No Called Strikes in This Business

The FOMO is real. Gamestop this, Bitcoin that, and did you get in on Cathie Wood’s Ark ETFs yet?

If you, like me, have passed on these and dozens of other investment opportunities, please remember one thing: There are no called strikes in this business.

In baseball or softball, if three good pitches pass over the home plate between your knees and your shoulders, you’re out. Time to grab some pine.

That’s not the case at all when investing. You can swing on a handful of pitches, let 1,000 perfectly good balls pass you by, and still be in good shape for retirement. Those ignored pitches may turn out to be fads; they may represent the next trillion-dollar market cap company. We can only know in hindsight, and in the grand scheme of things, it doesn’t much matter.

 

No Called Strikes in This Business

 

no-called-strikes

 

If you’ve heard this analogy before, it’s probably because one of the most famous investors of our time, Warren Buffett, used it to describe stock market investing back in 1984 on Adam Smith’s Money World television program.

 

Specifically, he said:

“There are no called strikes in this business. The pitcher just stands there and throws balls at you….You sit there and they throw U.S. Steel at 25 and they throw General Motors at 68, and you don’t have to swing at any of them. They may be wonderful pitches to swing at, but if you don’t know enough, you don’t have to swing. And you can sit there and watch thousands of pitches, and finally you get one right there where you want it, something that you understand—and then you swing. I might not swing for two years.” -Warren Buffett

 

 

1984 was four years after the IPO of Apple, Inc. and the year the Macintosh computer was introduced. It would be 32 more years before Warren Buffett’s Berkshire Hathaway would invest in Apple in 2016.

He watched that stock pass over his plate time and time again for more than 3 decades before taking a swing. As of December, 2020, after selliing off $7.4 Billion in Apple Stock, it still comprises 43% of Berkshire Hathaway’s stock holdings.

Just because you don’t swing the first time, the third time, or the 10,003rd time you’re given the opportunity does not mean it’s too late! Just ask the throngs of people swapping dollars for Bitcoin after a coin surpassed $30,000, then $40,000, then $50,000+ in 2021.

 

No Swing and No Miss on Bitcoin

 

Speaking of Bitcoin and “no called strikes,” I believe the first time I saw the baseball term used in reference to investing was in a 2013 article from my friend Jim Dahle at The White Coat Investor entitled 5 Reasons I Don’t Invest in Bitcoins.

There are so many things I love about this article. First and foremost is the fact that “Bitcoins” is plural right there in the title. You don’t hear people talk about Bitcoin in the plural, probably because most who trade in $BTC are buying fractions of a coin, not multiples of the cryptocurrency. Plus, Bitcoins just sounds funny.

Back in 2013 when Dr. Dahle stated Reason #1 he’s not invested in them as “There are no called strikes in investing,” $10,000 would have bought about 14 Bitcoins. As this is published in 2021, $10,000 wouldn’t get you one fifth of a Bitcoin. As the saying goes, what a difference eight years makes.

You might be thinking he’s eating a lot of crow these days. That he wishes he had never such a thing and bought up or mined all the Bitcoin(s) he could have gotten his diamond hands on.

Au contraire, mon frère.

In fact, he’s recently doubled down, publishing the Top 7 Uses for Bitcoin, in which he explains why he still hasn’t found a place for Bitcoin or any cryptocurrency in his porfolio.

Where do I stand on cryptocurrency? I’m rather agnostic to it. I’ve heard valid arguments from intelligent people stating that Bitcoin could be bid up to $1,000,000 or crash to zero in the next decade.

I’d be surprised if either one turns out to be true, but I’m comfortable sitting this one out, either way. After all, there are no called strikes in this business.

That’s not to say I have no skin in the cryptocurrency game. I have invested a decent chunk of money into Republic.co, a more mature startup that helps newer startup businesses raise funds. They also have a foothold in the blockchain space, having launched an initial coin offering of their own Republic note and they’ve been exploring possibilities with cryptogoods and non-fungible tokens (NFTs).

