10 Jun 2021 Sticky Baseballs and Playing The Right Game
Major League Baseball is an interesting place right now. After a number of seasons where offensive numbers (especially home runs) have been trending higher than ever, a number of things have happened to suddenly and drastically curtail offensive output: a new baseball was put into play that was meant to be favorable to pitchers, there was a long layoff before last season began (due to COVID), and now MLB has largely turned a blind eye to pitchers using sticky substances to substantially increase the amount of spin they can put on pitches (which increases their effectiveness significantly). At first the sticky substances were primarily sunscreen that pitchers would wipe off their arm as they sweated and mix with resin that they were “hiding” on their hat bills or inside their gloves, but it has come to light recently that a number of teams are hiring actual chemists to create new substances that are even stickier.
Baseball is a sport that lends itself to cheating—see the Houston Astros, the “steroid era,” and now sticky baseballs—and part of what is so interesting about that is, because of the incentives in place and the general competitive spirit of a bunch of athletes, players who may have ethical qualms with cheating of various forms are almost forced to engage in it anyway, or they will find they will find themselves quite literally without a job, replaced by the next player who is willing to cheat with everyone else. And the job skills of a MLB player are not extremely transferrable to other professions…
But you know who doesn’t have to worry about sticky baseballs right now? Chris Paul. That’s who. Because Chris Paul plays point guard for the Phoenix Suns, which is not a baseball team at all, but a part of the National Basketball Association.
At any given time as an investor, investing can feel like it’s full of sticky baseball scandals. Whether it’s the absurdity of the meme stocks and pumped up joke cryptocurrencies, or the constantly discussed specter of inflation, or the perma-bears who do more damage in constantly predicting a stock market crash than the crashes do when they eventually come, well, in short, there’s always something. And just like in the game of baseball, it can sometimes reach a point of inflection when regular investors feel like they have to start getting into these things or else risk losing the game.
But as Morgan Housel has said, “It’s so easy to lump everyone into a category called “investors” and view them as playing on the same field called ‘markets.’ But people play wildly different games.” People play wildly different games. From hedge funds and family offices and huge endowments to banks and index providers to Reddit message-boarders and TikTok crypto-influencers, there are all sorts of ways to invest that have basically zero overlap with a single individual or family who is investing in order to meet financial goals. The incentives are completely different, the structures are completely different, and the priorities and values aren’t even on the same planet. You aren’t even playing baseball. You’re Chris Paul, and basketball is your game.
We don’t work for hedge funds or banks or Reddit message boarders. We work for people who will need some money to go on a 30th anniversary trip, for people who want to give away their money in tax-efficient and value-aligning ways, for people who have weird benefits packages and want to be sure they’re maximizing them, for people who want to help their kids and grandkids with college, for people who want to transition healthfully into retirement. And to do those things well—to “win” that game, if you will—doesn’t require the people we work for to buy meme stocks or to hedge with derivatives or to make tactical bets on what the stock market may look like in six months.
So, just as Chris Paul is likely aware of the sticky baseball situation, and perhaps interested in it and any analogies he may draw to the game of basketball, you can choose to be aware of what’s going on in these strange corners of the stock market. But please don’t start putting resin on the basketballs.