Winning The Loser’s Game

Through years of meeting people in and around the capital markets, I’ve concluded that the brightest and most valuable are those who combined keen intelligence with the ability to distill complex concepts into relatively simple thoughts and explain them.  I first read Charles Ellis when studying for the CFA exams and I’ve committed myself to reading each article or book that he’s since written.  While this book is written with equity investing as its context, its concepts apply to all investment activity whether for institutions or individuals.  Winning the Loser’s Game includes chapters that investigate investment risk, investment return, the impact of time horizon on investment decisions and the importance of investment policy.  All chapters are worth reading but the two that I found profoundly helpful were the first two chapters.  Taken together, the author describes how investing in securities is a zero-sum game in which one side gains at the cost of the other, while both lose after accounting for the cost of the transaction, and that perhaps the only way to truly win is to avoid making mistakes while profiting from the mistakes of others.

Charles Ellis is an investment consultant and founder of Greenwich Associates.  He is perhaps best known as the former Chair of the Investment Committee at Yale University where he collaborated with David Swenson in devising the Yale’s now-famous investment strategy.

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