Nov

28

I thought there were a couple interesting aspects of Steve Leslie’s Nov. 22nd post. He concludes: “Success in poker is like success in life. It is attainable but not easy and it requires lots of work. That is why so few attain it.” Yet if everyone, or a significant number, were to follow professional advice, the quality of poker play could jump nationwide without any change in levels of success (though perhaps many would gain by feeling less stupid about losing, since bad luck rather than bad play would be responsible).

Similarly with sports. Every NBA or NFL team could raise their quality of play 20% with no change in levels of success.

Except in international competition. NBA teams and players, as well as gamblers, might do better in world competition following a popular U.S. book, lecture tour, or movie that somehow inspires competitors to higher quality play.

Unlike gambling and sports, which are zero-sum games, (apart from the mental or physical pleasure gained through competing), investing is a positive-sum game. Higher quality investing directs funds to higher quality projects. Insight into foolish corporate or commodity projects and positions, provides both returns to winners and instruction to losers. Losers don’t just lose pots or games, if left alone they continue to misdirect and waste capital and labor resources. “Capital” belongs to people and “labor resources” are people. Misdirecting them wastes the time and money of people in production, and deprives consumers of goods and services that could have been produced with better “play” by investors (assisted by speculators).

The question arises whether there might be a similar difference in the quality of play across cultures. If the game is basketball, U.S. beats China. If the game is ping pong, China beats U.S. (for now, at least). I don’t know how good the Chinese are at poker, though I hear gambling is very popular. As hundreds of millions of everyday Chinese gain enough wealth for everyday gambling, there will be some thousands or tens of thousands wealthy enough for big-time gambling as well as big-time investing and speculating.

As these newly minted big-time speculators jump into the game, will they make systematic “newby” mistakes? I don’t know enough about Chinese culture to know what to expect. But with commodity prices jumping up and down in front of tens of millions of gambling-prone newly capable investors what might we expect? (Plus, thousands of local government officials seem able to gamble and speculate illegally with local bond revenue.) Markets will draw in an influx of low-skill, limited-experience players, flush with success from one culture and range-of-experience (wealthy Chinese manufacturers), trying their hand with commodity speculation.


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