Transmissions from an American journalist's 44 weeks in Moscow.



I have often been asked how or why I made the reporting jump from finance to hockey. Anatoly Tarasov, the architect of the indomitable Soviet hockey program, was a fierce proponent of cross-training; he encouraged his players to explore other athletic endeavors including ballet, and many Russians carried the habit of playing pre-game soccer to future NHL locker rooms. I would like to think that my experience across multiple beats adds a layer of perspective, but regardless, the similarities between finance and hockey surprise me more than the differences. Here are three lessons that come to mind in recent days...I would love to hear your additions to this list!

1) Politics, Portfolios, and Pucks

I once interviewed a portfolio manager who had a bullish position on Russian sovereign debt. He took a bet on the forward-thinking governance of the Central Bank and policy moves with regard to the Russian Ruble; the thesis had paid off for him at the time. When I began to formulate questions around this theme, he immediately interrupted me.

"We can't talk about that on-air," he said. "My PR guy said we can't talk about Russia. People don't like that." While fundamentals may have changed in years since, public perception of the Kremlin was enough to cause a portfolio manager who had success in the region to conceal his wins. And there is no counting the number of times that markets have risen and fallen in fear of political maneuvers—some of which never come to pass [and yes, some of which do, with market reactions baked-in months beforehand].

When the Soviet Union competed in the Canada Cup series in the 1980s, each matchup between West and East was painted as a showdown of communism versus democracy (a ridiculous notion given that many of the players were barely old enough to vote). While interviewing Curt Fraser, a hockey player who competed on behalf of the United States in 1987, it became clear that political bluster had little-to-no impact on the mentalities of the men who were allegedly defending ideology on the ice. If anything, the distraction was a detriment to the final product—a nerve-jangling media circus that prevented cooler hands and heads. In the same way that politics can move markets beyond rational comprehension, or frighten investors from diversification, it can often result in sub-optimal talent allocation in the world of professional sports. Soviet greats such as Slava Fetisov spent years begging their government for a shot in the NHL, wasting playing peaks in diplomatic cross-checks versus Stanley Cup Finals. Vladimir Konstantinov faked an inoperable sarcoma to facilitate his defection.

In the words of an NHL ad I saw once: “Do sports instead of soap operas.” I wish someone would tell that to Congress.

2) Big Shot Syndrome

Enigmatic people and processes have a certain allure, but one that can become dangerous when unexamined. A favorite investment disclosure comes to mind here, one that perhaps should be stamped on every locker room door as well: past performance is not indicative of future results.

In both hockey and finance, big shots fall as spectacularly as they rise. Strong personalities can build wealth and champions as quickly as they can demolish them. I point to any number of multi-billion hedge fund managers whose double-digit returns melted into devastating losses—often due to decision-clouding hubris, or worse yet, a belief that he or she was "above" the law. An appetite for risk can become an addiction to it, and the desire for a quick fix can cloud rational reasoning. I will provide a front office example here, but I am sure you can source plenty from locker rooms.

In 1996, the New York Islanders were on the hunt for a savior—preferably one with deep coffers. Financial ruin bred with a fleeing fan base created the perfect conditions for John Spano to enter stage-left. A swashbuckling Dallas tycoon (or so he claimed), Spano "bought" the Islanders for $165 million, and was subjected to virtually no due-diligence from the team or league itself. He successfully swindled the Islanders in one of the most notorious cons in professional sports, promising cash and wiring next-to-none. His magnetism vibrated at the same frequency as Long Island's desperation; the disaster left in his wake was worse than the one he encountered.

As Montreal Canadiens goaltender Ken Dryden wrote in his stunning autobiography, The Game, “When you are a presence, there are many things you need not do, for it is simply understood that can do them. So you don’t do them…you let others’ imaginations do them for you, for they do them better than you can.”

If others’ imaginations were enough to win Stanley Cups, Philadelphia would have nabbed a few more by now.

3) What are you playing for?

Financial advisors generally plan for a client's retirement. That being said, a market wobble results in dozens of calls from frightened investors—many of whom claim to have long-term goals, and yet have no stomach for short-term revisions. Of course, there is a reasonable question to pose here: are we entering turbulence with an expiration date, or have we hit an iceberg? If it's the former, staying invested is often key to weathering the storm. The latter calls to mind the integrity and risk appetite of your leadership.

In the late 1980s, NHL teams were reluctant to tap into the seemingly bottomless pool of Soviet hockey talent. The best Russians went undrafted over fears that teams would never be able to convince or facilitate a defection. Detroit Red Wings GM Jimmy Devellano was the first NHL executive to take the plunge, nabbing Sergey Fedorov and Vladimir Konstantinov in the 1989 NHL Entry Draft to the audible gasps of other teams. It would take years to get players out of the USSR—and even longer for the investment thesis to come to full fruition—but on the backs of "The Russian Five," Detroit went on to an unprecedented run, including back-to-back Stanley Cups in the late nineties. Trading the short-term payout of drafting North Americans, and stomaching the turbulence in the meantime, became the runway for long-term legacy. To Detroit's credit, management stayed the course.

It is a helpful question to ask yourself, in ice hockey as much as in retirement planning: what is the prize that I am ultimately playing for, and how long can I wait to realize it?

Of course, there are endless examples that I can point to in this crowded intersection of finance and sports. Fierce rivalries, despite their stomach-churning clashes, can elicit top performances from all parties involved. When the blood is running in the streets—including your own—that is the time to buy...and so on.

Sport fascinates me in its universality, in its power to distill life lessons into digestible fables, and in its unique ability to showcase the resilience of humanity. I never imagined that one day hockey might help me to synthesize lessons I observed on Wall Street, but perhaps that is the quality that drives me back to markets as much as it drives me back to Madison Square Garden: the irresistible uncertainty of it all, despite our best efforts at divination.