Game Changing Asymmetry


Source: ORACLE® Team USA

If things actually worked they way we are taught in school, all you need to do it get a “college degree” and you’ll be successful.

The reality is, learning the essentials like reading, writing, and arithmetic are basic requirements like eating, sleeping, and you know what.

To be great at something, we have to do a lot more than the basics.

You may consider that many of the greatest game-changers in America didn’t need anyone to tell them what to do next. They instead charted their own course and it was one that didn’t exist before.

Our society wants us to fit into the middle of the bell curve like the average person, but for some of us it’s a lot more fun to be an outlier,

Congratulations! To Larry Ellison and his ORACLE® Team USA for completing an improbable comeback to win Race 19 to successfully defend the 34th America’s Cup on Wednesday in San Francisco.

It’s a fine example of a game-changing asymmetry.

Before the huge win, Larry Ellison, who is co-founder and CEO of ORACLE®, was criticized for skipping a keynote address at a company conference to instead watch the comeback of his regatta team. It was a once in a lifetime moment only a few will ever experience by a man who has earned his freedom.

It’s a fine example of knowing when to get off the treadmill…

And, if you know the story, this unlikely outcome came from an unlikely team to start with. The combination of a billionaire CEO and a car radiator mechanic. The story is in The Billionaire and the Mechanic by Julian Guthrie. (I’ve been listening to the Audible version). It’s about how an unlikely duo won the sport’s oldest trophy – before this one. From Amazon:

“The America’s Cup, first awarded in 1851, is the oldest trophy in international sports, and one of the most hotly contested. In 2000, Larry Ellison, co-founder and billionaire CEO of Oracle Corporation, decided to run for the coveted prize and found an unlikely partner in Norbert Bajurin, a car radiator mechanic who had recently been named Commodore of the blue collar Golden Gate Yacht Club.

Julian Guthrie’s The Billionaire and the Mechanic tells the incredible story of the partnership between Larry and Norbert, their unsuccessful runs for the Cup in 2003 and 2007, and their victory in 2010. With unparalleled access to Ellison and his team, Guthrie takes readers inside the design and building process of these astonishing boats, and the management of the passionate athletes who race them. She traces the bitter rivalries between Oracle and their competitors, including Swiss billionaire Ernesto Bertarelli’s Team Alinghi, and throws readers into exhilarating races from Australia and New Zealand to Valencia, Spain.

With new television coverage and huge media, the America’s Cup is poised to be bigger than ever, and The Billionaire and the Mechanic is a must-read for anyone interested in the race or this remarkable story.”

CNBC Viewership in a Downtrend and a Good Example of Asymmetry vs. Symmetry

ZeroHedge points out that CNBC’s Nielsen ratings are at a 20 year low. In fact, they point out:

“CNBC’s Fast Money (-32% Y/Y), Mad Money (-42% Y/Y) and Kudlow (-52% Y/Y) all had all time low ratings in the “all viewers” category in August 2013″

Below is their Nielsen viewership total and prime viewers chart since 1992. You can see how viewership grew sharply during the bull market in stocks of the 1990’s. Viewers seemed to lose interest by around 2005 after the stock market decline from 2000- 2003 had recovered by 2005. No surprise their viewership trended back up and peaked around 2008 – 2009  when global markets dropped -50% or worse and negative news was at an all time high. Since the stock market recovery (driven mostly by the Fed’s Quantitative Easing I will add) their ratings have declined to a 20 year low. Fewer people are watching CNBC than ever.

I have related the swings in viewership to the directional trends and price volatility in the global markets. That may or may not be a driver of their viewership, but there seems at least some correlation. But, it seems that if the financial media like CNBC had strong credibility their  viewership would be more consistent.

Either way, after the 1990’s viewers have probably realized that financial media like CNBC is just financial entertainment – much like Sports Center, just a different game. People sit around a table with different views and debate what’s going to happen next and state their opinions. Most of the time you have no empirical evidence if their opinion even means anything – if you don’t know their track record. It sometimes gets outright silly. I’d rather watch Sports Center for fun – money management is a serious matter. It isn’t a game to me.

Finally, the chart below is a fine example of symmetry. Symmetry is balance. I always point out the error in people saying you should “balance your risk and reward“, when in fact we want imbalance. If we want something to trend up over a long time, we want Asymmetry: an imbalance between profits and losses. That is, we want more reward, less risk. Or, more profit, less loss. If your profits and losses are symmetry (balance) over time, you’ll have periods of gains followed by periods of losing those gains with no progress overall. For example, if CNBC were able to keep some viewers while just losing some, their chart would grow from the lower left to the top right with just minor dips along the way. Instead, we see their viewership has oscillated up and down. They have periods of strong viewership followed by periods of weak viewership that erases the prior growth. Over all it’s an symmetrical chart: it moves up and down over 20 years, but ends in the same place.

That may sound familiar as the stock market has done the same thing… and if your portfolio just tracks that market, so does your account. You may be “up” now, but that’s just because the market is “up”. What happens if the market goes down -50% again over the next few years? Will you have symmetry?


Source: Nielsen Media Research