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WHAT THE JAPANESE CAN TEACH US ABOUT INVESTING

Okay, I’ll admit – the title of this piece is a bit misleading, but I figured that with all the negative comparisons to Japan I keep writing here on the site I might as well write something positive.

I am a baseball aficionado.  Not just a casual observer.  Baseball has always fascinated me for reasons that bore the casual observer.  I love the 7th inning hold, the stealing of signs, the sac bunt, etc.  Those things get me excited when I watch baseball.  See, baseball is a game of little things that all come together to form one larger result.  Big plays rarely win baseball games.

No one in the game of baseball does the little things better than Ichiro Suzuki.  I could watch Ichiro play baseball forever.  To the casual observer Ichiro is not particularly exciting.  He is no Vlad Guerrero – who swings the bat like he is chopping a tree down with one swing.  He is no Albert Pujols – who has the purest swing in the game.   But an at-bat with Ichiro is like a delicate ballet combined with the methodology of a chess match. Just watch this video of Ichiro batting against American power pitcher Curt Schilling:

The casual observer might only notice that Ichiro gets out. But this is the brilliance of Ichiro. This sacrifice fly is a typical Ichiro at-bat. The game is tied 0-0.  With the bases loaded and no outs Ichiro isn’t trying to hit a home run. He isn’t even trying necessarily to get a hit. Ichiro gets himself in a 1-2 hole and plays into the weakness of a big strong American power pitcher. Schilling is thinking high heat. Ichiro eats it up and sends the ball into deep left field. The at-bat results in an out, but more importantly, it results in a run scored.  1-0 Japanese All-Stars over Americans.

Investing is no different.  It is a game of repetition where hundreds of small actions result in one larger result.  But most importantly, it is a game of risk management.  It is not the home run hitter who wins in the long-run.  Rather, it is that strategist who devises the best long-term plan who ultimately wins.   While hitting home runs is sexy it is rarely a recipe for success in the investment world.  Aim high, but play small.  Over time, good risk management and patience wins.  Power is no substitute for precision and patience.  The same is true in the world of investing.

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