Sunday, February 12, 2012

Two Blogs from Shanghai

Investment lessons from this year’s Super Bowl

My recent trip to Hong Kong, Singapore and Shanghai stimulated thinking and reading about investing in China. This was my first visit to Asia during a Super Bowl, and this blog post will focus on notes made while watching the game on a Chinese-language station. The second of my two blogs from Shanghai summarizes my observations regarding investing in China.

As some of the members of this blog community know, I have the privilege to manage the defined contribution money for the National Football League and the Players Association. Thus, watching the Super Bowl is something of a pleasurable requirement wherever I happen to be. This year I found that viewers in Shanghai were treated to the same excellent camera work from the same network that many of you saw.

Lessons for the team owners

In terms of the league activities, the NFL owners operate through a series of committees. (This is an excellent example of successful self-regulation, which in the past has worked quite well for the financial community.) The Competition Committee develops the rules of the game that is fair for all thirty-two teams and their players, with a focus on what appeals to their fans, (both in the stadiums and in front of their television sets). One of the folklores in the league is that on any given game day, any team can beat any other team. Even with this principle, before the season began there was not a single expert that believed that the eventual winner of the Super Bowl would be the New York Giants. Through the complexities of the game schedules, the eventual winner got to play in its finest game of the year. (That should be some consolation to the chair of the committee, who just happens to be the main owner of the great New England Patriots, who almost won.)

For many years the team owners have been trying to export the game beyond the US. While there were a few advertisements on the Chinese language station, there were a lot fewer than what we would have received at home. The fewer ads financially supported a much-worked single commentator. Watching from Shanghai, I could see how often nothing was happening on the field. These programming gaps were filled I am sure, in the home market. My conclusion from this observation is that the league has a big marketing effort ahead of it if it wants to build a fan base in Shanghai with its twenty million-plus population.

Lessons for the team cities

Teams often take on the attitudes and personalities of the cities they call home. Boston was founded on an idea, in this case, religious freedom. Residents of the city became the intellectual spur that led to the American Revolution. The first signer of the Declaration of Independence was the governor of the state. Later on, Boston would become famous for developing trust law and acting conservatively for others. Its football team, the New England Patriots (originally the Boston Patriots), played largely to these tunes, with finely executed, and generally conservatively managed plays.

New York was founded by the Dutch and their commercial law and practices (think “Tulip Bulb Mania”) as a site to promote competitive trading. The establishment of the United States with the Declaration of Independence hung in the balance, as many New Yorkers had conflicting viewpoints as to whether to sign the document or not. Later, the marketplace competition gave many the impression that New Yorkers were sharp dealers and could be rough. My guess is that only in New York could our greatest securities markets flourish. Thus in character, the combination of a very strong front line, very aggressive backs, and a quarterback who was not afraid to gamble, are representative of what the rest of the world thinks of New York.

Lessons for investors

Sometimes perfection is not enough. In the game, Tom Brady established a record of sixteen consecutive passes with amazing accuracy; often hitting well-defended receivers. In terms of the ability to successfully execute conservative plays, I believe the Patriots were the best on Sunday, if not most days of the year. But they lost to a more aggressive team that forced things to happen. In the final play of the game when the Patriots could have scored the winning touchdown, their talented quarterback threw a long "Hail Mary" pass into the end zone, with two potential receivers who were guarded by at least four defenders. The Patriots just ran out of time to show their superiority.

As an investor, the lesson I take out of watching the game is that one can execute flawlessly, but still lose. In the competitive world of performance, measured in finite periods of the calendar, one can run out of time. The last day or trade can make the year. At times, one can win by forcing the competition to make mistakes including going out of their normal patterns.

In this year’s Super Bowl, no one came out as a loser, all played well, including the officials and the competition committee.

To read the second of my two blogs from Shanghai, click here.

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