Investing's Great Game
Friday, 8/08/2025 09:01
Want the thrill of the casino? Go to a casino...
AS THE LATE, great value investor Peter Cundill once remarked – and it became the title of one of his biographies – 'There's Always Something to Do',
writes Tim Price at Price Value Partners.
The more pessimistically inclined can, of course, take the flipside of that argument, and invert it, such that There's Always Something to Worry About. In 2025, the list of legitimate concerns could plausibly include any and all of the following, namely:
- The highest global debt levels ever
- Credit ratings are now much lower than in the past – more than 50% of investment grade bonds are now rated "BBB" (the lowest rung in the category)
- Tariffs and trade wars
- Transfer of jobs from humans to machines and AI
- Softness of economic growth
- Mistrust of capitalism (and democracy)
- Rising support for socialism.
So it's important to discriminate between what's worthy of worry, and what should, as far as possible, simply be ignored, or at least accepted as something we cannot alter. We've cited in the past Reinhold Niebuhr's Serenity Prayer:
"God, grant me the serenity to accept the things I cannot change,
"Courage to change the things I can,
"And wisdom to know the difference."
There is probably a loose connection somewhere in humanity's mental wiring whereby some of us – ourselves included – get distracted by the thought of worry itself. In his book 'The Psychopath Test', Jon Ronson writes amusingly of discovering something called DSM-IV-TR, which is:
"...an 886-page textbook published by the American Psychiatric Association that sells for $99. It sits on the shelves of psychiatry offices all over the world and lists every known mental disorder. There are currently 374 known mental disorders. I bought the book and leafed through it, searching for disorders that might compel the sufferer to try and achieve a position of power and influence over others.
"Surprisingly, this being such a vast book packed with so many disorders, including esoteric ones like Frotteurism ('rubbing against a non-consenting person in a public transportation vehicle while usually fantasizing an exclusive, caring relationship with the victim, most acts of frottage occur when the person is aged 12-15, after which there is a gradual decline in frequency') there was nothing at all in there about psychopaths.
"Maybe there had been some backstage schism in the psychopath-defining world? The closest I could find was Narcissistic Personality Disorder, sufferers of which have 'a grandiose sense of self-importance and self-entitlement', are 'preoccupied with fantasies of unlimited success', and are 'exploitative', 'lack empathy' and require 'excessive admiration', and Antisocial Personality Disorder, which compels sufferers to be 'frequently deceitful and manipulative in order to gain personal profit or pleasure (e.g. to obtain money, sex or power)'.
"'I wonder if I've got any of the 374 mental disorders?' I thought. I opened the manual again. And I instantly diagnosed myself with twelve different ones.
"General Anxiety Disorder was a given. But I hadn't realized what a collage of mental disorders my whole life has been, from my inability to grasp sums (Arithmetic Learning Disorder) and the resultant tense homework situations with my mother (Parent-Child Relational Problem) right up to the present day, to that very day, in fact, which I had spent so much of getting jittery with the coffee (Caffeine Induced Disorder) and avoiding work (Malingering).
"I suspect it was probably unusual to suffer from both General Anxiety Disorder and Malingering, unproductiveness tending to make me feel anxious, but there it was. I had both. Even sleep offered no respite from my mental disorders. There was Nightmare Disorder, which is diagnosed when the sufferer dreams of being 'pursued or declared a failure'. All my nightmares involve someone chasing me down the street whilst yelling, 'You're a failure!'
"I was much crazier than I had imagined. Or maybe it was a bad idea to read DSM-IV when you're not a trained professional. Or maybe the American Psychiatric Association had a crazy desire to label all life a mental disorder.."
Howard Marks implies that investing is essentially a game. But that implies a degree of randomness and chance and sheer good or bad luck about the world of investing that we refuse to accept.
Yes, in the short term especially, luck plays a huge role in our investment success, or lack thereof. But over the longer term, the financial market is simply not a casino. Or if it is, there are undoubtedly ways to tilt the odds firmly in your favour. As Albert Einstein said, albeit in a somewhat different context,
"God does not play dice with the universe."
The longer we spend in financial markets, the more convinced we are that people get from the markets precisely what they want. That is to say, if you seek excitement, you will almost certainly get it – but that is not the same thing as investment success. What is the point of gambling if you only ever win?
One of our favourite quotes on this topic derives from Seth Klarman about the US value fund managers at Tweedy Browne:
"There's a wonderful story – Chris Browne at Tweedy Browne tells a story of how they were interviewing somebody to come join their firm. And after the interview he's walking the fellow to the elevator and the fellow says 'You know it's amazing here at Tweedy Browne, at most firms you can tell from the atmosphere and the place whether the market's up or the market's down. At Tweedy Browne you can't even tell if the market's open.'"
In other words, if you want the thrill of the casino, go visit a casino. But given that most of us, when it comes to our investments, are dealing with irreplaceable pots of capital, our life savings, it probably makes sense to adopt an approach to "the Great Game" that almost completely strips emotion out of the process.
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