Friday, February 19th, 2010
best in show

The dog world was abuzz this week when Sadie the Scottish terrier took top honors at the venerable Westminster Kennel Club Dog Show.OK, I don’t really know what the dogs thought of it, but the dog people were pretty excited. She became the first pooch to win the “triple crown,” after her earlier victories at the National Dog Show and the American Kennel Club Show.

I love dogs as much as the next guy, including the wonderful mix of breeds that we have in our neighborhood.  (They all have one thing in common:  Labradors and rottweilers and terriers have all turned tail and run when they have heard the manic attack cries that Kitty emits if they approach our door.)  Watching the televised coverage of the archetypes of the canine world parade around Madison Square Garden, you get caught up in the emotional aspects of the competition.  Your biases show up in a hurry, from “I want one of those” to “I wouldn’t be caught dead with one of those.”

In a way, it is much like our instinctive reaction to various investments.  We take a natural shining to some things and don’t understand at all what others might see in that which disinterests us.  At the dog show, in dulcet tones the announcer describes the breed being judged, including some hints about the personalities of the dogs that might not be noticeable at first glance.  We would all be better off if someone was there to give us such advice before making our investment decisions; a little voice that said, “This one is guaranteed to break your heart,” would be nice to have.

For someone who observes how decisions are made, watching Westminster leads to many questions about process.  Certainly the winnowing behind the scenes (much like the screening that portfolio managers go through to get a chance to win an institutional account) would be fascinating to see, but the television coverage picks up with the semifinals, the judging of the various groups.  A set routine is followed, with the judge for the group first probing the dog’s physical characteristics, then observing its gait and presentation as it shows its stuff for the crowd.  (Again the echoes of manager selection are inescapable for someone who has been through that drill.)

To the uninitiated, the next part seems like hocus-pocus, but I’m sure to devotees it’s not.  The judge, after having spent a short time with each of the dogs, and maybe seeing them take one last comparative walk, selects the best of the group.  Like the figure skating judges on the other channel, they are highly-qualified arbiters of what’s best, with technical checklists to run down in their minds, but it’s done on the fly and in the moment.  The investment business is full of decisions like that.  It is fair to describe them as “hit and miss,” with all sorts of behavioral risks about.

Which is all just a prelude to the final stage.  The winners of the seven groups are to meet in the ring to determine which is the champion dog of the year.  The judge is shown arriving in style, having been “sequestered for two days.”  He spends a short time with the dogs and pronounces the winner.  It all seems a bit perfunctory to the uneducated.

Having seen the swings of emotional momentum in the markets and how they build over time, I could only wonder about whether the same things happen in the show world too.  I had a hint when one of the announcers responding to the choice said something like, “Many people were enamored already before the announcement.”  Yes, this dog was the it girl and Westminster was the culmination of her coming out.

Certainly the judge was fully aware of the dog before his sequestration.  Did he react to her introduction at the Garden with a thought of “there she is”?  We’ll never know, although he was quoted later as saying that a dog like Sadie comes around once every ten years.  That’s quite a statement to make after a few minutes together in the show ring.

Which is not to say that there was collusion or that the selection was preordained, only that our decisions come wrapped in packaging that we may not see if we don’t look for it.  The selection of an outside manager by an investment committee may come down to a little thing noticed at the last minute, or it may have been in the cards for months and the process was just a show.  The stock-by-stock decisions of an individual investor are different from that drawn-out selection process in time and scope, but remarkably similar in the need to carefully and objectively sort out the “whys” of the choices that we make.

Sadie got to ring the bell of the New York Stock Exchange and, unless she spends her last days in dissolute living, she’ll go down as one of the greats.  For us, those markets open day after day, and our decisions today reverberate for some time to come.  So, before you pronounce something best in show, take an extra minute.  It may keep you from ending up with just another mutt.