I can highly recommend Howard Marks' new book The Most important thing, one of my favorite chapters is called (not surprisingly) Investing Defensively, and it contains an important distinction.
For Me, It Started With Tennis
In July, Larry Keele and I met with the Directors of the Vanguard Convertible Securities Fund to report on Oaktree’s performance as the fund’s manager. I was extremely pleased to see Charles Ellis of Greenwich Associates, one of the great thinkers in the investment
field, whom I hadn’t come across in many years. I was especially pleased to have a
chance to tell him about the seminal part his 1975 article, “The Loser’s Game,” had
played in the development of my thinking. The article employed a metaphor that was
simple but profound.
Charley’s article described the perceptive analysis of tennis contained in “Extraordinary
Tennis for the Ordinary Tennis Player” by Dr. Simon Ramo, the “R” in TRW. Ramo
pointed out that professional tennis is a “winner’s game,” in which the match goes to the
player who’s able to hit the most winners: fast-paced, well-placed shots that his opponent
can’t return. But the tennis the rest of us play is a “loser’s game,” with the match going
to the player who hits the fewest losers. The winner just keeps the ball in play until the
loser hits it into the net or off the court. In other words, in amateur tennis, points
aren’t won; they’re lost. I recognized in Ramo’s loss-avoidance strategy the version of
tennis I try to play.
Charley took Ramo’s idea a step further, applying it to investments. His views on market
efficiency and the high cost of trading led him to conclude that the pursuit of winners is
unlikely to pay off. Instead, you should try to avoid hitting losers. I found this view of
investing absolutely compelling. I can’t remember saying, “Eureka; that’s the approach
for me,” but the developments over the last three decades certainly suggest his article was
an important source of my inspiration.
Because of his conviction that markets are efficient, Charley recommended passive
investing as the best way to end up the winner – let others try the tough shots and fail.
Oaktree’s view is a little different. Although we believe in the existence of inefficient
markets as well as efficient ones, we still view the avoidance of losers as a wonderful
foundation for investment success. Thus we diversify our portfolios, limit the
fundamental risk we’ll take, try to buy things that provide downside protection, and
emphasize senior securities. We, too, try to win by not losing."
- Howard Marks, "What's Your Game Plan"
As it relates to infosec I think this distinction is very relevant. Are you playing to win or not to lose? Many times you don't have a choice, but I think its useful to look at the security technologies and processes in this fashion - trying to win (enterprise) or trying not to lose (defensive).
In the case of trying to win, the security services are performing identity and access management services where the enterprise is consciously taking on risk to drive down cost and/or drive up revenue. In the case of trying not to lose the company is hedging its bets by monitoring or other defensive posture that can deal with untoward events.
These two goals are both thrown together under the heading of "Information Security" yet their people, processes and technology are quite different, its up to the security managers to decide on the balance of how much is spent trying to win versus trying not to lose.
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