What does Baseball, oral sex, and Investing have in common?

A valuable lesson, that’s what. And one of the wildest series of events that has happened to me.

I was 16 at the time and had just started year 11. One of the girls from school, who happened to catch my bus, developed a crush on me. We’ll call her “Crystal” to protect her identity. Well Crystal was trying really hard to get me to be her boyfriend.?

My friends knew she had a crush on me, and they were pressuring me to say yes. I knew there was something off though. I was also torn with how I can turn her down without being a dick and hurting her.?

One afternoon on the bus ride home, I’d worked out how to politely say no, I’m not interested in a girlfriend at the moment. After I told her this, she blurted out “I’ll give you a blow job, I’m really good at giving head”.?

Mind you we’re sitting on a bus during this conversation. Kids older than us and younger.? She wasn’t shy about it.

At that stage I already had a gut feeling something was off, but I couldn’t put my finger on it.?

After all, I was a 16 year old boy, and just gifted a guaranteed blowie if I said yes. What would you have done?

With teenage hormones pumping and trying to make sense of my own emotions and hers, it was tough.

But my gut said no, so I listened to it. I thanked her for the offer and said no. Who knew I had delayed gratification down packed!

That night I tried to make sense of what my gut, or subconscious knew but I hadn’t worked out yet.

I reached out to my dad and had a chat about it. He listened, asked a couple of clarifying questions, and then asked me inquisitively “so why’d you say no?”.?

I thought for a while, and realised her behaviours and actions showed that we had vastly different values.?

There was also a risk...

I could tell by the way she handled rejection, that I might be worse off down the road if I say yes.

Well, the next day we were all good and she respected my answer. The result was nowhere near as bad as I thought. I’d worked myself up for nothing.? A week later she was dating someone else.

I’ll tell you how that ended up in a minute.

Looking back, I can see how hindsight can blind you from the fact it is extremely difficult to make the right decision in the moment.?

You don’t have all the information you need, and an infinite number of future outcomes could happen! Worse yet, when you get into the future and look back, only one of those potential outcomes occurred.?

Was it the most likely outcome? The least? Or something you hadn’t even thought of??

Investing has many similarities.?

When you’re making a decision, you have imperfect and partial information. There are infinite outcomes that could happen.?

But what I learnt was that risk is everywhere. Surprisingly my subconscious had done a risk assessment for me. It was telling me the odds are not in your favour.

Too much downside and not enough upside to warrant the risk.

It also taught me that it’s ok to say no. Not every opportunity needs to be seized. Especially when peer pressure is literally screaming and harassing you to say yes.?

I guess that single event, saying no in the face of peer pressure and groupthink, was reinforced 10 fold by what happened next. I’ve taken that strength to say no with me through life and it is critical to investing successfully.

Here’s what Howard Marks thoughts are.?

I don’t think many investment managers’ careers end because they fail to hit home runs. Rather, they end up out of the game because they strike out too often – not because they don’t have enough winners, but because they have too many losers. And yet, lots of managers keep swinging for the fences.

They bet too much when they think they have a winning idea or a correct view of the future, concentrating their portfolios rather than diversifying.

They incur excessive transaction costs by changing their holdings too often or attempting to time the market.

And they position their portfolios for favourable scenarios and hoped-for outcomes, rather than ensuring they’ll be able to survive the inevitable miscalculation or stroke of bad luck.

At Oaktree, on the other hand, we believe firmly that “if we avoid the losers, the winners will take care of themselves.”

Howard Marks - What's Your Game Plan Memo from 5th of September 2003

Another classic is from Warren Buffett’s Forbes Interview from 1974 using a baseball analogy.

Investing is the greatest business in the world because you never have to swing. You stand at the plate; the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you. There’s no penalty except opportunity. All day you wait for the pitch you lie; then, when the fielders are asleep, you step up and hit it.

Buffett and Marks both highlight patience and maintaining high standards. Something I was willing to do.

Networking and Mentors

Another similarity was seeking people you trust and have more experience than you. It helped a lot to leverage my fathers experiences, especially because it was guiding me to understand myself. Investing is no different. Investors network and learn from each other just like everyone else. Perhaps the most public networking was when Mohnish Pabrai and Guy Spier won a charity auction to have lunch with Warren Buffett. They say $650,100 was worth every cent. Just this past week Guy Spier held a networking event for value investors, VALUEx.

Emotions and Decision Making

Finally, emotions make you irrational. Do you think it was rational for a girl that’s been rejected by her crush to say that? Nope. When we’re making decisions based on emotions, we are at the whim of our worst selves. Have you ever looked back on a conversation and said to yourself “gosh, why did I say that?”. I have.

Emotions are an alarm system, our body trying to tell us something. We need to listen to it, understand what it means. Then actually think rationally. Why have a frontal lobe if you don’t use it??

The stock market can cause a range of emotions. However, it’s up to you how you respond. Act emotionally and you’ll sell low (out of fear of loss), and buy high (out of fear of missing out). Leaving you worse off than dollar cost averaging into a broad ETF.?

Dealing with your emotions and making decisions are a muscle. You need to get reps in, practicing the right decision, so when it gets harder, you’re ready to make the most rational decision.?

As you can see, everyday life and investing have a lot of transferable skills. On the way to mastering investing, you end up mastering yourself. That’s why I love it. Self mastery feels awesome.

Oh yeah, the story.?

So Crystal and her new boyfriend of one week made it all the way to home base in the car park of a local fast food restaurant.?Ahh young love.

One week later they broke up.?

And about a month later, things had spiralled out of control. So much so, that Crystal stormed into her ex’s classroom while the teacher lectured from the front of the room, a class full of other students. Crystal started shouting abuse at him, hitting him and throwing things at him from around the room. All in front of a class and teacher, just as shocked as him.

Definitely dodged a bullet there. It turns out crazy ex girlfriends aren’t just in the movies.

Till next time,

Jack

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