#14 - The Mystery of the Silent Tennis Audience
On elements of good judgment, embracing uncertainty and key ideas from Buffett's letter to Berkshire Hathaway shareholders - 1978
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Silence of the audience in sports is unusual. As many sporting competitions are currently being played without the fans and spectators due to social distancing norms, many sports players have made remarks on how they miss the genuine support and passion of their fans in the stadium. Tennis usually has an audience which is silent during the game. Emotions and cheers are rare and any persistent noise is silenced by the chair umpire. We try to figure the reason for that in today's issue.
Based on feedback received from a few of our readers, we shall continue publishing key ideas from Buffett’s letter to shareholders every week.
In today’s edition, we look at -
Elements of Good Judgment
Embracing Uncertainty Through Stoicism
Why Tennis Crowds Have To Be Quiet?
Key Ideas From Buffett’s letter to Berkshire Hathaway Shareholders - 1978
Grab a cup of your favourite coffee and let us dive in.
Elements Of A Good Judgment
Read the article here (Read Time ~ 21 mins)
Every leader has to exercise sound judgment in order to form views and interpret ambiguous evidence that eventually leads to a good decision. However, there is no clear framework to learn good judgment.
This article claims that there are six key components that contribute to good judgement - learning, trust, experience, detachment, options and delivery.
Learning: Listen attentively, read critically - Good leaders and decision makers tend to be good listeners and readers. People with good judgement tend to be skeptical of information that does not make sense. Active listening, strong filtering of useless information, thinking critically of presented data and understanding underlying motives of the presenters to figure out misaligned incentives and discrepancies can help in ambiguous situations.
Trust: Seek diversity, not validation - Leaders should draw on skills and experiences of others as well as their own in making a decision. The same can be done by cultivating sources of trusted advice by surrounding yourself with people who tell you what you need to know rather than what you need to hear.
Experience: Make it relevant but not narrow - Experience brings context and helps in identifying potential solutions and anticipate challenges. Leaders with deep experience in a particular domain may fall in a rut making judgments out of habit, complacency or overconfidence. Expanding your scope of experience is useful to broaden and sharpen your judgment.
Detachment: Identify and then challenge, biases - It is critical to understand your own biases and hence the ability to detach, both intellectually and emotionally, is a key component of a good judgment. It is important to understand, clarify and accept different viewpoints.
Options: Question the solution set offered - When expected to choose between options formulated and presented by advisers, a leader should broaden the scope of options to check for any other possible solution. Many bad judgment calls in hindsight are because important options and unintended consequences were not considered. Do not be afraid of considering radical options.
Delivery: Factor in the feasibility of execution - Smart leaders press for risks of implementation and press for clarification from project advocates
Luck and factors beyond your control determine success but good judgment stacks the cards in your favor.
Embracing Uncertainty Through Stoicism
Read the article here (Read Time ~ 6 mins)
Humans abhor uncertainty, and will do just about anything to avoid it, even choosing a known bad outcome over an unknown but possibly good one. The darker kind of uncertainty we are facing now - malign uncertainty - tends to make bad moods worse. There are two ways to solve the “problem” of the unknown: by decreasing the amount of perceived risk or by increasing our tolerance for uncertainty. Most of us focus almost exclusively on the former.
Stoicism embraced by ancient Greeks is a suitable philosophy for helping people cope and increasing their tolerance for uncertainty. Much of life lies beyond our control, Stoics believe, but we do control what matters most: our opinions, impulses, desires, and aversions. Our mental and emotional states.
“Change what you can, accept what you cannot” sums up the Stoic creed.
Why Tennis Crowds Have To Be Quiet?
Read the article here ( Read Time ~ 14 mins)
Photo courtesy: pixabay
Tennis is a deeply weird sport, a psychological, physiological, gladiatorial war of attrition. The origins and evolution of tennis, like those of just about all organized sports, are messy and unclear. Tennis’s origins do not involve huge stadiums or even bleachers. They involve a scattered few kings, queens, and princes in a strangely shaped box. Court tennis, as it’s called in the United States, is a bonkers sport.
