Gambling away my daughter's future? Or investing in it via the World Cup?
My blog
has been, over the years, if nothing else but ‘eclectic’. It started off
with my wistful peregrinations around Kyrgzystan and Central Asia and then
moved on to university life in rural New Hampshire with my wry and
not-always-so-astute observations of the locals and their antics. From there it has meandered into a
ridiculous array of topics, from love & relationships to existential angst
to consumer boycotts to me whingeing about technology and cultural
transgressions and deeply irritating quirks. There has been way too much
philosophy in and there have also been some misguided, cack-handed and possibly
ill-advised forays into the world of finance & investing, football tactics
and strategy (far too in-depth for a lay audience and not perceptive enough for
football junkies), not to mention [American] football gambling with my wife and
cat. There is really quite a range of topics that I have attempted to
cover over the years.
This blog is, also, more than anything else, ambitious. (Much
like my cooking – when people ask me whether I’m a good cook, I always say that
I am ‘ambitious’. Interpret that how you will - one of my cardinal rules of
cooking: avoid recipes. They make the process stressful and less fun. One of my
second rules: drink while cooking. It makes the process less stressful and more
fun).
Long-time loyal readers may remember some of my attempts
to explain the world of finance and investing. You may remember my 2010 World
Cup ‘analysis’ and ‘predictions’. Those were very ill-advised. I am deeply
embarrassed (‘In Praise of Folly’?) and even when I go back and read some of
those I think, ‘hey, we all have a few clunkers in us, right?’
So
ashamed am I, that I won’t even provide links to those. I will, however, point
you in the direction of my pre-World Cup post from 4 years ago, though with a
warning: it’s pretty long and gets into some emotional stuff. The basic
premise: I went through my experiences of World Cups past, from where I lived
and who I’ve supported over the years, along with all sorts of existential ‘identity
crises’ along the way. It ended with a World Cup culinary challenge: I was
going to cook a dish to represent a different team every day of the World Cup.
That meant various exotic Ecuadorian, Croatian, Iranian and Nigerian dishes,
not to mention your more every day American, English and Italian delights.
That, and subsequent posts, got into an obscene amount of detail.
Much
like my attempts to get my wife (and cat) more involved and excited with
American football with our weekly gambling competitions, this was a way of
literally spicing up the World Cup for her, and making the whole experience
more palatable. It was tremendous fun and I experimented with loads of new
culinary creations, some more successful than others.
With
this World Cup, we were less excited in the build-up. There is no Northern Ireland
in it (and I’m still bitter about their playoff loss to Switzerland, the
cheating Swiss bastards). No United States. No Wales. Not even my ancestral
homeland of Italy (though I’ve never supported them in football). And of
course, no Ukraine. On top of that, the emetic fact that it’s in Russia and
with some people boycotting it, as this tournament approached my feelings have
been more ambivalent.
Still, I
love football, I can’t not watch it, and I thought about some ways to spice
things up this time around. With a new daughter in my life, time for cooking is
at a premium. Plus, we can’t do the same thing 4 years later.
I
thought about my former colleague Jonathan, and his World Cup beer challenge from
4 years ago. He managed to track down a beer for every country (32 of them) and
drank one when the teams played. Very admirable.
I
thought that this year, it might just be manageable to have a drink – any drink
(alcoholic, naturally) – representing a country on each day of the tourney. But
with the opening fixture being Russia – Saudi Arabia, that would have been nigh-on
impossible, because of boycotting Russian products or the difficulty in
tracking down a bottle of Saudi ale.
Then I
remembered that back at university there was a guy who had this hare-brained
idea for a research dissertation: he wanted to look back over the years and
analyse the economic performances of teams who had won the World Cup in the
4-year period thereafter. He was convinced that there was a clear and direct positive
correlation between a country winning the World Cup and its economic growth
immediately after. Football can inflame the passions and render us all brain-dead
at particular points of high emotion. Economists are another breed altogether,
filled with equally hare-brained schemes and theories.
But it
got me thinking the other day…
As a[n
amateur] investor, I’d like to think I know what’s going on the world of
finance and economics. As a [very rare these days] sports gambler, I’d like to
think I know what’s going on in the world of sport when it comes to
handicapping games and teams. As a massive sports fan in general, I’d like to
think I know a thing or two about football.
So I decided
thus: Combine them all and make one more ill-advised (yet hopefully not
ill-fated) attempt in the world of finance, football and gambling (at least as
it applies to this blog). In short, I’ve decided to use this World Cup as a
great opportunity to gamble with my daughter’s future financial well-being. Her
financial future and security are now riding on the outcome of a silly game
involving 22 grown men running around in shorts, kicking a ball around, trying
to get it into a net.
I’ve
mentioned a couple of times before, as a rationale and inspiration for my
American football Sunday evening fun with my wife and cat, the monkey and the
dartboard experiment (‘Any Monkey Can Beat the Market’). Though many are loath
to admit it, luck plays an outsized role in our lives, whether it’s beating the
stock market, gambling on sports, the lucky bounce or wicked deflection of a
ball in sport, getting the right exam topic, winning the lottery…countless
studies have emphasized how much human nature overvalues ‘skill’ when it
reality it often comes down to pure luck. That’s the reality.
Think
about past World Cups and the animals that have made various predictions, many
of which beat the so-called ‘experts.’ There was Paul the Octopus in 2010 who
seemed to get almost everything right.
Skill =
Observed Outcome – Luck
‘In
other words, skill is the difference between a team’s winning rate (or observed
record) versus the luck of winning a coin toss (which should happen half the
time).’
