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Where Sea Monsters Live
Posted By Barry Ritholtz On May 1, 2012 @ 7:00 am In Apprenticed Investor,Investing,Markets,Philosophy,Psychology | Comments Disabled
Last weekend, I got into — or more like watched — an interesting finance debate related to specific policies, websites, officials and analysts. All the usual suspects were covered. One person went on and on about central-bank planned economies, manipulated currencies, debasing of the dollar, gold, HFT, etc. “Its all a Ponzi scheme” he declared, evidencing a lack of understanding of precisely what that word means.
I listened politely and smiled.
It was over a dinner party consisting of a mix of finance and humanities people. Our lead instigator (whom I will shall refer to as Goatee boy), kept babbling on about these subjects (he apparently just discovered ZH). The rest of the group engaged in a heated and entertaining debate — which I sat out. Since I lost my voice 2 weeks ago, I have been very selective as to who and where I am going to waste it on. This turns out, as we shall see, to be a surprisingly effective and delightful strategy, one I may have to employ even after I get my voice back.
Eventually, one of our party notices my silence, and turns to me.
“Well, Ritholtz, you are unusually quiet — this is your roundhouse, what do you have to say?“
I gesture to my throat, make a croaking sound, and then begin to speak very softly. Everyone leans in to hear what I say (I must remember this trick in the future). I say something like this:
“An enormous difference exists between debating policy and managing assets. They are two radically different activities. Hence, you folks may be talking at cross purposes.
Grad students can go to Cafe Reggio  on MacDougal Street, smoke clove cigarettes, stroke their goatees and debate this philosophically all night. That’s fun, and its what you are supposed to do in grad school.
However, that is an indulgence of the student philosopher.
Anyone who toils in the markets professionally or manages money for other people (or even their own investments) does not get to enjoy such a lavish, self-indulgent luxury. Their job is not to opine on such matters, but rather, to manage cash in the environment that is — the world that exists presently, and is likely to exist in the near future. It is not their role to manage money based on the way things ought to be — rather than the way things are.
I think of myself as a Sailor, and my job is to navigate the seas on behalf of my clients/passengers.
Any good sailor knows the Seas, the prevailing tides and the lunar cycle, He understands the trade winds. He must know how to read charts, the weather, the sky & clouds. He anticipates the changing seasons. He can navigate by the stars.
A good sailor knows his boat inside and out, and can make repairs with whatever is at hand.
An experienced sailor knows when to ride out a storm, and when to turn around and head to the safety of port.
An old salt, a professional sailor, he knows when the sea is angry, when the storm gods are vengeful, where the sea monsters live.
The sailor that knows all of that, and is a little bit lucky, might return home to port alive. The rest don’t stand a chance.
You can discuss the sea and the storms and the serpents all you want, but all this chatter is mere spit in the ocean.
Stop talking, and start sailing.”
The takeaway? Learn the basics. Get the advanced concepts down. Even learn the myths and superstitions. Apply what you learned . . . and don’t forget to be lucky.
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 Cafe Reggio: http://www.cafereggio.com/
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