This month’s BOOK OF THE MONTH requires some acknowledgment. Ann and Pierce gave it to me. They just thought I had to read it. They were right.
I met Ann and Pierce long before we met.
That’s not a typo. At St. Olaf, one of my majors was English (when I wasn’t trying to get through chemistry). It turns out Pierce’s dad was the chairman of the English department. So, in a way, he’s responsible for my fractured prose. A good chairman would have steered, right away, to me to “English as a Second Language.”
I, of course, did not know Ann and Pierce at this time.
Pierce, Ann and I met years later through Mary Kay. Ann and Mary Kay went to graduate school together and then went on to be senior executives at a company that was sold in 2000. Ann went on to start another company. Mary Kay and I were seed investors, helped raise funding and served on her board of directors. Ann sold the company last year.
In addition to a ton of money, she was rewarded for her efforts by contracting breast cancer. In the midst of her cancer treatment, she forged on with her family’s planned vacation to Switzerland. While hiking with Pierce, her beloved brother collapsed and died of a heart attack. Life is volatile.
In the midst of all of this, they had time to give me a book to read. It’s called Moneyball by Michael Lewis. At first, this doesn’t strike one as a finance book. It’s about baseball. But, the more I read, the more I realized it was a finance book. It’s about applying analytical rigor to an inefficient market to exploit the inbred conventional wisdom and aversion to failure. This quote from the book ties in perfectly with the Keynes quote that is always on the front page of my letter:
Managers tend to pick a strategy that is least likely to fail rather than pick a strategy that is most efficient. The pain of looking bad is worse than the gain of making the best move.
This book details how the Oakland A’s exploited that inefficiency (despite having one of the lowest payrolls in the major leagues) to make the playoffs every year and, somehow, win a record setting 20 games in a row.
This is the kind inefficiency I’m trying to exploit with the Plumb Performance Portfolio©.
Thanks Ann & Pierce, and best wishes for a happy, healthy and less volatile 2008.