I guess I also own some Bitcoin in a roundabout way. I’ve been invested in Tesla since 2010 via my VTSAX holdings, and Tesla recently announced their purchase of $1.5 Billion in Bitcoin.

I may not be swinging a bunch at blockchain-based assets, but I’m not entirely missing out, either.

 

The Allure of the Home Run

 

Compulsive gamblers are infinitely more likely to tell you about their big wins than their regrettable, forgettable, but not infrequent losses.

Investors on an internet forum are not exactly compulsive gamblers (although I’ll bet a few of them are). Like the bettors, though, they are equally likely to play up their home runs while dismissing the many times they’ve swung and missed.

Some who speculate truly do win more often than they lose. How can this be? There are a few reasons.

It could be skill. The common rebuttal is that if someone is good enough to consistently make small bets with individual stocks and options, they should be running a large fund and making millions or billions. What’s missing in that rebuttal is the fact that what might work well for an individual on a small scale may not be able to be replicated when trading with hundreds of thousands of shares.

Measuring risk-adjusted returns is not a simple calculation, and traders who hit home runs on the regular are no doubt taking more risk than the index fund investor. This is another reason that an individual investor can do much better (or much worse) than a boring indexer like me. They are taking on more risk.

The role of luck cannot be dismissed, either. In any bell curve of possible outcomes, there will always be a subset that fall more than one standard deviation above the mean. Chance alone can be all that’s needed to match or outperform the broader markets for a random selection of investors.

Whatever the reason, the fact is you’re bound to hear about others who are making large amounts of money in a short amount of time, and it’s tough not to feel like you’ve missed out.

Take consolation in the fact that your simpler investment plan takes less time to implement, subjects your money to smaller risks, and requires no significant combination of skill or luck to be successful in the long run.

 

I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.

 

Singles and Doubles

 

In the 15 years or so that I’ve had significant money to invest, I’ve let many, many strikes go by. I know now that many of those pitches were softballs lobbed underhanded. Any sort of swing at some of them could have knocked the ball right out of the park.

Yet, I did not swing. And I have no regrets.

Like Dr. Dahle, who has been swearing off Bitcoins for 8 years running, I’m also a multimillioinaire who has no need to work for money.

 

All this despite:

 

Owning only 4 individual stocks, all of which I bought for an ancillary benefit. I have Berkshire Hathaway because I’d really like to make it to a shareholder’s meeting while Warren and Charlie are around to speak. I also invested in cruiseline stocks in 2020 for the free on-board credits.

 

Purchasing my first ETF in 2020. Prior to 2020, I had exactly $0 in exchange traded funds. Mutual funds have suited my needs just fine, and I only switched some of my holdings to ETFs in tax loss harvesting maneuvers.

No, I don’t own any ARK ETFs, although I do own every security you’ll find in them via my total stock market fund holdings.

 

Buying no cryptocurrency. I’ve got no digital keys to misplace, and I haven’t bought or sold any Bitcoin, Ripple, Ethereum, or Dogecoin. I may benefit tangentially from the rise of cryptoassets and I technically own some cryptocurrency indirectly, but I’ve let those pitches pass me by.

 

Buying into exactly zero IPOs. Airbnb more than doubled the day it went public. To be honest, I don’t care to do due diligence or perform fundamental analysis on any private or publicly traded companies. I’m not going to pretend to be better than the professionals whose livelihood depends on doing it well.

 

I’m happy owning all the stocks and researching none of them. Yes, this leads to a series of singles and doubles rather than home runs. It’s the simple path to wealth, tried and true, and it suits me very well.

I have two very active Facebook groups — one for medical doctors and another group for all comers — and members ask about individual stocks, ETFs, IPOs on a not-infrequent basis. While it’s not the way I invest, I find it interesting to see the chatter.

What turns me off to that style of investing more than anything is not the fact that for most, it’s not a terribly effective way to invest, but that every day, you should be evaluating whether to buy, sell, or hold every individual holding you either own or are considering acquiring. I don’t want to live my life having this overwhelming number of micro-decisions to make with my money day in and day out.

 

I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.

