Published on: 16th June, 2019
This week’s reads focus on how data analytics helped Liverpool succeed, how Ritholtz could be revolutionising marketing in wealth management, the benefits of reading fiction, a restaurateur’s run-in with Yelp, how a wealth manager is inculcating frugality among NBA stars and the emergence of sober bars as people go teetotaling.
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1. Long read: How Data (and Some Breathtaking Soccer) Brought Liverpool to the Cusp of Glory
Author: Bruce Shoenfeld
Source: New York Times (https://www.nytimes.com/2019/05/22/magazine/soccer-data-liverpool.html )
As everyone now knows, Liverpool are once again the football champions of Europe. But what you might know is the role data analytics – Moneyball style, Billie Bean style analytics – has played in Liverpool’s triumph. In fact, without analytics, Liverpool (which is owned by the same American company which owns baseball’s Boston Red Sox) would not even have hired the inspirational coach, Jurgen Klopp, who guided them to the European title.
“Jürgen Klopp was in his third week as Liverpool’s manager, in November 2015, when the team’s director of research, Ian Graham, arrived at his office carrying computer printouts. Graham wanted to show Klopp, whom he hadn’t yet met, what his work could do. Then he hoped to persuade Klopp to actually use it.
Graham spread out his papers on the table in front of him. He began talking about a game that Borussia Dortmund, the German club that Klopp coached before joining Liverpool, had played the previous season. He noted that Dortmund had numerous chances against the lightly regarded Mainz, a smaller club that would end up finishing in 11th place. Yet Klopp’s team lost, 2-0. Graham was starting to explain what his printouts showed when Klopp’s face lit up. “Ah, you saw that game,” he said. “It was crazy. We killed them. You saw it!”
Graham had not seen the game. But earlier that fall, as Liverpool was deciding who should replace the manager it was about to fire, Graham fed a numerical rendering of every attempted pass, shot and tackle by Dortmund’s players during Klopp’s tenure into a mathematical model he had constructed. Then he evaluated each of Dortmund’s games based on how his calculations assessed the players’ performances that day. The difference was striking. Dortmund had finished seventh during Klopp’s last season at the club, but the model determined that it should have finished second. Graham’s conclusion was that the disappointing season had nothing to do with Klopp, though his reputation had suffered because of it. He just happened to be coaching one of the unluckiest teams in recent history.”
Ian Graham, the Director of Research at Liverpool, does not watch football matches at all. He simply studies the data and teases out the analytics and helps Liverpool make better decisions: “Graham had not seen that game, either. In fact, he told Klopp, he hadn’t seen any of Dortmund’s games that season, neither live nor on video. He hadn’t needed to…To understand what happened, all he needed was his data.
Analytics has famously influenced the tactics in professional baseball and basketball in recent years. Ultimately, it may have just as great an impact on soccer, which traditionally hasn’t relied on statistics to figure out much of anything. Graham, who earned a doctorate in theoretical physics at Cambridge, built his own database to track the progress of more than 100,000 players from around the world. By recommending which of them Liverpool should try to acquire, and then how the new arrivals should be used, he has helped the club, once soccer’s most glamorous and successful, return to the cusp of glory.”
2. Long read: Josh and Barry Tweet Like Crazy: Are They Revolutionaizing RIA Marketing – or Just Wasting Time?
Author: Greg Bartalos
Source: RIA Intel (https://www.riaintel.com/article/b1fn730zgdqvf9/josh-and-barry-tweet-like-crazy-are-they-revolutionizing-ria-marketing-or-just-wasting-time)
New York–based investment advisory firm Ritholtz Wealth Management is famous for its outstanding blogs and for Ben Carlson’s bestselling book “A Wealth of Commonsense”. What Ritholz is also doing is redefining marketing for the wealth management profession.
Josh Brown, is the co-founder, CEO and public face of the firm. “Brown, who tweets under the handle @ReformedBroker, has stormed the advisory space with his relentless and ubiquitous media — both traditional and social — presence. He recently made a splashy guest appearance on the Showtime hit Billions. And with more than a million Twitter followers, Brown also builds business through his widely read Reformed Broker blog, CNBC appearances, and The Compound channel on YouTube, where he riffs with his team about wealth management, markets, and pop culture.”
