A quick lesson to checking your beta in order to get better
That's a ridiculous idea,' scoffed Charles as he whipped the ball back at me across the squash court. 'You're just not seeing it straight.'
He certainly had a point – in more ways than one. The sweat was pouring into my eyes from our exertions and it was becoming a real struggle to maintain any semblance of opposition in the game. Couple that with my 'ridiculous idea' that active fund management was more of an art than a science, and I was losing on both counts. My adversary would have none of it.
Mind you, Charles very rarely accepted the arguments of others, even when he was quite plainly in the wrong. He assumed it his right to be right.
His brash confidence had served him well in his career and he now found himself sitting relatively near the top of one of London's newly consolidated fund management houses. Sure, he'd had to step on a few of his colleagues in the process but that's just the way of the world. And now that he'd reached his pinnacle he was damn well going to make the most of it. A couple of hours away from his office for a spot of squash down the club would benefit his mind and body. That, he presumed, would be to everyone's advantage.
I begged for some time out and slumped down in the corner at the back of the court, heart thumping. Charles continued to slam the ball against the back wall while I attempted to recover. I was sure this fitness thing wasn't doing my mind or body the good it deserved but at least a rest gave me a chance to collect my thoughts.
'Maybe an 'art' is the wrong term,' I ventured. 'I'm just suggesting that no matter how many calculations you make, how many models you construct, at the end of the day you're just guessing about corporate performance.'
I'd obviously caught his attention: his racquet missed the ball by quite a margin for the first time since we'd been on court. 'Why do you think we spend so much time quizzing management teams and poring over their figures?' he asked. 'Do you think it's all for fun?'
'No, but I do think it is all a bit random dressed up as something a lot more intellectual. You know better than I do that past performance is no guarantee of the future so why pay so much attention to, say, last year's results? Even a company's own future projections are subject to any number of variables which might push them right off target. Why should you have any greater insight?'
Charles was bored with my devil's advocacy. The ball had started back on its old punishing journey between cat gut and concrete so I reluctantly bowed to my own inevitable defeat and willed my stiff legs to drag me back up.
It didn't last long. My racquet flailed about with great artistic merit but resulted in little direct link between where I imagined the ball might end up and where it actually went. Charles, however, had refocused on the game allowing him to almost scientifically chart the direction of the ball and his corresponding progress toward victory.
'You know your trouble,' chuckled Charles a little too knowingly as we returned to the locker room. 'You've got no concept of risk – neither in your argument nor your game. Okay, an amateur may be able to beat us in the short term by throwing darts to select stocks but, over a longer period, they will lose out. That's also why you lose at squash.'
'I don't get it,' I replied, puzzled but curious as to the link.
'Your aim is merely to return the ball. You don't base that return on my past performance, nor do you allocate resources efficiently around the court to balance your risk. You may win one or two points but, over the course of a match, you don't stand a chance against tactical know-how.'
I considered arguing that, in the long term, active fund management might not stand a chance but thought I'd pushed my luck a little too far already. I left content in the knowledge that all I needed to do was change my squash benchmark. Charles had had his last game.