Supported by Greenhaven Road Capital, finding value off the beaten path.
It’s fun and interesting to cross domains to get ideas, use them, mash them into a workable form, and declare victory or defeat. Bill Simmons chatted with Joe House about the 2017 NBA Finals and there were a number of goodies. I’m a fan of Simmons and think he’s a superforecaster. Let’s see what we can learn.
1/ Play games you can win. “It did seem like they (Cleveland) weren’t trying to turn it into a track meet quite as much.” – Simmons
The Cavalier’s opponent, the Golden State Warriors, are the best scoring team in the NBA this season. One way to beat them is to slow the pace of the game. Simmons said that’s what Cleveland tried to do. If the Cavaliers try to be better than the Warriors in a game with a lot of three-point shots at a fast pace, they’ll lose.
We’ve seen how companies like Instagram, Sam Adams, and Airbnb and Uber use this. Playing a game against your opponent’s strengths doesn’t work.
2/ Availability tendency. “We are always mindful of not overexaggerating what is right in front of our eyes, but…” – House
It’s entertaining to make claims like this, and it can get us to fruitful discussions but we should at least be aware of the ease with which examples – like Kyrie Irving – come to mind. Psychologists like Daniel Kahneman and economists like Richard Thaler wrote that because we are cognitive misers we tend to equate how easy an idea comes to mind with how accurate it is.
Dan Carlin said about ideologies, “there’s an ease to adopting an ideology because it gives you ready made answers for any situation.”
Kyrie Irving may be the best, but there are warning signs we should be aware of.
3/ Shift the odds. “I would let Draymond and Iguodala shoot threes all day. I would leave them wide open…because Durant and Curry are the guys that just kill them.” – Simmons
“You need to do everything you can to tilt it a little bit. Cleveland was inviting Shaun Livingston and Draymond to take shots. It’s not like that all by itself is going to change the outcome of the series but Cleveland needs to be doing all that it can.” – House
Much like investing, business, or relationships there are no sure things. All we can do is shift the odds. This is why Warren Buffett and Charlie Munger suggest avoiding dumb things. If you can avoid terrible outcomes you’ve shifted the odds.
In past episodes, Simmons and House have admitted this too. (If gambling were legal) some bets can be good even though they didn’t pay off.
4/ Tailwinds, rising ponds. “Do you think Dirk ever played better than this?” – Simmons
“I’m having a hard time making the comparison because this Warriors team isn’t like any team I’ve seen in thirty years.” – House
Jack Schwager said, “If you’ve done well in a bull market all you can assume is that you’ve done well in a bull market.” That articulates the point House made. Durant has succeeded on a team that’s the equivalent of a bull market. Dirk succeeded on a team that was not.
In sports, this balance can be difficult to shake out because it’s a complex system. Having one great player on your team makes the second best player a little better. House and Simmons point this out when they talk about the LeBron-Kyrie pairing. That second best player makes the third best player better and so on down the line. But like point #2 (availability tendency), we should be aware of situations with tailwinds.
Great business leaders like The Outsiders and Intelligent Fanatics grow their businesses in any market condition. Great people grow their businesses in any market condition too. Ben Horowitz suggested hiring the best salesman on the second best brand rather than the second best salesman of the best brand. Kara Swisher wondered if this was part of what happened to Yahoo?.
5/ Argue well. “People always want us to disagree more on the podcast and this is a good disagreement for us.” – Simmons about the Love for Wiggins trade.
The best organizations welcome thoughtful challenges and arguments:
After spending years with the Patriots Michael Holley wrote, “Belichick has no problem listening to any counterargument – provided it can be supported with some type of evidence.” Good leaders encourage debate and we get that from Simmons and House.
6/ Too hard pile. “Here’s the problem – and this is why modern basketball is becoming harder and harder to gamble on – you just don’t know when someone gets twenty-four threes.” – Simmons
A related point to number #1 (play games you can win) is to skip things that are too hard. Buffett and Munger have a “too hard pile.” Daniel Kahneman said, “I’ve always felt ideas were a dime a dozen. If you had one that didn’t work out you should not fight too hard to save it, just go find another.”
Simmons and House said parts of football gambling are too hard too:
7/ Linear thinking. “There’s no reason to think they (Golden State) couldn’t do it again next year.” – House
This comes when the duo talks about dynasties in the NBA. In the modern NBA, only LeBron’s Miami teams made it to the finals four consecutive years. It’s possible, but like points #2 (availability) and #4 (tailwinds) we should consider the nuance and not get stuck in a linear mindset of ‘this is how things are now and is how things will always be.’
The 2012 Oklahoma City Thunder team wore this narrative. The team was young, athletic, and talented. What could go wrong?
8/ Toward the end of the podcast Joe House’s blood sugar must have bottomed out, or he entered the initial phase of food poisoning because he said, “I have talked myself into Dwight Howard as a Washington Wizard.”
When House, a normally astute observer says something like this I can only assume he was ill, or this is code for him being held hostage.
If he actually talked himself into this – please Joe, say it ain’t so – it’s because he’s focused on immediate results. House’s team, the Washington Wizards have two players in the prime part of their careers. House feels a win now pressure. This is too bad.
Charley Ellis said that investing was easy because the competition wasn’t very good. This works for any area, said, Ellis. It’s what Sam Hinkie worked toward in Philadelphia.
Like #1 (play games you can win) and #6 (skip games you can’t), it’s more difficult to win short-term games than long term ones. Marc Andreessen said that at a16z their orientation is toward long-term investments and Ben Carlson said that long-term thinking was the last true advantage.
Thanks for reading,
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