But in a world where everyone’s attention is distracted by social media, why does anyone listen to what Ritholz has to say. “In a media-drenched landscape, quality guarantees nothing. Being different, however, offers a way to blast through the clutter. And Brown, 41, stands far apart from most advisers by not being buttoned up and polished. A big part of his appeal is his no-bullshit persona with a sense of humor served up in ultracasual attire. Brown’s “let it all hang out” mien is disarming and enticing, especially in an age when every syllable is focus-grouped and spun for maximum effect. People want what’s genuine and recoil from claims of omniscience. However, should authenticity reflexively correlate with trust?… Yet despite a glib and freewheeling style, his advice is informed by humility, he claims, likely born of hard lessons learned over many years as a stockbroker and arguably out of necessity, given his fee-only firm’s sober-minded corporate mission.”
Josh Brown is not the only asset that Ritholz has when it comes to marketing. “Brown’s partner, Barry Ritholtz, 57, also works in the limelight. The co-founder, chairman, and chief investment officer writes the well-respected Big Picture blog and, for Bloomberg, hosts the influential Masters in Business podcast and writes a column. Ritholtz, who tweets under the handle @ritholtz, has nearly 140,000 followers, the second most among advisers after Brown.
In sum, a strategy based on passive investing and active evangelizing is working.
Six years ago, Brown, Ritholtz…launched Ritholtz Wealth Management (@RitholtzWealth) with roughly $90 million in assets. Today the firm has about 30 employees and a stunning $1 billion in assets.”
In case you work for a big brand in the asset or wealth management industry, you will find much of the what guys at Ritholtz have to say really hard to swallow. Eg. “Brown believes that ideas should be vetted publicly and is dismissive of the prestige automatically conferred on people by dint of the company names on their business cards. He once wrote, “I don’t think I would ever invest money with someone who isn’t on Twitter.” Brown acknowledges that it “sounds ridiculous,” then explains: “If you’re just a nameless, faceless person at UBS or wherever, nobody really knows what you think. You’re living on the brand. And no one does the brand anymore. People follow people.” Brown asserts that that’s why Kim Kardashian has far more Twitter followers than the E! channel she appears on. “Nobody cares about the E! channel. They care about her. That’s happening in finance.””
3. Long read: Does reading fiction make us better people?
Author: Claudia Hammond
Source: BBC (http://www.bbc.com/future/story/20190523-does-reading-fiction-make-us-better-people)
In our blogs we often discuss the impact of reading extensively on the human mind (example: https://marcellus.in/blogs/marcellus-the-working-habits-of-great-minds/). This fascinating piece from the BBC goes a step further and cites scientific research which shows that reading does make us better people.
Why does this happen? Reading, it turns out, “is like a training course in understanding others. The Canadian cognitive psychologist Keith Oatley calls fiction “the mind’s flight simulator”. Just as pilots can practise flying without leaving the ground, people who read fiction may improve their social skills each time they open a novel. In his research, he has found that as we begin to identify with the characters, we start to consider their goals and desires instead of our own. When they are in danger, our hearts start to race. We might even gasp. But we read with luxury of knowing that none of this is happening to us. We don’t wet ourselves with terror or jump out of windows to escape.
Having said that, some of the neural mechanisms the brain uses to make sense of narratives in stories do share similarities with those used in real-life situations. If we read the word “kick”, for example, areas of the brain related to physically kicking are activated. If we read that a character pulled a light cord, activity increases in the region of the brain associated with grasping.
To follow a plot, we need to know who knows what, how they feel about it and what each character believes others might be thinking. This requires the skill known as “theory of mind”. When people read about a character’s thoughts, areas of the brain associated with theory of mind are activated.”
The article goes on to cite multiple studies which have shown that people who read fiction are more perceptive than the rest of us, can read other people’s emotions better and are more helpful. For example, “At the Princeton Social Neuroscience Lab, psychologist Diana Tamir has demonstrated that people who often read fiction have better social cognition. In other words, they’re more skilled at working out what other people are thinking and feeling. Using brain scans, she has found that while reading fiction, there is more activity in parts of the default mode network of the brain that are involved in simulating what other people are thinking.
