It Was a Mistake to Play a Flawless Game

Kathryn Schulz, the author of Being Wrong: Adventures in the Margin of Error, is interviewing various people on Slate about their mistakes. Her interview with Victor Niederhoffer, a hedge fund manager, a former partner of George Soros, and a five-time U.S. Nationals squash champion, contains a few great nuggets.

On why he should have made more mistakes playing squash:

As a squash player, I was gifted. I had all the right things going for me. I practiced. I was very good with the racket, and I had tremendous anticipation. But I tended to play an errorless game by hitting a slice on my backhand, which took a lot of power off the ball. That wasn't a disaster, but it was definitely a weakness in my game. My opponents always used to say that on a good day they could beat me, because they could hit more spectacular shots than me. But they never did. I went for about 10 years without losing a game, except to [the great Pakistani squash player] Sharif Kahn. He made about six, seven errors a game—but he also made eight or nine winners. I would make about zero errors per game but only one or two winners. He had the edge on me about 10-4, and I regret that I was never willing to accept the risky shots and confrontations, never willing to play a more error-full game.

On making money when everyone else is scared:

When the public is most frightened, only the strong are left, and that's when the market is in the best possible hands. I call it taking out the canes. Whenever disaster strikes, the very sagacious wealthy people take their canes, and they hobble down from their stately mansions on Fifth Avenue, and they buy stocks to the extent of their bank balances, and then a week or two later, the market rises, they deposit the overplus in their accounts, invest it in blue-chip real estate, and retire back to their stately mansions. That's probably the best way of making money, to be a specialist in panics. Whenever there's panic hanging in the air, that's a great time to invest.

On the limits of directness in life:

But regrettably, duplicity is very, very important in life. The direct approach always creates tremendous obstruction and friction from the adversary, so often the indirect approach is necessary.

Here's Kathryn's different interview with Joe Posnanski about sports. Posnanski talks about the myths of "clutch hitters" and "hot hands."

(thanks to Paul Kedrosky for the pointer)

One Response to It Was a Mistake to Play a Flawless Game

  1. James A says:

    Thanks for pointing to this great series of articles.

    Reading Neiderhoffer’s account of the trauma he went through after losing so much money leads one to think about how often people are held to account for being factually wrong. Some thoughts.

    The Dershowitz interview is fascinating, where he says he isn’t as susceptible to psychological biases as his adversaries because “I’ve thought hard about my psychological connections and I think I’ve managed to separate out the psychological from the legal, moral, and political”.

    Since the lawyer is ultimately accountable to his own client, I have to think that a tendency for identifying and correcting for your own biases is strongly selected against in the trial lawyer profession.

    Another factor is that as a trial lawyer, it seems to me that you aren’t in the position of having to make predictions that could turn out to be wrong. The cases that are argued inevitably concern historical events, and the agreed-upon facts concerning these events are presented at the deposition. So victory comes down to being able to use your will, moxie, and ingenuity in painting the facts in a way that is favorable to obtaining the desired result for your client.

    Niederhoffer, like entrepreneurs, was in a situation where future events could have a catastrophic impact, so he has had to think much more carefully about the assumptions he was making.

    Scientists (I’m thinking mostly physics and chemistry here) tend to be extremely careful about how they word their conclusions, since once their papers are part of the published record, anyone can conceivably go back and attempt to reproduce their results. Probably the worst thing that can ever happen to a scientist is to be forced to retract a paper.

    Who gets off easy when it comes to being wrong? The very people we look to for making predictions. For all the attention we pay to columnists and pundits, I’ve always been surprised at how short people’s memories are for their inaccurate predictions and how it seems that they are rarely held accountable several years down the line. Since the ultimate currency of the pundit is attention rather than complete factual accuracy, there’s tremendous pressure to write provocative and entertaining columns rather than safe ones. Phil Tetlock has written about how experts who use words like “however” and “perhaps” are a tough sell for CNBC.

    I stopped reading “Wired” regularly after Kevin Kelly published “Get Ready for the Roaring Zeroes” back in 1999 – but he’s still doing very well for himself.

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