Business & Money

There’s a great book called Extraordinary Tennis Ordinary Players. In it, Simon Ramo writes about how tennis can be subdivided into two categories: professional and amateur.

“In expert tennis, about 80 percent of the points are won; in amateur tennis, about 80 percent of the points are lost.”

In other words, professional tennis is a winners game. It’s about power, spin, and angles. Players have to hit incredible shots that are un-returnable by their opponents.

By contrast, amateur tennis is a loser’s game. Players are constantly hitting the ball into the net, hitting out of bounds, and double faulting. Here, the best strategy is simply to put the ball in play and allow the other guy to beat himself.

I think the same is true of investing. In professional circles, you get complex valuation models, quant funds, and other esoteric strategies. But the vast majority of people are better served just putting money into low-cost index funds and ETFs.

Human Progress

This brings about an obvious question though for the future of markets. What percentage of funds would need to be invested in index funds for this hypothesis to fail?

Let’s back up a second. Investing in index funds is known as passive investing. It’s passive because you aren’t analyzing the fundamentals of the companies in the index. You’re not looking at balance sheets, income statements, measuring return on invested capital, or any of that. Weightings are simply calculated based on the market capitalizations of the companies in the index.

But how are those market caps determined? Prices are set by all of the active managers buying and selling stocks. So, in reality, passive investing is reliant on active investors setting prices.

So coming back to my question, if all (or most) money was invested passively, with no one doing their homework related to the underlying companies, wouldn’t that produce more opportunities for active investors? Wouldn’t that allow prices to stray further from intrinsic value?

Philosophy

This past week, the wife and I went to a meditation workshop at the Shambhala Meditation Center here in NYC. It was a great experience! It started with a 30-minute guided meditation, followed by a short video, and then an open discussion lead by two of the center’s instructors.

The video was this one…

I loved the part about sidewalk cuts and physical accessibility in cities. For able-bodied people, sidewalks cuts are not something we often think about. We simply go about our day stepping on or off of curbs and sidewalks without much consideration. It’s not until you need to push a stroller or move heavy things do these questions of accessibility then jump to the fore of our minds.

A point made in the video is that a lack of physical accessibility measures often comes with an associated lack of mental and emotional accessibility. It’s not just the fact that sidewalk cuts might be missing in certain places, but the thought process that it reflects. It means that there was no consideration given to how disabled people might traverse the environment. It means that disability is not seen as “normal,” and thus physical accommodations are not important or necessary.

A good analogy here might be the separation of bathrooms, water fountains, and other facilities during Jim Crow America. Forcing black people and white people to use different facilities precludes physical closeness. And that in turns precludes mental and emotional closeness.

I think this idea also has something to do with why I find mediation to be such a valuable use of time. In the same way that sidewalk cuts create an onramp from the street to the sidewalk, you might say that meditation creates an onramp to our mental, emotional, and psychological inner-workings.

My Latest Discovery

I’ve recently started following Suhail Doshi, the founder of Mixpanel, on Twitter. I’d highly recommend doing the same for anyone with interest in early-stage companies.

He regularly publishes “tweetstorms” where he rifts on various subjects. Take this one for example about the first 18 months of starting a company.

I loved this one…

And this one…