It’s all about winning. It doesn’t matter if you’re a political party in an election, an athlete of (almost) any description, a charity in a fight for funds, a commercial enterprise in a battle for market share, or a participant in a Trivia night, the desire to come in a
head of your competition rises to the fore in any competitive situation. This thought occurred to me last Sunday while competing in the Auckland half marathon for the 14th (or was it the 15th?) time. Competing at my age is a loose term but one tries and I had the added incentive of running for a charity (The Himalayan Trust, founded by the late Sir Edmund Hillary) so a good performance was important. The issue was, however, what makes for a good performance? Not dying? Sub 1.50? It’s a good question. Certainly for the elite runners any time over 70 minutes would be a disaster while winning the whole thing was actually an aim for 4 or 5 so the definition of “a good performance” is pretty clear at that level; for the rest of us, not so clear. At the end of the day it is really about not doing badly and then working some positives out after the event (or some excuses if things went badly…). Then there are the “events” that you actually aspire to be elite in. In my case, this includes trivia sessions where the competition for a slab of beer or a god-awful $2 trophy is really just an excuse to be elite at something. Podium finishes are an expectation while the spoils of war are also nothing to be sneezed at. Really.
This is also the life of the investment manager. For the elite managers – those that aim to consistently and reliably outperform their peers – absolute returns way ahead of their competition and the markets they invest in are expected and they get well rewarded for so doing. They also tend to pick the markets that they can shine in due to some edge they might posses and these markets can be quite idiosyncratic (high yield municipal bonds in the US for instance) or seemingly quite mainstream (global equities is a good example); the trick is to find something in which you have an edge. For the median, run of the mill, hack, however, the aim is somewhat different: it is “to not be appalling” and therefore not too far out of step of your equally nondescript contemporaries. Here you are managing business risk and the aim is to add “relative value” and stay at least in line with everyone else and preferably just ahead of the real dross. Most managers are like this and their major point of differentiation is that they have none; it is our job to not have those managers on board.
But back to the run… Did I finish up winning? The answer is yes: I passed a lad dressed as a carrot and stayed in front of him all the way to the finish, a magnificent example of man’s superiority over garden vegetables and certainly at least as praiseworthy as not being a consistently 3rd quartile investment manager.