Investing Lessons from the Reigning Jeopardy Champ

The Price is Right was my first love when it came to game shows (I always wanted a Plinko board in my house). If you stayed home sick from school there was a good chance you’d be watching the Showcase Showdown. But the show was on during the day so I lost touch with Bob Barker as I aged.

As I got older Jeopardy! became a nightly tradition in my house. In high school, my brother and I would even take out a pen and paper so we could keep track of our own scores while we played along. In the summers off from college, my friends and I would play the computer version while having a few beers before going out to the bars.

I don’t watch it much anymore but became interested again recently as sports bettor James Holzhauer broke the record for most money won on the show. This week Darren Rovell interviewed Holzhauer to discuss his strategy.

He talked about the fact that everyone on the show is smart so the best way to stand out is not necessarily his trivial knowledge but strategic use of the buzzer to be the first one to answer:

So, being on Jeopardy! I would say is mostly about your trivial knowledge. But the people who appear on the show have all passed the same test. They can all do most of the questions on the board. So, the buzzer becomes most of the game. Then you see on TV, everyone’s ringing in on most questions and it’s whoever wins the race that gets there. So, I knew that would be the critical thing. And I tried to do all the research I could ahead of time.

There’s an e-book that I read by a former champion, with great advice in there. And I actually him emailed him and he told me to ask the producer before I went on about some questions exactly how long they lock you out [if you buzz too early]. And then I had some really specific questions about, let’s say I hammer the buzzer five times, am I locked out for five quarters of a second? And she kept looking at me like, who is this guy?

He also made a buzzer out using masking tape and a mechanical pencil to simulate what it would be like during the actual show.

Holzhauer might be showing some modesty about his level of knowledge and his success has a lot to do with his gambling style of play but the fact that he figured out how to stand out from the crowd has some important investing lessons. Young people should take note that Holzhauer bets big early and often (hint, hint).

There are more intelligent people than ever before looking to make money in the markets. There will be tens of thousands of people attending Warren Buffett’s annual Berkshire Hathaway meeting this weekend. Everyone who attends has probably read all 47,289 books about the Oracle.

There are hundreds of thousands of CFAs around the world, the majority of who live outside the U.S. Michael Bloomberg became a billionaire 62 times over selling more financial data than anyone could hope to use in a lifetime to hundreds of thousands of investment professionals.

Early in his career, Benjamin Graham could sift through dozens and dozens of stocks trading below the value of cash they had on hand. Those opportunities simply don’t exist anymore because everyone is so much more informed and the markets are so much more professionalized.

To succeed today requires much more than intelligence. Almost everyone in the markets is smart in some form or another. There are far fewer patsies at the poker tables than there used to be.

If you think intelligence alone will bring you glorious profits in the markets think again. Your competition is people like Jim Simons and his gaggle of PhDs, rocket scientists, code breakers, and astrophysicists. Good luck trying to win in a battle of brainpower against Renaissance Technologies and the like.

Knowledge and data are table stakes at this point.

If you truly want to stand out you have to understand how the system works and figure out other ways to succeed.

1-on-1 with Jeopardy! James: How Betting on Sports Helped Him Master the Game

Further Reading:
Edges That Won’t Go Away

Now here’s what I’ve been reading lately: