Mamba Mentality and How to Win at the Stock Investing Game

I have a confession. I have never been crazy about basketball. I played the game in school, but my body was too frail for the 625-gram ball to find any meaning in my life, like cricket and football did.

It was this lack of craziness that the only superstars from the game I ever knew of were Michael Jordan and Magic Johnson, also because the names sounded similar.

It was early this year that I first heard about another of the game’s legends, Kobe Bryant, and because of the news of his demise in an air crash. Then, the more I read and saw of this man just led me to feel an immense amount of respect for his basketball prowess and the efforts he made over the years to reach the pinnacle.

As I read about Bryant, I realized that life for him was not free of controversies. The worst came in 2003 when he, at the top of his career, was charged with sexual assault. He proclaimed himself innocent and the charges were later dropped. Bryant and his accuser reached a civil settlement, and his reputation was badly tainted.

This is when he named himself “Black Mamba” as an alter ego to cope with the backlash. Bryant adopted the nickname to separate his life on and off the court. As he said in an interview with The New Yorker in 2014 –

The name just evokes such a negative emotion. I said, ‘If I create this alter ego, so now when I play this is what’s coming out of your mouth, it separates the personal stuff, right?’ You’re not watching David Banner — you’re watching the Hulk.

Black mamba, by the way, is a species of venomous snake native to parts of sub-Saharan Africa. Bryant said of the animal that inspired the name –

When I step on that court, I become that. I am that killer snake. I’m stone cold, man.

Anyways, the reason I bring Kobe Bryant to you today is because there are not too many people in the world who have approached practice and mastering the craft as he did during his basketball career. And there is a big lesson that I can take out for investing in stocks from Bryant’s playbook, which I will share soon.

Anyways, another basketball great, Phil Jackson, while sharing an insight into Bryant’s mentality, said that the amount of work he was putting in every day to get better was radical –

…we saw a guy that did some miraculous things. It was dedication. I often went to work at 8:30, and if we had a late-night, that’s pretty early. I’d pull into my parking spot, and Kobe’d be there taking a nap in his car. He’d been there since 6:30 working out. He had a remarkable drive towards getting better. I’ve never seen another player attack his personal habits the way he did.

In the wake of his retirement from professional basketball, Bryant decided to share his vast knowledge and understanding of the game to take readers on an unprecedented journey to the core of the legendary “Mamba mentality.”

Thus, was born his autobiography, The Mamba Mentality: How I Play.

The book chronicles Bryant’s life journey and reveals his famously detailed approach and the steps he took to prepare mentally and physically to not just succeed at the game, but to excel. He has also shared how he studied an opponent, how he channelled his passion for the game, and how he played through tough injuries.

One of the most insightful parts from the book for me personally is when Bryant explains how his obsession with gaining any advantage he could get during games led him to study the referee’s handbook. Yes, the referee’s handbook!

He understood that every referee was in charge of a specific part of the court, as he wrote –

I made a point of reading the referee’s handbook. One of the rules I gleaned from it was that each referee has a designated slot where he is supposed to be on the floor. If the ball, for instance, is in place W, referees X, Y, and Z each have an area on the court assigned to them.

This helped him figure out that there are certain areas on the floor referees don’t see that good. He claims he got away with a lot of small things frequently when he was in those situations during games –

When they do that, it creates dead zones, areas on the floor where they can’t see certain things. I learned where those zones were, and I took advantage of them. I would get away with holds, travels, and all sorts of minor violations simply because I took the time to understand the officials’ limitations.

This passage establishes just how badly Bryant wanted to win, even if that meant working on the blind spots of not just his opponents but also the referees overseeing the games he played.

There are all sorts of stories related to Kobe Bryant’s ultimate competitiveness and approach to basketball. This one is just one of them that proves only the truly greats pay such attention to details in combination with the hard work they put in at the game every single day.

From Bryant to Ben
The game of investing in stock market has no real referee to oversee it. But there is one person taking advantage of whose blind spots, like Kobe Bryant did in his game, can lead you to create wealth over the long run.

That person is none other than Ben Graham’s hypothetical Mr. Market.

In his 2012 shareholder’s meeting, here is how Warren Buffett described this idea of taking advantage of Mr. Market’s occasional blind spots –

…the beauty of stocks is they do sell at silly prices from time to time. That’s how Charlie and I have gotten rich. You know, Ben Graham writes about it in Chapter 8 of the Intelligent Investor.

You know, next to — well, Chapters 8 and Chapters 20 are really all you need to do to get rich in this world.

And Chapter 8 says that in the market you’re going to have a partner named “Mr. Market,” and the beauty of him as your partner is that he’s kind of a psychotic drunk and he will do very weird things over time and your job is to remember that he’s there to serve you and not to advise you.

And if you can keep that mental state, then all those thousands of prices that Mr. Market is offering you every day on every major business in the world, practically, that he is making lots of mistakes, and he makes them for all kinds of weird reasons.

And all you have to do is occasionally oblige him when he offers to either buy or sell from you at the same price on any given day, any given security.

And unlike basketball referees, Mr. Market is much helpful and accommodating. This is simply because unlike referees who are strict and sober, Mr. Market is “a psychotic drunk.” As Buffett said in his meeting –

The stock market is the most obliging, money-making place in the world because you don’t have to do anything.

You know, you sit there with thousands of businesses being priced at the same price for the buyer and the seller, and you don’t — and it changes every day, and you’ve got lots of information about most of those businesses, and you don’t have to do anything.

Compare that to any other investment alternative you’ve got. I mean, you can’t do that with farms.

If you own a farm and the guy has the farm next to you and you’d kind of like to buy him out or something, he’s not going to name a price every day at which he’ll buy your farm or sell you his farm, but you can do that with Berkshire Hathaway or IBM.

It’s a marvelous game. The rules are stacked in your favor, if you don’t turn those rules upside down and start behaving like the drunken psychotic instead of the guy that’s there to take advantage of it.

And here is Buffett in his 1987 letter talking about how investors, chasing fancy strategies and unreasonable returns have forgotten the simple lesson from Graham that can teach them to take advantage of Mr. Market’s occasional blind spots –

Ben’s Mr. Market allegory may seem out-of-date in today’s investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising “Take two aspirins”? The value of market esoterica to the consumer of investment advice is a different story.

In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace. In my own efforts to stay insulated, I have found it highly useful to keep Ben’s Mr. Market concept firmly in mind.

You see the parallel with what Bryant did to succeed, don’t you?

He succeeded massively by coupling good judgment of the game of basketball while keeping the referees’ positions and their blind spots firmly in mind.

Anyways, following a super-successful career in basketball, Bryant’s second act was in, well, investing.

In 2016, near the end of his career, Bryant started Bryant Stibel, a US$ 100 million venture-capital fund with Jeff Stibel, an entrepreneur and investor. The fund was backed by Bryant and Stibel’s own capital, and invested largely in technology, media, and data companies.

He told CNBC in an interview in 2016 that he hoped to be remembered for investing more than basketball in 20 years. “Championships come and go,” he said, “But if you really want to create something that lasts generations, you have to help inspire the next generation.”

While talking about investing, Bryant was talking not about months or years, but generations.

If you too have that in mind, i.e., generations, while looking at wealth creation through equities, you will find ample opportunities to take advantage of Mr. Market’s occasional slips.

But if all you are focused on is him, i.e., stock prices, you will end up playing to his book and never be able to put your focus back on the game. You will end up being his servant, not master.

One of the factors that made Bryant such a legend was that he stacked the odds in his favour by understanding how the referees moved around the court, and patiently waiting for them to reach their blind spots that he could take advantage of.

Likewise, investing is about bringing the odds in your favour by understanding Mr. Market, and patiently waiting for him to make you a deal you simply cannot refuse.

You may, well, call it the Mamba Mentality.

P.S. There was some distant connection between Bryant and Buffett. In 2014, Bryant invested about US$ 6 million of his own money in BA Sports Nutrition, a sports drink startup. In less than four and a half years, his investment surged to be worth roughly US$ 200 million when Coca-Cola (in which Buffett’s Berkshire owns a stake) brought a minority stake in the startup in 2018.

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Stuff I’m Reading (New Feature)
Based on requests from people loving my Saturday posts, I’m starting this experiment to be more regular in sharing stuff I’m reading and thinking about, in bits like pieces. Let me know if you find this useful, so I may carry on. Here are the five bits from today –

• Staying with Kobe Bryant, here’s a lovely poem he penned – Dear Basketball.
• Scott Galloway, prof of marketing at NYU Stern, writes about the there unlocks in the business world that have created over $500 billion in shareholder value, and the fourth unlock that was revealed recently.
• Morgan Housel writes – “History is only interesting because nothing is inevitable. The biggest lesson from the last three months is that whatever your view of the future is, it’s probably wrong. Things change in ways people can’t imagine at times they never considered.”
• PD Mangan’s short but extremely useful guide on how to be healthy.
• May help some people, young and those seeking new opportunities – best career advice I’ve ever received.

Useful? Want to see this regularly?

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That’s about it from me for today.

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Stay safe.

With respect,
— Vishal