 

When you read about Roaring Kitty’s exploits on r/wallstreetbets, hear the IPO chatter in the physician’s lounge, or get stock tips from whomever the modern-day equivalent of a shoeshine boy is, remember this: there are no called strikes in this business.

Thousands of could-be strikes can pass you by, and you can still win this game.

 

11 thoughts on “No Called Strikes in This Business”

  1. Great post!

    As a baseball fan and a fan of “boring” investment strategies I love this analogy. I agree with you and feel pretty ambivalent about crypto and such. I think the bottom line is that we don’t need to take on that volatility risk to achieve our goals.

    You are living proof of that!!

    Reply
  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. I do have 3~ of my investment portfolio in about 10 cryptos. I may reduce that the next bump up simply because for example, it’s down 20% overnight today! That’s a little silly. But my theory is that best and worst cases rarely happen but in this case, the worst case means my portfolio will do 3% worse than otherwise, and the upside is that I make enough to buy a vacation house. I put 2K in 2014 and in 6 months during 2017 I withdrew enough to fund both our ROTHs and H.S.A., left the rest in, and now it’s around 50K. But it was also at 6K a year ago and I haven’t withdrawn or added a bit! Yeah…3% is as much as I want in there!!

    Reply
    • I like that approach. Use play money, and if it does amazingly well, it could have a meaningful impact on your financial future. If it falls flat or worse, you’re only out a few percent.

      I’m not opposed to making bets with a relatively small portion of the portfolio. It’s not necessary, but can be fun and exciting when things work out.

      The nearly 20% drop in Bitcoin overnight was pretty wild — but it only gave up a couple of weeks worth of gains. Tesla has done something similar over a slightly longer timeframe, but had massive gains leading up to it, of course.

      Cheers!
      -PoF

      Reply
    • I see real estate and other “alternatives” as purely optional, but I’ve allocated about 20% of my portfolio to the asset class.

      I think there can be FOMO with just about anything that’s not cash. You see the posts in the Facebook groups, right? I’ve been in cash since 2015 to avoid the pending bear market and now I have $800,000 in a money market fund…” And now they’re hesitant to get into stocks when they’ve more than doubled with their cash on the sidelines.

      VTSAX FOMO can be just as real!

      Cheers!
      -PoF

      Reply
  4. We have slightly different investment philosophies but I do agree with this post. One shouldn’t FOMO at every pitch and try to get in later. Also if one doesn’t enjoy studying the investment and want to spend time tracking it and constantly re-evaluating it; then they are better served with simpler alternatives.
    Bottom line, stick to your investment plan

    Reply
  5. Brilliant article. Perfectly encapsulates my investment style as well. If you speculate a lot you may have a few big wins and lots of small losses. Depending on how things play out, which is not under your control or within your ability to predict, you may or may not be successful. On the other hand, low cost index funds likely consistently make money and let you sleep at night.

    Reply
  6. I agree that investing in cryptocurrency isn’t necessary to build wealth. In fact, slow and steady is a surefire way to getting rich and there’s nothing wrong with that.

    I have a small amount of investing into cryptocurrencies but more so than the cryptocurrency itself is the technology behind it. Once I understood the underlying technology behind what goes into cryptocurrency, I saw the future and realized how great it was.

    However, so many people go into bitcoin and think “omg, look at the price! I missed out on so much!” These people are ridiculously missing the point. I don’t think cryptocurrencies were designed as a way to build other people’s wealth but to revolutionize the payments industry.

    For wealth building, it’s completely unnecessary and if all you’re going to focus on is the price, stay away!

    Reply
  7. Great article! Was there a typo towards the end? I think you meant to say: “Like Dr. Dahle, who has been swearing off Bitcoins for 8 years running, I am a multimillioinaire who has no need to work for money.” 🙂

    Reply
  8. BRK also lets you get a discount on Geico insurance! Covers our home as well. I believe it’s 8%.

    Also really hoping to catch the Woodstock of Capitalism one day! 😉

    Buffett put out his latest shareholder letter just two days ago and I’m starting to dig in! Always a pleasure to read.

    Reply

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