98 THE INVESTMENT TEAM
quently, the Federation, as in a game of chess, has to think several
steps ahead of the Borg to defeat them.
In the markets we face today, as soon as winning strategies are
identified, the market “morphs” to absorb them and render them
ineffective. Winning strategies have to be designed to stay a step
ahead, continually reinventing the next version of the strategy. It
seems that almost all information is available instantaneously now.
On the Internet, for example, you can find out not only how many
trees are growing in North Dakota, but also how many red-headed
woodpeckers are living on each one of them. The Internet repre-
sents a huge collective consciousness. And guess what? You are up
against that giant brain. Now, I ask that old geezer in the print
ad—the one saying, “9,763 stocks. I like my odds.”: Do you still
like your odds?
But there is still another way in which the market is changing
that makes it harder to predict and, therefore, to win. This second
way involves the personality styles that we’ve been discussing. The
mix is changing.
Let me use John Maynard Keynes’s beauty contest analogy to
explain how:[P]rofessional investment may be likened to those newspaper
competitions in which the competitors have to pick out the six
prettiest faces from a hundred photographs, the prize being
awarded to the competitor whose choice most nearly corresponds
to the average preferences of the competitors as a whole; so that
each competitor has to pick, not those faces which he himself
finds prettiest, but those which he thinks likeliest to catch the
fancy of the other competitors, all of whom are looking at the
problem from the same point of view. It is not a case of choosing
those which, to the best of one’s judgment, are really the pretti-
est, nor even those which average opinion thinks the prettiest.
We have reached the third degree where we devote our intelli-
gences to anticipating what average opinion expects the average
opinion to be. And there are some, I believe, who practice the
fourth, fifth, and higher degrees [Keynes, The General Theory of08-13 ware 98 1/19/01, 1:11 PM