Investment Lessons From Moneyball

Investment Lessons From Moneyball

685 260 CORE Advisory Group

One of the greatest movies of all time, in my opinion, is Moneyball. Perhaps it’s because I always enjoy a good David-versus-Goliath story or, in this case, how a small market team was able to outshine those with much greater payrolls.

The reason is that Billy Beane, the manager of the Oakland Athletics, is a contrarian at heart. He acknowledged a weakness in the method everyone scouted and selected players, thereby giving him opportunities to pick up high-quality, highly skilled but undervalued players for a fraction of the cost.

“In human behavior there was always uncertainty and risk,” wrote Michael Lewis in Moneyball. “The goal of the Oakland front office was simply to minimize the risk. Their solution wasn’t perfect, it was just better than the hoary alternative, decisions by gut feel.”

Similarly, investors should be asking the right questions about how they make decisions. Are they falling privy to human emotion such as following the crowd or making decisions based on intuition?

Success lies in two key concepts: being open to new opportunities and working exceptionally hard to capitalize on them. Great opportunities are constantly around us, but most of us simply don’t tune them in. How would one go about recognizing these opportunities?

Imagine radio waves or cell phone waves. We are unable to see them or feel them, however, we know they exist. Why? Because we have devices that capture those waves and turn them into something we can understand – sound.

This also holds true for “opportunity waves”. They surround us all the time. Every event creates them, yet only a few people are able to tune in, because they made the conscious choice to capture them.

The good news is, you don’t need such a device since our minds are already hard-wired to pick up on opportunity waves. Nonetheless, like most features on your smart phone, you just haven’t figured out how to use them yet.

The best investors have discovered how to effectively utilize that part of their brain. They recognize that every article they read, every interview they listen to, and every presentation they attend is infused with great ideas waiting to be received.

When ordinary investors hear a speaker examine the challenges of the inefficiencies of peak energy production, they attempt to find out which traditional energy producer is the most efficient. When extraordinary investors listen to the same speaker, they think about who is leading the new work on batteries that store power generated in off-peak times.

When ordinary investors read a report stating oil prices are on the rise, they examine which airlines have the best hedging strategies in place. When extraordinary investors view the same report, they consider which aircraft manufacturers are working on future-friendly designs that significantly maximize fuel efficiency.

And when ordinary investors come home to find their teenaged kids abandoned their chores to video chat with their friends, they get upset and take away the kids’ devices. Extraordinary investors also get upset and take away their kids’ devices, but not before deciphering the latest apps they were using and how to invest in them.

Analyze the best success stories over the centuries and you’ll discover, without exception, the ones remembered through time are those who are extraordinary thinkers with extraordinary work ethics. As with yin and yang, you can’t have one without the other.

When you are ready to embrace extraordinary, call or email us at CORE Advisory. Let’s have a CORE Conversation and begin the investor’s journey to EXTRAORDINARY.