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A Game of Them

Summary:
I always made one prayer to God, a very short one. Here it is: “O Lord, make our enemies quite ridiculous!” God granted it.Voltaire, in a 1767 letter to Etienne Noel Damilaville Sigh. Yes, we’re going there. Epsilon Theory readers are well aware of the prevalence and temptation of what we call the Game of You: mirroring and rage engagements. In a mirroring engagement, we follow and interact with an influential missionary of common knowledge because it is gratifying to find someone who looks and thinks like us! In a rage engagement, we follow and interact with someone who we dislike, in part because outrage is fun. But even this is usually a sort of mirroring engagement, where our rage is just performance art for our brethren. Virtue signaling, but without the pretense at

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A Game of Them

I always made one prayer to God, a very short one. Here it is: “O Lord, make our enemies quite ridiculous!” God granted it.

Voltaire, in a 1767 letter to Etienne Noel Damilaville

Sigh. Yes, we’re going there.

Epsilon Theory readers are well aware of the prevalence and temptation of what we call the Game of You: mirroring and rage engagements. In a mirroring engagement, we follow and interact with an influential missionary of common knowledge because it is gratifying to find someone who looks and thinks like us! In a rage engagement, we follow and interact with someone who we dislike, in part because outrage is fun. But even this is usually a sort of mirroring engagement, where our rage is just performance art for our brethren. Virtue signaling, but without the pretense at virtue. In both cases, it’s largely entertainment.

Mirroring and rage engagements are not real conversations, and they’re not meant to be. They’re one layer of abstraction away from reality, in the way that most entertainment is.

There’s a special case of mirroring and rage engagements that takes this kind of interaction a step further. Let’s call these martyring engagements. They’re the same as a mirroring or a rage engagement, except they exist yet another layer of abstraction away from any semblance of reality. How, you ask, do we achieve this?

  1. Build up a ridiculous straw man about the source of unfair and unreasonable treatment of something perfectly innocent.
  2. Circle the wagons for a rage engagement by assigning that straw man to whatever group you want to take down a notch.
  3. Do a mirroring engagement victory lap with the other ‘good guys.’

There is a reason that Voltaire’s prayer – that God make his enemies ridiculous – is always answered: because we always answer it on God’s behalf. It is very easy to do. We simply find the most unmitigated imbecile among the people we disagree with, and then assign his or her imbecility to everyone whom we would make ridiculous. Et voila.

We did this back in December with the usual hyperventilation over the War on Christmas. What was the cause this time? A really dumb opinion article written by a GQ correspondent in the Washington Post. This was all it took for the internet to build up a week’s worth of bilious martyring engagements over the fear that someone out there might not like it if you said “Christmas.” We all know that in the real world, the odds of this ever being an issue that comes up at all are practically zero. We all know that just about everyone just. Could. Not. Care. Less. But there’s always one someone out there who’ll gladly be our huckleberry, and that’s all it takes.

This, of course, brings us to this week’s martyring engagement of choice – yup, Alexandria Ocasio-Cortez acting like a normal college student. Do you know anyone of any political persuasion who thought the dance video was anything but harmless, cute and funny? Do you know anyone who really thinks that it had any import on how her admittedly cringe-worthy economic ideas ought to be interpreted? Still, every news organization made it an issue, and social media buzzed in righteous defense of someone who was being attacked for something innocent by…er…Stephen Baldwin and an anonymous internet troll? Folks, there was an awful lot of rage and mirroring going on here. Its source wasn’t genuine surprise. If you responded to this meme, you knew what you were doing. You knew that practically nobody had a problem with it, but when the martyrdom engagement is in force, well, what are you gonna do?

It just feels so good to pretend that our enemies are ridiculous, doesn’t it?

The Game of Them is not just a political and civic problem. It’s a problem for those of us in markets, too. Unlike the (almost) pure entertainment value of those martyrdom engagements, when we act on the lies we tell ourselves about other investors in a zero sum game, we are taking uncompensated risk. What’s the biggest, most common, most frequent lie investors tell themselves about the ridiculousness of other investors? It’s the biggest Lake Wobegon of them all, the thing I have heard from >90% of fund managers, >90% of financial advisers and >90% of asset owners.

“My biggest edge is time-horizon arbitrage. The rest of the world thinks quarter-to-quarter. I’m more focused on the long-term.”

No it isn’t.

No they don’t.

No, you probably aren’t.

If you’re building a set of principles about any zero-sum game, the conclusions you make about others are never throwaways. They reflect which risks you think are compensated and which you think are not.  I’m telling you now, if you think time-horizon arbitrage is your edge, the odds tell me that it’s quite likely that you are probably wrong about others participating in the market, and probably wrong about yourself.

And when our cartoons about others so clearly reflect back on our own chances at success, it’s easy to see how A Game of Them becomes A Game of You.

Rusty Guinn
Executive Vice President of Asset Management, Salient. Rusty Guinn is the executive vice president of asset management at Salient. He oversees Salient’s retail and institutional asset management business, including investment teams, products, and strategy. Rusty shares his perspective and experience as an investor on the Epsilon Theory website.

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