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Long Term Greedy
When doing expected value calculations I like to remind myself of a few key points: Biases - generally, humans are quite poor at estimating future payoffs. We tend to overvalue what we have in the short term relative to what we can achieve in the long term. As a result, we tend to favor short term pay offs at the expense of achieving our long term potential. To assess how much this bias impacts your life, it is important to track your ability to make smart decisions over the long term. Because our memories tend to back-fit history, it is important to right down key decisions as well as the core assumptions underlying their implementation. While many readers think that this blog is 'brave' in its 'honesty', its value as a self-assessment tool requires that I be both open and honest. Information - anybody that tells you they have certainty in protocol, or prediction, is showing an intellectual arrogance in their own ability. The best that any expert can claim is that, generally, they seem to do OK with the facts at the time. Even then, books like Fooled by Randomness and The Black Swan should make all of us HIGHLY skeptical about our ability to make predictions. That said, we can't sit around not doing anything. In fact a decision, not to decide, is still a decision... So what to do?! Understand that we are all operating in a world of imperfect, changing information that can be impacted by the highly improbable. Know our common blindspots / biases and track how much these impact our decisions. Analyse the outcomes from important decisions - not in terms of good/bad - rather in terms of our capacity to see (in advance) the factors that played a role in outcome. Understand our areas of expertise and, more importantly, know where we are clueless. Avoid important bets in areas where we are clueless because outcome will be a function of chance. Consistently following the basics is simple but EXTREMELY challenging due to our collective psychology. Maximizing Athletic Value
What I missed last year was that my VO2/FT/LT performance could achieve lifetime bests in each sport in the year of my 40th birthday. I missed that, and it surprised me. Superior top-end fitness wasn't indicated in any of the expert literature. What I would have predicted was I could match my low-end performance in priority to achieving top end milestones. The above is an upside surprise - an unexpected tailwind. My biases want me to believe that superior training or protocol was the result. If I look at my log it doesn't look all that different from normal. What may be fading as I age is The Fourth Dimension -- how my key benchmarks change across workout durations. I saw that happening a few years ago. Even then, I have more in my life and I used to be TIRED when I was training at a high level. Daniels reminds us that athletes tend to forget what it was like when they were training themselves to a peak performance. [As a side note - the performance model proposed by Gladwell in Outliers is a mirror of what Daniels has been telling us for years] My main athletic challenge has been recovery related -- over-training. To be a decent ultra athlete, outstanding biomechanics and constitution are a given. If you don't have these attributes then you'll never be able to tolerate the training to develop yourself. The good news is that these can be built through outstanding nutrition and a patient apprenticeship. My pre-triathlon years (part of my 10,000 hour apprenticeship) were highly valuable and, likely, a good part of the reason why I was able to achieve great results relative to my potential. With burnout, injury and illness -- especially chronically over the years -- expected value comes in... An unwillingness to lose fitness (short term greed) results in reduced long term athletic performance/development. The paradox of sports (especially running) is that you can do well in the short term from absolutely destroying yourself for the long term. A 95% relative race result does not require 95% genetics. We often see this when young athletes rock up the standings then disappear into obscurity. Much more common is the smaller flares that are sent up, and visible on the chat forums. If you tend to make self-depreciating "jokes" and are often sick/injured then you need to think honestly about your current athletic approach. Breakthrough performance will likely require:
I've coached successful females with all the signs of menopause in their 20s and 30s - most of these ladies, unfortunately, continue until a personal health emergency forces rest on them. That's the flip side of sports -- within the larger context of a life with meaning, our setbacks can be real opportunities. Myself, I have tried something RADICAL for the past nine months. I used the birth of my daughter as an 'excuse' to dial down my training, and competitive schedule. There is strong social pressure on me to race, train, be lean, be fast... be "Gordo"... However, I decided to focus on my marriage and business instead. It's worked out well so far. Some ideas/questions for you to consider: When was the last time you made a conscious decision to strip your life to the basics? How would you live your life if your goal was personal wellness, loving your family and maintaining a stable long term