Waiting for the Right Pitch

Sometimes an apparently simple idea from one field can provide great insight in another.  As we watch the final games of the 2008 baseball season investors might be surprised at what they can learn.  

Ted Williams is on everyone's short list of the greatest hitters ever.  He is the last player to bat .400 in a season.  He combined average with power, hitting 521 career home runs, while taking some time out twice for military service.  He and John Underwood wrote one of the greatest instructional books on hitting, The Science of Hitting.

The single most important idea was patience.  Wait for your pitch, one that is right for you.  The Splendid Splinter had what he called a "happy zone."  A pitch in this area was ideal.  The lesson can be seen from the picture below.  It shows a rectangle with the image of 77 baseballs.  Each baseball has Ted's expected batting average for a pitch at that location.

You can see more discussion of this image and an interesting list of batters at one of our favorite baseball sites, The Hardball Times.

One problem with this simple but excellent advice:  Most find it impossible to follow!

Looking to Warren Buffett

Many people know that Warren Buffett is a big baseball fan.  He is also an expert on baseball trivia, especially the 30's through the 50's.  According to the New York Times, he has some illustrations on his wall from The Science of Hitting, perhaps including the image above.

Buffett quotes the lesson from Williams as follows:

“The most important thing in investing,” Buffett said, “is what Williams said was the most important thing in hitting” — waiting for the right pitch.

“What’s nice about investing is you don’t have to swing at pitches,” Buffett said. “You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out. You can wait for the pitch you want.”

Adding to the Lesson

There are many places where this principle can be applied.  It is almost as if everyone in the investing universe is swinging wildly at every pitch.  So many opinions, so little actual knowledge.  Consider the following:

• CNBC, apparently starved for content, has actually increased the number of boxes in the Hollywood Squares.  Get serious.  What have we learned?  If you stick a microphone in front of someone, you will get an answer.  It does not matter if the respondent has relevant knowledge.
• Journalists as experts.  Journalists on television, in the MSM, and in blogs are straying far from their "happy zone."  Instead of helping us find and understand real experts, they take the easier course of writing their own opinions.
• Experts straying out of their real field.  There are many examples, and perhaps readers will contribute more.  For starters, we have plenty of fellow bloggers who stray from what they know.  This ranges from economists who want to talk about law, to lawyers who want to preach economics.  It includes accountants who cannot understand public policy issues, and public policy analysts who ignore accounting principles.  It means criticism of quantitative models by those who have never built one, and slavish devotion to models by people who should know better.

Warren Buffett is not going to help you on these problems, since he does not use any of these information sources.  He also does not care what the market is doing from day to day.

We all need to figure out this one for ourselves.  Who is swinging at pitches that are high and outside, instead of sticking to the "happy zone?"

We expect to return to this important theme.