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Market Intelligence

Don’t be a Ploppy!

Seaver Wang | September 14, 2014

I often feel like my advice falls on deaf ears. After all, even investment professionals frequently make the rookie mistakes I’ve been writing about all these years. So, what’s a ploppy? “Ploppy” is a derogatory term that advantage players use to describe the average blackjack player who does not play with a mathematical edge against the casino. Why play a game that you know you can’t win in the long run? Sure, it’s entertaining, but that’s the catch. The $1.3 billion (construction cost) Bellagio Hotel in Las Vegas did not get built by winners. And if you think its taboo to compare casino games with investing, you’re right, but so what, the similarities are still there. Let me shed some light on the subject.
You’ll notice that I avoided calling advantage players gamblers. That’s because gamblers are ploppies. When I speak of advantage players, I’m talking about card counters or people who exploit special promotions given by casinos and have a mathematical advantage. By the way, it’s all legal. All you are doing is using your brain. It’s mathematics, not gambling. Gambling is hoping for a win based on luck. In the world of mathematics, there is no such thing as luck or a winning or losing streak. And we’re not talking about degenerate gamblers that come to mind when people talk about casinos. Ed Thorpe is the inventor of card counting. He is a P.H.D. and former M.I.T. professor who figured out the correct way to play each hand using super computers so that the edge swings back to the player. He later started a hedge fund that used the same type of thinking. Stanford Wong is another icon of blackjack. He holds a P.H.D in Finance from Stanford University and used mathematics to help optimize ways to make money playing the game. And FYI, it doesn’t take a genius to count cards or to take advantage of coupons or promotions, it just took geniuses to figure out and prove the strategy works.
So what’s my point? In the world of investing, it doesn’t take a genius to figure out why we can beat the market because the P.H.Ds and academics and the Warren Buffets of the world have already figured out how. It can be done with practice and discipline. And like all the hundreds of snake oil salesmen who claim that they have “a system” to beat the casinos, there are just as many in the investment world claiming to have “a system” to beat the market. Watch out who you are taking advice from.

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