This is the 144th installment of The Labyrinthian, a series dedicated to exploring random fields of knowledge in order to give you unordinary theoretical, philosophical, strategic, and/or often rambling guidance on daily fantasy sports. Consult the introductory piece to the series for further explanation.
Over our almost two years of existence, we’ve written a few pieces about Warren Buffett. One of the first FantasyLabs pieces by co-founder Jonathan Bales was about what Buffett can teach us about DFS. One of my first Labs pieces was about value investing and NBA shooting guards. Since then I’ve written about Buffett’s 5/25 rule and his practice of writing covered calls. I wouldn’t say that we’re obsessed with Buffett — he’s no Mark Cuban! — but Buffett is basically the balls.
In this piece, though, I want to spend some time looking at Charlie Munger, the vice chairman of Berkshire Hathaway and Buffett’s investing partner for the last 40 years. Munger is still an active investor at 93 years old.
Poor Charlie’s Almanack
Poor Charlie’s Almanack is a collection of various speeches Munger has given since 1986. It’s 548 pages of awesomeness. I mean, I assume it’s awesome. I haven’t read it because 548 pages is a lot of f*cking pages. What am I supposed to do? — quit my job so I can read this book full-time?
Anyway, in Munger’s speeches he talks a lot about the importance of multidisciplinary approaches and “elementary, worldly wisdom.” Like Buffett, Munger reads a lot. Unlike Buffett, however, Munger tends to read a lot outside of business. He tries to gain as much knowledge and wisdom as he can from as many fields as possible: Psychology, biology, law, mathematics, etc. He doesn’t endeavor to become an expert in these fields. Rather, he wants to be an expert about those fields: He strives to master the fundamental principles in non-business disciplines and then, when opportunities arise, apply them to business.
Ultimately, Munger has one goal in accumulating information from various fields: To build an increasing number of mental models he can leverage.
Munger’s Mental Models
A couple of years ago Michael Simmons wrote a Forbes article about Munger’s use of mental models. Here’s an excepted passage of what Munger says in the piece about how he uses his suite of personal models to analyze companies:
The first rule is that you’ve got to have multiple models — because if you have just one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models. And the models have to come from multiple disciplines — because all the wisdom of the world is not to be found in one little academic department. It isn’t that tough — because 80 or 90 important models will carry about 90 percent of the freight in making you a worldly-wise person. And, of those, only a mere handful really carry very heavy freight. Use a checklist to be sure you get all of the main models. You need a different checklist and different mental models for different companies.
I want to spend the rest of the article thinking about what Munger is saying in this passage. It seems highly relevant to DFS.
If you subscribe to FantasyLabs, you’ll notice when you enter our Player Models for the first time that we don’t have just one Pro Model. We have multiple models. Right now we have five Pro Models for MLB and eight for PGA and Euro golf. We think that it’s important to use multiple models in each slate.
When you create your own models, you shouldn’t build just one. You should experiment with hundreds of models and then reduce the number of models on which you rely to a more manageable number.
The big point is this: You want to use as many models as possible. Just pretend you’re Leonardo DiCaprio.
The idea that knowledge from outside fields can benefit us in our primary tasks is very Labyrinthian-esque. If Munger weren’t older, more famous, and much more successful than I am, I’d say he borrowed the idea of a multidisciplinary approach from me.
F*ck it. Munger’s whole philosophy is plagiarized from me. Whatever, I’m over it.
I’ve mentioned before that reading is vital to DFS. Specifically, I think that reading non-DFS content is important because it allows you to create various frames of reference for the DFS landscapes you survey. A few months ago I wrote a piece about five micro habits for DFS success. Here’s one of them, which was offered by Labs NBA Director Justin Phan:
Read something unrelated to DFS, even if just for a minute each day. It’s easy to get lost in the grind and find yourself trapped in a bubble where you inevitably read and consume a lot of the same DFS material. Taking some time out to read a blog post or a page out of a book on another topic will give you a unique perspective that could provide a leg up on the field. (Seth Godin’s blog is a favorite of mine.)
I could write about 1,000 more words on this, but you get the idea.
A Few Models, Most of the Load — Not as Dirty as It Sounds
Munger’s belief that a few models — or maybe a few big ideas — can provide 90 percent of the wisdom one needs is telling. I think that’s how it is in DFS. When you’re researching with our Trends tool and trying to maximize for Plus/Minus, you’ll likely find that even just a few factors — such as Vegas data, opportunity, and efficiency — can predict the majority of player production.
I think of this minimalist perspective as the Occam’s razor for DFS pragmatists. Focusing on the core factors that account for most of the signal and deprioritizing the lesser factors that have a relatively high degree of noise is a way of ensuring that decisions are made from a position of strength. You should have an arsenal of models at your disposal, but you should rely most heavily on only a few of them.
When people talk about a guy who looks like a good DFS play, they might say something like, “He checks all the boxes.” In a similar fashion, if a guy rates well in multiple models — especially the main ones you use — that’s a great indicator. Ideally, the players you use are those who routinely stand out when you’re running down your checklist of models.
And if you don’t have a checklist of models — if you’re not checking players across multiple models when you’re researching — what’s the point of having multiple models?
Different Checklists, Different Companies
Just as Munger uses different checklists for different companies, DFS players should use different models for different types of contests and slates. Among our Pro Models, we have different versions for cash games and tournaments, and each of the versions named for individual members of Team FantasyLabs weight factors differently.
For instance, the 2017 Bales MLB Model weights our proprietary Weather Rating at 14 percent. In other words, 14 percent of each player’s rating in the Bales Model is determined by the Weather Rating of the game in which he’s playing. In slates that have a great variety of weather, it makes sense to use the Bales Model, as weather will be a factor that matters significantly in that slate. If, however, a slate has no significant weather issues, then it might make more sense to use the CSURAM88 Model (built by Labs Co-Founder Peter Jennings), which assigns Weather Rating a weight of zero percent.
Different slates and contests call for different Models based on the factors likely to be important given the circumstances, which is why — when previewing Models in our Premium Content Portal — Pete builds new Models for each slate. And in each video Pete says something like, “This is more of a GPP Model,” and then he talks about the factors he’s prioritizing and why.
For Munger, the goal is not just to have multiple checklists. The goal is to have multiple checklists so that he can find one that best serves the moment at hand.
Also, I’m about 85.7 percent sure that’s the first time I’ve written the phrase “moment at hand.”
The Hedgehog and the Fox
It seems that Munger’s investing approach is to be a fox instead of a hedgehog. Philip E. Tetlock in his book Expert Political Judgment noted that foxes (who use a variety of perspectives and ideas) tend to predict the future with more accuracy than hedgehogs (who use one global perspective or idea to explain the world).
About a year and a half ago, Tetlock was on an episode of Freakonomics Radio promoting his most recent book, Superforecasting. It just so happens that the first guest on the show, talking in a very foxy fashion, is the Charlie Munger of DFS:
No matter how much he pays me for a British accent, I won’t call Bales “The Warren Buffett of DFS” until he makes his first billion dollars.
I think that’s reasonable.
The Labyrinthian: 2017.49, 144