Investing and the Zero-Sum Poker Game
Investing and the Zero-Sum Poker Game
(Bloomberg Opinion) -- Investors should think about markets as if they were spectators watching players at a poker table. Some will win, some will lose, but the net takeaway for the table is zero. That’s the advice of Jeremy Grantham, co-founder of money manager Grantham Mayo Van Otterloo & Co., and this week’s guest on Masters in Business.
Continuing the analogy, Grantham said that for most investors, buying the entire table, instead of betting on any one player, is the best strategy.
That’s a philosophy he has preached since 1971, before index funds even existed. Grantham and Dean LeBaron did create one, selling index portfolios to institutional investors. Pension and Investment magazine jokingly called it “the most talked about product with no business.” Today, GMO has more than $100 billion under management.
Grantham and his wife established the Grantham Foundation for the Protection of the Environment, and gave 98 percent of his considerable fortune to it. Data shows only 2 percent of all philanthropic efforts go toward environmental causes.
His favorite books are here; the transcript of our conversation is posted here.
Next week, we speak with Bethany McLean, contributing editor to Vanity Fair and author of “Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron,” which was later made into a documentary. Her most recent book is “Saudi America: The Truth About Fracking and How It’s Changing the World.”
To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”
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