The attractive challenge of a sailboat race is the multitude of decisions we must make before we even leave the dock, but especially as we make our way around the racecourse. The decision-making process, as it is said, boils down to risk management: what you see happening around you relative to conditions and competitors and determining how best to map out your moves and come out ahead-or at least in the hunt. It’s similar to what stock traders do every day, a point I made in a recent conversation with my old pal Racer Rob:
Doc: Hi there Rob. It’s been a while. How’s the new boat going?
Rob: Doc, I tell you. That boat is a rocket: isn’t it amazing how a fast boat can make you look so smart?
Doc: Isn’t that the truth!
Rob: The one problem we have been having is consistency. When things go right they go really right, but when they go wrong . . . well you know.
Doc: Do you have an idea about where the problems are?
Rob: Oh, it’s the wind strategy stuff. It’s something I need to sit down with the sailing coach about.
Doc: You know, Rob, you have always impressed me with your understanding of the technical stuff about wind shifts-oscillations, shorelines, and clouds. I wonder if this isn’t a question about how you apply that knowledge rather than whether you know the stuff or not.
Rob: You might be right. I’ve read all the books and all the magazine articles, but when it comes down to it, I can never quite work out how to apply it on the racetrack. I mean, do tack and cross, do I go with the lifted tack, or do I stay away from the lay line? It’s easy when you can do all three at once, but what if they conflict?
Doc: Yacht racing is certainly a game of risk-based decision-making.
Rob: I can deal with risk, all right. I play the stock market and I do very well thank you. The problem is you have to know how the game is played.
Doc: You play the stock market?
Rob: Sure I do. That’s what I mean. Sometimes, compared to yacht racing, trading stocks is grade school stuff.
Doc: So how do you do? How do you make your decisions?
Rob: Well, you can’t really predict it perfectly, but what you’re trying to do is, as far as possible, reduce the luck element.
Doc: How do you do that?
Rob: You make your decisions as informed as possible-you do the research and work out what is going on, and where you think the stocks will move.
Doc: But how do know when to buy and when to sell? You seem to have to make those decisions very quickly.
Rob: Well, the way I do it is that I try to set a number. If I think a particular stock is becoming well priced then I will work out what I think is a good price, and if it hits that (or gets near it) then I buy. Sometimes I buy anyway, but usually that’s when I get some new information.
Doc: And what about selling?
Rob: I take into account the information I have and work out what would be a good price to sell at.
Doc: So, in a nutshell, you work out what you think will happen (on the basis of your research), and you set a tentative price. The price acts as a trigger. If the market reaches that price or close to it then you are ready to act. And that price may change if new information comes up. Is that a fair summary?
Rob: I guess so.
Doc: You know, I have often thought that stock market trading is a really good analogy for how we work with windshifts. I mean, it’s not perfect. You certainly don’t have people tacking on your breeze all the time in the trading room . . .
Rob: You think!
Doc: But the general ideas of risk and management-when to tack and when to hold-seem to follow the same principles.
Rob: This ought to be good! Go on then. Give it your best shot.
Doc: I love a cynic! I guess the three fundamental principles remain the same. Do the research, work out what you think is going to happen, and then set and monitor the trigger points.
Rob: Uh huh! That was unconvincing and trite.
Doc: I think an example is in order. You are halfway up the first beat and heading right on port tack. Your compass is reading 285 and you get a knock-the compass is now 295. Do you tack or hold?
Rob: Oh come on. That’s not nearly enough information. What about all the other boats in the fleet? Where are they?
Doc: Let’s keep it simple. In this example you can ignore all the other boats. We’ll just sail shifts for now; do you sell or hold?
Rob: I guess my first reaction is to sell-I mean tack. No, wait a minute. How far is it to the lay line? And is this shift an oscillation or is it persistent?
Doc: Good questions. Let’s say you are halfway from the rhumbline to the right side lay line. And let’s say that it is an oscillation. Do you have enough information yet?
Rob: Well I would need to know what the average wind direction is. If the breeze is oscillating, I need to know what the mean is for port tack.
Doc: Let’s say the mean is 295.
Rob: Right on mean? Well I guess I’m not sure. I guess if the breeze is oscillating then it will probably go further so I would probably tack.
Doc: Would that change if you were only 50 yards from the layline?
Rob: For sure! I would take any little knock that would let me tack away.
Doc: So, close to the lay line, you would have tacked on less of a shift?
Rob: I would have gone on 290.
Doc: So you have distilled all the information down to a single number-290. I wonder how much quicker and easier decision-making would be if we expressed our evaluations of the information using triggers like compass numbers. “I know we want something bigger than 295 to tack, but we will take anything over 290 because we’re getting out toward the layline.”
Rob: OK, but what about pressure, current, and waves?
Doc: Numbers aren’t the only cues. The key here is to stay proactive rather than reactive-sound familiar? Make a decision about what is important and then plan your decision-making around one or two key triggers. “That puff 25 seconds up looks like a knock. If it is we will be tacking.” Or “We need to get out to the right and out of this current. If we cannot cross the starboard tackers, we will dip. We cannot afford to tack onto anyone’s lee bow.” Or “This left-hand shift looks like it will be persistent and progressing, but we should still get some fluctuations-and we need to get out to the left. Even though it’s not a great number, we will tack to starboard on anything above 160.”
Rob: You’re right. This feels like playing the stock market. You have to be thinking ahead all the time. “What’s going to happen next?” and “What’s
Doc: and “what am I going to do about it when it starts to happen?” Using triggers lets you play the game another minute or two further up the course.