The courts were difficult and expensive to construct, the equipment has always been handmade and thus pricey, and the people who loved it wanted to keep it a game of leisure and affluence. Court tennis matches were social events, places to be seen, maybe to find a spouse for a wayward niece or nephew, or secure a business deal. The public—the cheering, drinking, boisterous public—was not a part of it.
One theory offered is that tennis requires such concentration that any distractions are excessively penalizing. Another theory states that players need silence to hear the sound the ball makes coming off an opponent’s strings. The ball is coming so fast—140 miles per hour, sometimes—that players need all the information they can get. Both the offered theories are unconvincing.
Tennis became popular with time but retained its aristocratic roots. Wealthy people would play tennis the way they wrote poetry or played the piano. It would be considered vulgar to make a living out of it. Tennis was not for sports fans but for aristocrats.
The audiences were not inclined to be noisy because of the sport's history with civility and considerate undertones. It seems that with the absence of need or a strong incentive to win, nobody cared about tennis as a sport.
The result? Please be quiet, the player is serving
Crazy evolution of the game!
Key Ideas from Buffett’s letter to shareholders - 1978
We would continue with summarizing the letters written by Warren Buffett in every week’s edition to bring out the key ideas and encapsulate the wisdom in those letters. While we summarize the letter, we encourage the readers to read the entire letter to capture the context in which the thoughts were expressed by Buffett.
On the nature of the textile industry - The textile industry illustrates in textbook style how producers of relatively undifferentiated goods in capital intensive businesses must earn inadequate returns except under conditions of tight supply or real shortage. As long as excess productive capacity exists, prices tend to reflect direct operating costs rather than capital employed. Such a supply- excess condition appears likely to prevail most of the time in the textile industry, and our expectations are for profits of relatively modest amounts in relation to capital.
On methods to turn around textile business - Slow capital turnover, coupled with low profit margins on sales, inevitably produces inadequate returns on capital. Obvious approaches to improved profit margins involve differentiation of product, lowered manufacturing costs through more efficient equipment or better utilization of people, redirection toward fabrics enjoying stronger market trends, etc.
On insurance business management - It is not easy to buy a good insurance business, but our experience has been that it is easier to buy one than create one. However, we will continue to try both approaches, since the rewards for success in this field can be exceptional.
On predicting markets - We make no attempt to predict how security markets will behave; successfully forecasting short term stock price movements is something we think neither we nor anyone else can do. In the longer run, however, we feel that many of our major equity holdings are going to be worth considerably more money than we paid, and that investment gains will add significantly to the operating returns of the insurance group.
On Berkshire’s insurance portfolios and stock acquisitions - We continue to find for our insurance portfolios small portions of really outstanding businesses that are available, through the auction pricing mechanism of security markets, at prices dramatically cheaper than the valuations inferior businesses command on negotiated sales. This program of acquisition of small fractions of businesses (common stocks) at bargain prices, for which little enthusiasm exists, contrasts sharply with general corporate acquisition activity, for which much enthusiasm exists. It seems quite clear to us that either corporations are making very significant mistakes in purchasing entire businesses at prices prevailing in negotiated transactions and takeover bids, or that we eventually are going to make considerable sums of money buying small portions of such businesses at the greatly discounted valuations prevailing in the stock market.
On managerial styles and cost management - Our experience has been that the manager of an already high- cost operation frequently is uncommonly resourceful in finding new ways to add to overhead, while the manager of a tightly-run operation usually continues to find additional methods to curtail costs, even when his costs are already well below those of his competitors.
On concentrating holdings - Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When we are convinced on the attractiveness, we believe in buying worthwhile amounts.
Afterthought
We sit silently and watch the world around us. This has taken a lifetime to learn. It seems only the old are able to sit next to one another and not say anything and still feel content. The young, brash and impatient, must always break the silence. It is a waste, for silence is pure. Silence is holy. It draws people together because only those who are comfortable with each other can sit without speaking. This is the great paradox.
- Nicholas Sparks
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