Losing the loser’s game

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“The first panacea for a
mismanaged nation is inflation of the currency; the second is war. Both bring a
temporary prosperity; both bring a permanent ruin. But both are the refuge of
political and economic opportunists.”


Ernest Hemingway.


“Recovery in sight, says departing Bank of England governor
Mervyn King..”


The Daily Telegraph.


In one of the most powerful and
memorable metaphors in finance, Charles Ellis, the founder of Greenwich Associates,
cited the work of Simon Ramo in a study of the strategy of one particular
sport: ‘Extraordinary tennis for the ordinary tennis player’. Ellis’ essay is
titled ‘The loser’s game’, which in his view is what the ‘sport’ of investing
had become by the time he wrote it in 1975. Whereas tennis is ‘won’ by
professionals, the practice of investing is ‘lost’ by professionals and
amateurs alike. Whereas professional sportspeople win their matches, investors
tend to lose the equivalent of theirs through unforced errors. Success in
investing, in other words, comes not from over-reaching, in straining to make
the shot, but simply through the avoidance of easy errors.

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