skillfully adopted and adapted behavioral findings into an aggressive investment philosophy. He is an innovator. He has formulated an Adaptive Market Hypothesis that uses social, biological, and physical modeling parts.
John Maynard Keynes was a giant in the economic community whose insights and programs dominated Nation building economic policies for decades. He was a successful private investor. He never feared changing his position when the data so directed. As Winston Churchill said: If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.”.
Daniel Kahneman is a founding father of financial behavioral research. It is rare to have immediate access to a true originator in an evolving scientific discipline who reports its progress so beautifully. He totally destroyed the hypothesis of a rational investor. His research and superior reporting in this fast developing arena should make us all better investors. I have likely been influenced in this selection by what Kahneman would term a “recency bias”. I am currently reading his fascinating new book “Thinking, Fast and Slow”.
This outstanding group of thinkers would make for lively table talk at dinner or over cocktails.
Warren Buffett is my winner overall. My toughest decision occurred in the final battle when, because of my placement of Divisions, Buffett was pitted against Keynes. Keynes was a classical renaissance man. His economic concepts and formulations ruled worldwide policy for decades, and he made compelling arguments to achieve that high status. In the end, Buffett received my vote because of his unchallenged investment record, coupled with his wit and folksy writing style. My final decision was strongly influenced by my overarching investment criteria.
The final outcome could easily have been different if the Division structure had been altered; in many instances, the sequential order of the individual contests determine the final victor. That is a definite shortcoming of the Bracketology system. It is both pathway and criteria dependent.
This completes my initial commitment. Please consider volunteering your own Final Four. There is still time, and I need more submittals to generate a meaningful summary.
Best Wishes.
3 replies after 24 hours is a good showing, I will state.
I surely can't speak for the rest; but I would suspect some regulars at MFO feel great about the fact they are able to visit and read more than once a week.
Let's see:
--- 10-14 hours per day for the "job" including possible travel time, cleaning one's body, and the many extras employers expect these days; as in work performed at home without pay, etc.
--- 8 hours of good sleep, if one is real lucky
--- 1-2 hours per day with the children, which could include after hours school activities and I sure hope keeping up with the childs school studies and homework.
--- the remainder of the time may include incidentals, such as: washing/drying clothing, grocery shopping, cleaning the house/apartment, all other domestic chores if one is a home owner, family and friends.......it appears I am already into a 30 hour day and have not yet included time to study for how to invest one's monies.
Oh, my final four are rotational/dynamic. They must be alive, so that I may determine their current assessment of the global situations and circumstances. If they appear to have had a clue as to the markets from the past 3-6 period, they may remain on the list. This situation causes those who are trying for the dynamic final four to be pretty sharp thinkers; both from a rearview perspective, as well as thoughts going forward.
***Tom Keene, Bloomberg radio and midday report on tv offers pathways to some of these folks; and does so in a most gracious manner. He knows a lot of bright thinkers; which allows the listener/viewer to make an assessment of the individual.
I do read sites as: JackAss.com, ShadowStats.com and Zero Hedge; as one may obtain more than enough mainstream from the traditional sources; and as has been the case for many years, one better be driving on some of the side roads of investing and not always traveling the usual roads with everyone else, in order to provide a more expanded view of the neighborhood.
Back to work for me..........................
Regards,
Catch
Recent Jim Rickards interview:
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/11/12_Jim_Rickards.html
Also, Rickards thoughts on where Libya gold is:
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/11/12_Jim_Rickards.html