People who read novels appear to be better than average at reading other people’s emotions, but does that necessarily make them better people? To test this, researchers at used a method many a psychology student has tried at some point, where you “accidentally” drop a bunch of pens on the floor and then see who offers to help you gather them up. Before the pen-drop took place participants were given a mood questionnaire interspersed with questions measuring empathy. Then they read a short story and answered a series of questions about to the extent they had felt transported while reading the story. Did they have a vivid mental picture of the characters? Did they want to learn more about the characters after they’d finished the story?
The experimenters then said they needed to fetch something from another room and, oops, dropped six pens on the way out. It worked: the people who felt the most transported by the story and expressed the most empathy for the characters were more likely to help retrieve the pens.”
4. Short read: The restaurant owner who asked for 1-star Yelp reviews
Author: Zachary Crockett
Source: The Hustle (https://thehustle.co/botto-bistro-1-star-yelp/)
Steve Jobs is known to have trashed any market research as he staunchly believed that customers seldom know what they want. The online review systems have in some ways used this fact to influence customer choices and perhaps even, as this Hustle piece suggests, at the cost of extorting small businesses. David Cerretini, a restaurateur in California, upset by the online review site Yelp’s heavy handed techniques to get him to advertise with them in exchange for positive reviews (or if he failed to advertise, penalise him by removing the good reviews and pushing the negative ones to the top), decided to flip the whole system upside down. He made an offer to his customers that if they left a one-star review about his restaurant on Yelp, they would get a 25% discount, only to see his business booming on the back of that.
“At the time, Cerretini had a reputation for being snarky. In the vein of Edsel Ford Fong (who gained a reputation in 1960s San Francisco for being the ‘World’s Rudest Waiter’), his sassy attitude with diners was part of his appeal. He maintained a Hall of Shame featuring facetious Yelp Eliters (or “Village Idiots”). He compiled idiotic customer inquiries (e.g. “Do you sell burgers?”) and sent out a newsletter of the “Stupidest Questions of the Month.” He posted an FAQ on his website stating that the customer is not, in fact, always right.
To loyal diners, it was Davide being Davide; to transient Yelpers, it was 1-star service. Soon, he came to a realization: “What if I don’t give a shit about reputation? What if I take away their power by actually making it worse?”
One morning in September of 2014, he placed a simple sign in front of Botto Bistro: Give us a one star review on Yelp and get 25% off any pizza! Hate us on Yelp. (The discount was later increased to 50%.)
….Most supporters refused to take the discount, but were thrilled to write a review and partake in what they deemed to be a grassroots, anti-Yelp uprising.
In a few days’ time, Botto Bistro’s Yelp page attracted more than 2,300 1-star ratings (95% of its total reviews) extolling the good food, proper service, and rustic ambiance. “Botto Bistro sucks,” wrote one reviewer. “Delicious food priced fairly. One star.”
“I got thousands and thousands of letters, thousands of emails a day,” says Cerretini. “People were sending me boxes of chocolates, cash, checks. Business owners from all over the country stopped by to thank me and write a bad review.”
5. Short read: Meet the Money Whisperer to the Super-Rich N.B.A. Elite
Author: Devin Gordon
Source: New York Times (https://www.nytimes.com/2019/06/06/business/nba-wealth-manager-klay-thompson-joe-mclean.html)
It is often said that likelier route to achieving financial independence is not so much in generating superlative returns as much in having a disciplined approach to saving. This applies even more so for sports superstars who often at a very young age tend to earn big bucks, quickly get on to a lavish lifestyle forgetting that their earnings period is short lived as their bodies age and their skills are no longer valued. This NYT piece talks about the unlikeliest of places – the NBA known for the extravagant lifestyles of its star – where a wealth manager has built a successful franchise inculcating discipline and frugality (in the given context) among his superstar clients.
“Every day of Joe McLean’s job, as the premier wealth manager of the N.B.A. elite, requires him to make the kind of purchases that most of us make only once or twice in a lifetime. He bought 25 cars on behalf of his clients last year, and he probably sold nearly as many. He closed on four houses in February alone. You wouldn’t believe how many pool tables he’s bought, let alone how many pools.
Managing basketball players’ money is not the same thing as managing their wealth. It’s Mr. McLean’s job to protect his clients’ assets no matter what form they take. Their cars need customizing. Their houses need renovating. Their private bowling alleys need polishing. Their koi ponds — filled with 30 creatures, each worth around $5,000 — need a specific kind of emergency netting installed when the team is on the road and there’s a hurricane bearing down.
