What Guys and Dolls can teach us about investment

Guys & Dolls

Guys and Dolls is a musical created by Frank Loesser, Jo Swerling and Abe Burrows, based on two short stories by Damon Runyon. The plot involves gambler Nathan Detroit, who needs money for a dice game, betting Sky Masterson that he can’t persuade missionary Sarah Brown to let him take her to Havana. Meanwhile, Nathan’s longstanding fiancée Adelaide is eager for him to propose.

The key moment

By the end of the story both Nathan and Sky have proposed marriage to their respective partners. However, the women are unsure if that want to marry them. In the number Marry the Man Today Adelaide sings that “You can’t get alterations on a dress you haven’t bought”, while Sarah Brown remarks that “In any vegetable market from Borneo to Nome/You mustn’t squeeze a melon till you get the melon home.”
They conclude that “You’ve simply got to gamble” and “You get no guarantee” and decide that matrimony is indeed the best solution.

The lesson for investors

No matter how skilled an investor you are, there are things that you simply won’t be able to anticipate, as there are virtually no “sure things” in investing (especially if you want to get decent returns). This doesn’t necessarily have to be bad: even the most optimistic investor in Facebook would never have predicted that it would be the runaway success that it turned out to be. However, all but a handful of people were taken aback by the sudden implosion of firms such as Enron and Lehman Brothers. So, if you want to invest, you will have to accept that a large part of the outcome will be down to chance.

Other financial wisdom

While chance plays a part in determining your returns, it’s dangerous to rely on it alone. Earlier on, Sky bets his fellow gangsters $1,000 each that he can beat them at a single game of dice. Imploring “Lady Luck” to give him a victory he notes that luck has “a very unladylike way of running out”. While it’s possible for an investor to do well solely because of luck in the short run, the chances of this continuing diminish sharply over a longer time frame. If you want to stay ahead, you’ll need to get an edge.