Here is some wisdom from Charley Ellis who wrote "Winning the Loser's Game". The essential message of this book is that like sport 'defence wins championships'. However it is the human elements of investing that makes the difference.
1/ How to beat the market. It helps if your competition isn't very good. “The secret to great success in business is to choose competition that’s not very good. The same thing works in sports, it works in lots of different things.”
An easy way to do this is to find places with no competition. Instagram did this when they became a photo app rather than a check-in app.
On being able to outperform other investors Ellis said, "(I would) finish reading a 50,60, 70 page study that told you quite a great deal about what was going on in the past, currently, and what was likely to happen in the future. It was an unfair competitive advantage and we took advantage of it.” Investors and entrepreneurs have little time for hobbies or coaching youth soccer. If you're going to spend that much time doing something you better love it. Joel Greenblatt wrote, "if you're not going to enjoy the 'game,' don't bother: there are far more productive uses for your time." The chase should be fun.
...attention to detail is quite important!!
2/ Habits and urges. “There’s a huge argument for not smoking under any circumstances, but there are still some people doing it.” “We know that gambling is designed to entertain people enough so they won’t mind losing ten or twenty percent of their money every wheel turn.” “They’re not actually gambling, they’re gradually losing money.”
Did you eat any take away food over holidays? Diet, much like smoking and gambling is one of those things where our habits and immediate satisfaction trump our goals and long-term rewards. It's hard, but we can do better.
Betterment, the Robo-advisor service will display potential tax costs associated with closing out a trade. This extra bit of information stops three out of four people from entering the order.
3/ Do it for the love of the game.When Ellis is asked what would happen to the investing world if you cut everyone's pay in half he said:
“They wouldn’t leave. They’d still want to play because it’s fascinating, it’s really interesting, it’s very enjoyable and you don’t have to stop at 35…I know a couple of people over 100 who are still involved in active management...The rewards are really quite substantial.”
It's fun. It's enjoyable. People like the challenge.
“Why were the highly accomplished so dogged in their pursuits?...They were satisfied being unsatisfied...It was the chase as much as the capture that was gratifying.”- Angela Duckworth
4/ Effort (sometimes) equals Results. Kids learn in school that if you study harder you can achieve better marks, then we learn in our jobs if we do more work for the employer we get more promotions. Trying harder works in many, many places. However it doesn’t work in investment management
Seth Klarman wrote "Investment returns are not a direct function of how long or hard you work or how much you wish to earn."