There is
also something called the ‘paradox of skill’, which
‘…is the
idea that even as absolute skill rises in any sport or activity, be it soccer
or business, relative skill declines which means that luck becomes more
important in shaping outcomes… [t]he paradox of skill is a phenomenon we
observe daily, be it when highly skilled athletes end up in a dead heat or when
highly educated money managers barely match overall market returns.’ (
In the world
of investing, it comes down to ‘beating the market’ and whether you are one of
the minority who is able to do that. And then if (or when) you do, you
attribute it to pure skill and not luck. But the reality is, there seems to be
no rhyme or reason half the time when the end of the year rolls around and you
compare your investments to others’. I’m no expert on this, but I’m probably
much more than just a mere ‘amateur’ investor, as I alluded to earlier. But
that doesn’t mean I – or anyone else – know what the hell I’m doing half the
time.
‘Luck is
what happens when preparation meets opportunity.’ (Seneca)
The
World Cup Financial Future Challenge
I’m not
sure if people still do this, but in the old days, when a kid was born in the
US, parents would often buy their son or daughter a share of stock in a company
like Walt Disney. It was partly symbolic but also the first step in their
little baby’s path to financial prosperity. Many parents these days immediately
put money into some sort of financial ‘instrument’ right from birth, and then
let the sucker grow (hopefully) until their child turns 18.
It’s
been quite some time since my good pal Dr Wasabi Islam made an appearance in
these pages (when we last heard of him here, I think it was as part of my
summer 2011 travels), but in planning my little girl’s financial future, he
suggested throwing $1000 into Walt Disney (‘it will be fun,’ he said) and
seeing what it would like 18 years from now. I thought about it, but…
…my idea
is more fun.
Here’s
how it will work
First, I
have to stress that even though the World Cup is already in full swing, I
hatched this little plan before the World Cup started, when all the teams were
still alive. That’s an important disclaimer for this project. (is this a sign
of things to come? As I was typing, I accidentally wrote ‘prophecy’ instead of ‘project’)
No
decisions are made until the semifinals. At that point, whatever four teams are
left will determine my daughter’s financial security.
Hypothetically,
and purely hypothetically, let’s say it’s Germany v Spain in one semifinal, and
Brazil v France in the other. And then the final would feature Spain v Brazil. [editor’s note: since the time of writing,
Germany has gone out of the World Cup – this is will still suffice as an
example of the principle.]
I invest
$500 each into Germany and France, the losing semifinalists.
I invest
$1000 each into Spain and Brazil, the finalists.
For ease
of comparison, I won’t allot any additional money to the winner – I want to
keep the figures equivalent to see what the outcome is roughly 18 years from
now.
Easy,
right? Totally down to skill, right? No luck here, whatsoever, right?
I do
have a slight conundrum here, and I will ask for advice from my dear readers.
When choosing what to invest in, should I choose a company that’s
representative of that country? In my four countries above, that might mean
Deutsche Bank or Volkswagen, Total or Carrefour, Telefonica or Banco Santander,
or Vale or Petrobras.
But how
would I determine which company to invest in? That would take away part of the ‘pure
luck’ equation.
Perhaps
it’s better to take a market index representing each company (Investing 101: a
market index merely tracks a basket of returns of a set of companies – 20, 30
or even up to 10,000 – representative of that country’s economy). That would be a fairer, more equitable way of
comparing the outcome.
Now,
before anyone protests over how whimsical and profligate I am being by gambling
with my daughter’s future well-being, you have to look at the potential
winners. Unless it’s a surprise but entirely possible winner like Belgium,
Croatia, Uruguay or Colombia, most of the potential winners present compelling
investment opportunities. There is plenty of risk involved (Argentina and
Colombia, notably), but also some contrarian but somewhat stable long-term bets
in there – my hypothetical winners above, for instance.
Sadly,
this little game misses out on some serious high-risk/high-reward potential
from the likes of India, Indonesia, the Philippines, Kazakhstan and Tanzania,
none of whom are likely to even qualify for the World Cup in the foreseeable
future. And I suppose there is some ‘risk’ in that some crazy, highly unlikely
outsider (Russia?!) could swoop in and shock everyone. There is, then, a chance
that my poor little girl will have to rely on the fortunes of Senegalese
shipping exporters, Icelandic cod fishermen, Swiss watch makers, Japanese
whalers, Colombian coca growers, English ale brewers or Uruguayan cattle
farmers for her future prosperity.
I’m
really not sure where I’d like to invest my little girl’s future, so let the
football decide.
Postscript
Valuable
lesson of fatherhood: when watching sport, as hard as it can be, for your baby’s
sake you have to keep your emotions under control. The other day, whilst trying
to get my girl to sleep late at night when she was being fidgety and squirmy, I
was gently bouncing her up and down on her fitball. It was nearing the end of
the Nigeria-Argentina match, which I so badly wanted Nigeria to win (though a
draw would have been fine to get them to the next round). It was 1-1 and
Nigeria had squandered a few chances to put the game away and then in the 87th
minute, Argentina scored the winner. I had to muster all my last ounces of
serenity and calm to stifle the agony and anguish I was feeling as I was bounced
up and down. I was absolutely gutted that Argentina had scored but I could
hardly show my emotions and let it all out.
Alas, I was
only partly successful. My poor little girl, who had been slowly drifting off
into sleepy-time world, sensed my tension and started squawking again, and I had
to quickly calm myself down (deep breathing, mindfulness, whatever) to get her
to drift off into blissful slumber.
No, not that kind of football! That will have to wait until September
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