STREET DOGS

From Ben Hunt at Epsilon Theory: I get bored with the interminable and rigorous discipline that being a great poker player or a great stock picker requires.

To be clear, it’s not the actual work of poker playing or stock picking that I find boring. And it’s certainly not boring to make a bet, either on a hand or a stock.

What’s boring is NOT making a bet on a hand or a stock.

What’s boring is folding hand after hand or passing on stock after stock because you know it’s the right thing to do.

The investment process that makes a great poker player or a great stock picker isn’t the research or the analysis, even though that’s what gets a lot of the attention.

Nor is it the willingness to make a big bet when you believe the table or the market has given you a rare combination of edge and odds, even though that’s what gets even more of the attention.

No, what makes for greatness as a stock picker is the discipline to act appropriately on whatever the market is giving you, particularly when you’re being dealt one low conviction hand after another.

The hardest thing in the world for talented people is to ignore our mental “shriek of unused capacities”, to use Saul Bellow’s phrase, and to avoid turning a low edge and odds opportunity into an unreasonably high conviction bet simply because we want it so badly and have analysed the situation so smartly.

In both poker and investing, we brutally overestimate the edge and odds associated with merely ordinary opportunities once we’ve been forced by circumstances to sit on our hands for a while.

One way or another, boredom must be eliminated.

It’s as much an iron law of markets as the impact of greed and fear.

And it’s just as powerful.