personal environment? Even if my ego "needs" athletic success -- getting really "healthy" every third, or fourth, year will likely improve my shot at long term athletic "glory". Check a sample of athletes that have been high performers over a thirty year timeframe -- in most cases you'll probably find some significant downtime in there (usually due to injury). With my mentor/role model (John Hellemans), I see a willingness to get far out of "race shape" but NEVER out of health. As triathletes, we make the common error of associating race fitness with health. It might be easier to be healthy when we are not seeking to be speedy. I have no idea what my body, or my life situation, will enable me to do. However 2005-2008, indicated that an 18-month time horizon provides me with a year long window to be pretty speedy if want. I suppose that's a long way of saying that stopping before I was wrecked has worked pretty well for me and a nine-month (and counting) hiatus from "proper" training doesn't appear to have ruined my potential as a 40-44 year old triathlete. I signed up for 2010 Cali 70.3 this week. If I had to guess... 4:20, with 95% confidence of being within 3%. Key assumption is time to train and having my feet hold up - the unknowns are immune/hormone function and life situation. Market Value That said, Endurance Corner, provides me with an indirect option on economic recovery and my greatest need right now is improved cash flow, rather than opportunities for long term capital gain. I'll explain... I was talking with a buddy and he mentioned that his recent trading had placed him in a position where he could continue to avoid real work for a few more years (good for him, not great for America's productivity). The chat reminded me of a few of my own biases: Good events -- when we win, we are prone to attribute it to intelligence (smart investment selection) or our own efforts (work ethic) Bad events -- when we lose, we are prone to attribute it to external factors (market moved against us) or genetics/social status/peer group 25 years of easy money creates habits, and thought patterns, that take a LONG time to change. At the back of all our minds, we probably want to return to the way-it-was. Herein lies the trap of today -- I see a huge social cost if we fail to restructure our attitudes (to work) and tolerance (for leverage). Stock Market Fundamentals -- I can't see the long term earnings improvement to support the current rally. Real Estate Fundamentals -- I can't tell you what's going to happen but I can recommend that you consider the following as they apply to any potential investment: Current, Pending and Shadow Inventory -- the backlog of houses currently on the market, coming on the market and which would like to come on the market if conditions improved. Supply is going to cap capital appreciation in most markets. Long Term Interest Rates -- how much further downside do you see in the cost of finance? What would happen in your local market if mortgage rates increased materially. The Non-Productive Economy -- the property boom was built on easy finance and a growing belief that our portfolios would work, rather than us. Look to scarcity of supply, quality of location and capacity of local population to purchase -- the SunBelt looks like a bear market trap to me right now. A twenty year view may see us unwinding the savings of the Baby Boomers, cranking up energy costs and increasingly competing for water resources. What are the geographic markets that will drive productivity growth over the coming decades? Consider how much of your local market is driven my the non-productive side of our economy. Here in Boulder, agents used to talk about the local market being insulated by cash buyers that were able to buy separate from economy considerations. Well those same people are downsizing like CRAZY because their portfolio was either: (a) cut due to equity exposures; or (b) crushed with declining yields. FWIW, owning our house is our personal indexed pension -- it's costly to maintain (about 1% per annum in taxes, etc) but I can clearly monitor the years of cash flow that could be released from unloading. Over the long run, housing should mirror inflation and increases in the local economy. The Role of Alternatives in Rational Decision Making Comparing 2005 with 2009 should produce some interesting data. 2005 had three HUGE months of training (Jan/Feb/Dec) and five very low months (Mar/May/June/July/Aug). Why did I train myself into the ground? Why did I rest? Many high-performers actively exclude the creation of alternative options for their lives. When things are going well, this can be a successful strategy. When things start to go off the rails, they "irrationally" ruin themselves because they have no rational alternatives for their time. How often do we say... I can't just sit at home on the coach... if that's your only option then you probably want to broaden your horizons! Over a lifetime, we will all encounter setbacks -- it would be a "freak" occurrence not to experience a few "freak accidents". Against this background, fall back plans greatly enhance long term expected value. Back next week,
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This week I thought that I'd share some ideas about maximizing expected value in the fields of athletics and personal finances.