…This is not to say Mr. McLean’s clients are profligate. To retain his services, each player must agree to put aside at least 60 percent of every dollar he earns, with the rate climbing to 80 percent if he’s fortunate enough to land a long-term deal. Or they’re gone. Mr. McLean has fired two clients for ignoring the policy.
….Mr. McLean doesn’t negotiate his clients’ deals — he’s not an agent. His job is to grow every dollar that comes in and track every dollar that goes out. He’s part investor, part butler, a C.F.O. and a golf buddy, a sports therapist and, when necessary, the disapproving dad. When the explosive power forward Aaron Gordon got his first big contract last summer ($84 million), Mr. McLean warned him that “with great abundance comes great discipline.”
Mr. Gordon, 23, is unusually self-aware for a rich young athlete, and he knew it was exactly what he needed to hear. “Joe helps me pump the brakes,” he said over the phone in April, the night before Orlando’s first playoff game in more than a decade. “I like the idea of instant gratification. I want to hit home runs every single time. Joe’s been dealing with money for a long time, and he understands it’s not about home runs, you know, it’s about the singles, it’s about the doubles. Longevity.”
Mr. McLean earns players’ trust in part by doing the work — sourcing the golf clubs, buying the koi nets — almost entirely himself. His company, Intersect Capital, manages contracts worth $1.7 billion for about 50 athletes, and it could add another billion in value this summer alone. And yet his firm, which is in San Ramon, Calif., employs only 10 other people, because the white-glove treatment is the whole point.
…”And Joe’s been right by my side. Whether he has to tell me, ‘O.K., this month you spent too much, we gotta calm down these next few months’ — I trust him that much.”
6. Short read: People are sick of drinking. Investors are betting on the ‘sober curious’
Author: Sara Ashley O’Brien
Source: CNN (https://edition.cnn.com/2019/06/08/tech/alcohol-alternative-sober-curious/index.html)
Last year, Coca-Cola launched its first alcoholic beverage in Japan partly to make up for the dwindling sales as the trend to stay away from sugary drinks gains strength. Turns out that people are now giving up drinking alcohol too. This piece in the CNN talks about how a combination of the need to take care of health, and companies and investors, especially in the start-up powered Silicon Valley, sobering down on the alcoholic part of their free will culture, people are turning teetotallers, resulting in the emergence of ‘sober bars’ to alcohol companies launching non-alcoholic beverages.
“Getaway is a sober bar, a new kind of dry nightlife option that is cropping up in New York City. The idea is to provide outlets for people who want to socialize in a bar-like location, but without having to drink alcohol.
They are part of larger trend. People are paying greater attention to their mental health and wellness, and many Americans are specifically looking to reduce their alcohol intake. People of all ages are drinking less beer, while millennials are drinking less overall. And Silicon Valley is taking note, with tech companies reevaluating their alcohol policies and investors looking to capitalize on people who prefer not to drink.
…Their sales of alcoholic beverages have been declining, big alcohol companies, ranging from Heineken to AB InBev (the owner of popular beer brands such as Budweiser), see an opportunity: They’re investing in non-, or low-alcohol drinks. So too, startup investors and entrepreneurs are hoping to cater to the “sober curious,” people who for the sake of wellness are reevaluating their relationships with alcohol and how often they drink.
Kin’s first product is a non-alcoholic beverage called “High Rhode.” It is part adaptogen (a nontoxic plant that is claimed to have de-stressing effects), part nootropics (a supplement said to help with cognitive functions), and part botanics.
… Liquid Death made waves when it launched. The startup applies the bold marketing of energy drinks to a water-in-a-can beverage. Its tagline is “Murder Your Thirst.” Like an alcohol brand, it has an age gate on its website that says, “This water may give nightmares to persons under 18 years of age.”
The idea is to make consumers look cool while they keep hydrated, and to the unsuspecting eye, one may never know they’re downing simple H2O.
The original impetus, according to CEO and co-founder Mike Cessario, was to cater to heavy metal and punk rock fans. But the ability to drink water out of a can (which is more ecofriendly than plastic) and look like you’re drinking a beer or an energy drink, has broader appeal.”
Note: the above material is neither investment research, nor financial advice.Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services and as an Investment Advisor.
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