Moneyballing the Financial World, Part 3
Jan 19th 2012 2:45PM
Updated Oct 29th 2012 5:04PM
Closing out my Moneyball series, I bring you the third part of the trilogy. I have no Ewoks for you, we will not defeat Sauron today, and as much as I may have liked Rocky III (can't exactly remember my feelings, 30 years later), please do not expect the eloquence of Clubber Lang. But I do have something important to share.
Concluding Part 2, I wrote:
... next week, I will introduce, highlight, and explain a new editorial feature that The Motley Fool is pioneering here in 2012 that brings a lot of the points above together into real-time Moneyball present on our site.
Before I unveil CAPScalls, though, two paragraphs of restatement for those who missed Parts 1 and 2.
Previously on "Moneyballing the Financial World..."
My invocation of Moneyball in this series, "Moneyballing the Financial World," began with perhaps my greatest pet peeve as an individual investor: That we all are bombarded through every media channel these days with unaccountable financial prognostications. Predictions that augur the market will do such-and-such by October, that XYZ stock is a dog and will drop to $4, that here are the "12 best bets for 2012." I likened all these predictions and market calls to taking swings in the game of baseball. But, in direct contrast to baseball, none of this prognosticating is scored, and so none of the activity is accountable. In major league baseball, every aspect of what players do is scored, rated, and ranked with a deep set of statistics that enable any casual Internet user to find just about any number throughout all of baseball's recorded history. In major league finance...not so much. In major league finance, though the media channels like CNBC and The Wall Street Journal shine the same bright lights on their own players -- leading with big headlines of one or another's prognostications -- seemingly no one is keeping stats on any of these sources, including the sources themselves.
As a consequence, I wrote, we need a Bill James revolution in the money world. James, one of my living heroes and the mind behind Moneyball (now both a book and a movie), has brought real intelligence to the data of baseball and has caused a whole generation to get smarter about baseball performance and strategy. By sad contrast, the financial world -- James-less -- stumbles along in a blind haze wherein none of the players generate statistics and no spectator is any the smarter. As a consequence, the audience has no idea whether the person just quoted in The Wall Street Journal is even hitting above the Mendoza line. Individual investors are left to guess whether they should trust this broker or that one, this media source or that one. In Parts 1 and 2, I ultimately called on all of us to insist of our sources that they provide us statistics and accountability -- "What's his record?" is the clarion call that I urge.
Which brings me back to the point at hand. For the past month, my company and our website have been piloting a new approach. I'll call it a "rather than join'em, beat'em" approach, insofar as I'm not content to join the rest of the world in refusing to keep score. So The Motley Fool has been trying out...CAPScalls.
CAPScall (n): When a Motley Fool writer or blogger takes a strong stance on a specific stock or ETF -- either bullish or bearish -- in an article. In that case, the writer would then go into CAPS and rate the stock in accord with the article, holding the argument within that article publicly accountable.
In the month of December, fully 124 CAPScalls found their way into our channels -- articles written by our staffers that are read on our site, and broadly distributed through Motley Fool partners such as Yahoo!, MSN, AOL, etc. If you want something done right, you do it yourself; I can think of no more important action that we at the Fool can take than simply to model out the exact behavior we're calling for.
And we have been, for a while now. Every pick in any Motley Fool premium service comes with this kind of accountability by default, with transparent and exhaustive premium service scorecards revealing every home run and strikeout we have ever produced from our premium services' batters' boxes. But here on the free side of Fool.com, we have been informally CAPScalling for years; here's a classic example from yours truly, a CAPScall on the future of Lehman Brothers (backed up on my CAPS page as well).
Or even just on CAPS itself, how about TMFStockSpam? That's the hilarious and revolutionary and oh-so-telling CAPS page dedicated to taking every spammy, penny-stock hype ad and giving it a big thumbs down -- and tracking the results. Shift-click this link and spend 30 seconds seeing its own eloquent (though wordless) testimony.
Now, not every pronouncement within the financial media needs to be scored; every financial source has its own forms of spring training and pregame warm-ups. But the obvious reason I'm writing this article today is that so many market calls do need to be scored, and should be. That is why in conjunction with the publishing of this article today -- which will be forwarded to every one of our writers -- I ask that anyone among our membership who believes that accounting for financial predictions and strong statements will help the world would take the time to do two things:
- If you encounter an investing article anywhere on the Internet that makes a strong statement but with no backup -- no CAPScall, no listing of the writer's record, etc. -- use the comments box to let that person know that you can't esteem their work without their showing leadership and willingness to score and be scored for their assertions.
- For all your friends who are individual investors and have not been "switched on" to ask and expect for accountability from their financial advice sources, that you send this article, or Part 1 of the series, to them and invite them to study and to care -- to join in our demand for scorekeeping.
Either of the actions above, and any of their iterations, will truly help take our world higher. You will be helping to spread a call for transparency in an opaque financial world where all the interests (Wall Street obfuscation, unaccountable media channels, mediocre advice-givers who would blench from being scored) are firmly and complacently entrenched, and have been for a long time. Kick out their crutches.
Leadership begins at home; I insist of my own organization that we get better at this, too. Help us! If you see a Motley Fool article or hear a Motley Fool podcast that makes a strong case for or against a stock, and you don't see any CAPScall explicitly called out -- see (1) above -- please comment. Let us know! You'll be making us stronger in pursuit of our corporate mission, which is to help the world invest better.
Finally, making accountable financial predictions is no exclusive right owned only by financial professionals. The accessibility and democratizing strength of the CAPS platform are primed to enable anyone to get in the batter's box, swing, and be scored. We continue actively to hire and employ Motley Fool contractors and employees who achieve consistent, long-term, demonstrable excellence with their CAPScalls. There is an embarrassment of riches in our community, and we will continue shamelessly recruiting that and showing that off to the world. Leadership begins at home, and indeed, for any fellow Fool so inclined, CAPScalling can begin at home, too. Right now!
No doubt there are other strong steps we can all take together to bring the financial world out from its skulking, distant remove, and closer to the accountable, bright lights shining on performance in major league baseball. Let's continue actively to consider them. Your further ideas and comments below are welcomed. Between inveterately asking, "What is his or her record?" though, and hatching a new brand of financial journalism predicated on performance, not puffery, we're off to a plucky start.
Read the rest of the "Moneyballing the Financial World" essay here:
The article Moneyballing the Financial World, Part 3 originally appeared on Fool.com.David Gardner is the co-founder and co-chairman of The Motley Fool. You can see David's CAPS score and his Fool profile.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.