Dr Simon Ramo was the father of the intercontinental ballistic missile (ICBM). He lived to a 103 and died in 2016.
In 1970, he wrote a book called “Extraordinary Tennis For The Ordinary Player”.
He wrote that the tennis played by professionals is very different from that played by amateurs. That professionals win points while amateurs lose points.
Dr Ramo explained that in a professional game, it is usually the better player who wins.
“[In] Expert tennis … the ultimate outcome is determined by the actions of the winner. Victory is due to winning more points than the opponent wins…”
But in an amateur game, the winner is the “less bad” player.
“Amateur tennis … is almost entirely different. Brilliant shots, long and exciting rallies and seemingly miraculous recoveries are few and far between. On the other hand, the ball is fairly often hit into the net or out of bounds, and double faults at service are not uncommon. The amateur duffer seldom beats his opponent, but he beats himself all the time. The victor in this game of tennis gets a higher score than the opponent, but he gets that higher score because his opponent is losing even more points.”
Charles D. Ellis took this idea and applied it to investing in his article The Loser’s Game.
When it comes to investing, the key for the “amateur” investor, is to make fewer mistakes.
“The way to avoid mistakes is to be conservative and keep the ball in play, letting the other fellow have plenty of room in which to blunder his way to defeat…”
For example, choose index funds over Portfolio Management Schemes.
Or choose a large-cap equity fund instead of a small-cap fund.
Don’t try to hit the ball to the baseline. Try, instead, to avoid hitting it out of the court or into the net.
Another example is when one goes looking for higher returns in bank or corporate deposits. A few percentage points can look very attractive. Especially in times like these when interest rates are very low.
But the additional percentage points come with a much higher risk. Better to play a conservative game and keep your capital in “play” rather than lose it in an aggressive move.
Ramo says: “Every game boils down to doing the things you do best, and doing them over and over again.”
Keep your investment portfolio simple. Target a middling return. Serving an ace is hard, even for the professionals.
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