It is essential to realize that military strategy can (and should) be applied to virtually all facets of one's life. Modern times have created endless situations where strategy must be applied - actually, this has been the case across time. In any event, here goes today's selection.
The Guerrilla-War-Of-The-Mind Strategy
What most often weighs you down and brings you misery is the past, in the form of unnecessary attachments, repetitions of tired formulas, and the memory of old victories and defeats. You must consciously wage war against the past and force yourself to react to the present moment. Be ruthless on yourself; do not repeat the same tired methods. Sometimes you must force yourself to strike out in new directions, even if they involve risk. What you may lose in comfort and security, you will gain in surprise, making it harder for your enemies to tell what you will do. Wage guerrilla war on your mind, allowing no static lines of defense, no exposed citadels - make everything fluid and mobile.
Understand: the greatest generals, the most creative strategists, stand out not because they have more knowledge but because they are able, when necessary, to drop their preconceived notions and focus intensely on the present moment. That is how creativity is sparked and opportunities are seized.Good stuff, no? Here is a situation where I succumbed to past battles and it cost me dearly. When WaMu was being seized and given to JPMorgan, I owned (for my employer) WaMu senior holdco debt. In the morning after the seizure, I had an analyst look at the bank to determine their "true" financial situation. She stated, and I agreed, that financial firms in bankruptcy wipe out unsecured holders, but she would look into it quickly. After a cursory review of the most recent 10Q, she stated there was nothing - exactly what we had anticipated based on past experience with failed financial institutions. Was the analysis biased to supporting the preconceived belief there would be nothing? This I cannot say, but I can say I did not press the issue as I would with any other type of firm due to my belief that there would be nothing. I did not drop my preconceived notions and focus on the present (the WaMu filing).
The result - a complete loss on the sale of the investment! Over $10MM down the tubes. Has we cleared our minds (or better put, had I cleared my mind) of old battles and results, I would have pushed for more depth and held onto the position (more on this in later excerpts/postings) and sold it at PAR! Had I focused on this as a unique situation (ass all "events" are) and forced greater depth, or taken over the analysis to get into it deeper, I would have seen the cash on the balance sheet (at holdco) and recognized the value of potential NOLs. My failure to wage - and win - war against the past cost my employer (and my returns) dearly.
While it is convenient to say everything was blowing up and getting killed, a general - or strategist - will keep a clear head on the battlefield and not react out of tired notions or fear (more on this later too).
I posted the sell ticket on my board to constantly remind me not of failure in that battle, but the result of applying or using dogmatic analysis.
That, grasshopper, is the lesson of the day. I am, unfortunately, ill so you are all dismissed.
Until later.
Remember the movie Gladiator, when Russell Crowe orders his outnumbered army to commence an assault on the huge array of Germanian troops...his words "Upon My Command, Unleash Hell!" His troops knew exactly what those words meant, and how to carry out the order. They weren't the stronger army, they didn't have more men, and they hadn't attended any fancy military academy. But they had a plan, and they executed it flawlessly.
ReplyDeleteMarkets and analysis are no different than preparing and engaging in battle. It comes down to one's investment thesis, analysis to test that thesis, and more analysis to retest that thesis.
Amen to your post!