Rounding The Mark:
Lessons Learned on the Race Course
© Copyright April 2000 James J. Puplava

2000 NOOD (North American Offshore One Design) Regatta

In life, all of us have a vocation. For “rest” from our vocation, many of us choose an avocation. Some of us play golf, others play tennis. I enjoy reading and sailing. Like most, I have found that my work and hobbies often color my perspective of the world at large. What happens in my vocation may carry over into my avocation and vice versa. All of us tend to view the world we live in through the prism of work and play.

I started sailing several years ago for two reasons - for leisure and as a way to forget about the day-to-day stress of managing money. Originally I confined my pastime to day-sailing as a way of relaxation. However, with sons interested in sports, my leisure activity soon turned into the team sport of sailboat racing. I hired a sail instructor to improve my sailing skills and help me with the “edge” you need in racing. It was my good fortune to discover that my instructor, Wally Henry, turned out to be a World Cup sailor who had sailed in four America’s Cup Challenges. The next thing I knew I was trading in my “pleasure” sailboat for a sleek racing version - a stripped down boat with few amenities - designed to go fast. My desire to improve my sailing skills quickly changed to learning the art of sail trim, and all the nuances of fine-tuning that help a skipper gain the edge in racing. My oldest son was bitten by the sport as well. So if I wanted a first mate, I had better get with the program. My wife prefers a day-sail with a pleasant wind and nothing too “tippy”.

After several months of instruction, it was time to put my new skills to a test. This past March I entered Jimmy-J into my first sailing regatta. Wally, my instructor, assembled a crew of three additional sailors to join my son and I for our first race. It was going to be a major race that would test my skills as well as that of my new crew. The race was made up of one-design sailboats with several classes of race boats. In one-design racing, each class has the same kind of boat with the same kind of equipment and sails. So there is no arms race to buy or equip your boat with better equipment or high performance gear. Everyone is equal in the class. If you win, it is because your skill at sailing was better than your opponents’ ­- not because you had the best gear, or equipment, or a more expensive boat.

In my class there were seven boats. My competition consisted of a legend in the racing world who had challenged Ted Turner in the America’s Cup. He was also the founder of the world’s largest sail maker. Another competitor was the owner of a high performance sailing school and a world-class sailor himself. The third experienced challenger was last year’s NOOD champion.

The competition was intimidating to a first time racer. And yet I wasn’t too worried, because I was not alone. My instructor, Wally Henry, was on board as well. He is a professional sailor who has sailed with Dennis Connor in the America’s Cup. He would serve as my tactician for the race. On the big boats, tacticians advise on strategy. On the small boats they do a lot more. On Jimmy-J, Wally served as tactician, coach and part of the crew.

The NOOD Regatta consisted of three days of racing with seven races planned. The number of races each day would depend on the weather and sea conditions. As we headed out to the offshore racecourse the first day, there was a tinge of anxiety. I was going be racing against some top-notch sailors with a lot more experience. In fact I was the least experienced sailor on the boat. And yet I was the skipper (a privilege that comes with being the owner of the boat). As we motored out, the wind began to pick up. It was turning out to be a windy day. High winds make sailboats heel more in the wind and when strong enough, test the durability of your sails and equipment.

Day One - Race 1

As we got into position for the start of the first race, I had already decided to put my ego aside. I turned the helm over to my son. The wind was picking up and my weight would be needed on the rail of the boat to help keep the boat from over-heeling, which slows down the speed of the boat. (The flatter a boat sails in high winds, the faster the speed of the boat.) The first leg of the race was upwind. When sailing against the wind, boats heel more. That’s why in a race you see sailors hiked over the side of the boat to flatten the boat and counteract the force of the wind pushing the boat on its side.

From the start of the first race, things began to go wrong. We got a slow start. Our tacks back and forth up the first leg of the course were anything but smooth. [sailing upwind, changing the boat’s direction from right to left]. Lines from the sails and wenches were tangled. We were out of sync and executing poorly. This was the first time our crew had sailed together and it clearly showed. As we rounded the first mark, we would be sailing downwind with the wind behind our backs. That’s when you change your sails on the front of the boat to spinnakers; the big bright balloon shaped sails that capture the force of the wind behind you.

As we rounded the mark, I took the helm and my son moved to the bow of the boat to hoist the spinnaker. For about a year, my son has been racing with another team on a bigger race boat and has the job of raising the spinnaker. Since the boat sails flatter downwind, my weight would no longer be needed on the rail of the boat. It was quite a feat to change positions as we came closer to the mark. Taking down one sail and hoisting another sail requires flawless execution. Races are often lost at this point because of the problems that can surface as you raise and lower your sails.

We did everything wrong. My son hoisted the spinnaker on the wrong side of the boat. In addition, we discovered that we’d brought the wrong spinnaker. While everyone else was using big spinnakers, we were using a small one. (Your sails act as horsepower. Smaller sails mean less horsepower and therefore slower boat speed.) By using a smaller spinnaker, we put ourselves at a disadvantage compared to the other one-design boats in our class.

The results of poor execution, the wrong sail, not paying attention to details and the lack of working as a team produced obvious results. We came in last place. As we crossed the finish line, my instructor commented that he couldn’t remember a time he’d ever come in last place. To rub salt on the wound, there were a few jibes from other skippers. Being an America’s Cup sailor attracts a lot of attention. Coming in last place is an embarrassment.

Day One – Race 2

The next race produced the same results. We were still executing poorly. To make matters worse, as we rounded the mark, my son raised the spinnaker upside down.  He normally executes this task flawlessly on his other team. Maybe it was his first race with his father on board that made him nervous? Whatever the reason, that mistake cost us a position in the race. Tension was building, the pressure was on, our egos were deflating, and it was time for redemption. We crossed the finish line in next to last place.

Day One – Race 3

Wind conditions were holding strong, so the race committee decided to hold a third race. This time we were fast off the finish line. My son redeemed himself as skipper by forcing the number one positioned boat away from the start line by deftly executing a tack that forced the other boat to turn around and restart. We were now executing better, paying more attention to details and starting to work together as a team. The result was that we were sailing smarter and faster. However, our smaller spinnaker still cost us valuable horsepower. We finished the third race in fifth place. We had moved up another notch. That night at the San Diego Yacht Club we were still known as “the gang that couldn’t shoot straight” and were the butt of many jokes.

We called it a day. We were all exhausted and anxious for another chance to redeem ourselves. We discussed our mistakes and vowed to correct them the following day.

Reflections on Day One

As I drove home that evening, I began to recall the day’s events, relating them to my profession as a money manager. Many investors in today’s stock market experience a lot of what went wrong with us on Day One. First of all we were a new crew and some of us were new to racing as well. We were anxious to race, but as a crew we lacked the experience of practicing as a team. We didn’t pay attention to details and we weren’t prepared for the mistakes we made. We had the wrong sails for the race and were not focused on the task at hand. We had an excellent coach, but a coach can’t win the game. It is the team that wins the game by executing the coach’s strategy.

Our team is like many of today’s first time investors who are anxious to invest, but who lack the knowledge and skill that comes with experience. Winning takes knowledge, training, practice and flawless execution of strategy. To win, you can't allow your emotions to interfere with your game plan. You must remain focused. You need to acquire skill and knowledge, practice and train. When investing you may acquire education and training from others, but your success will come from your own execution.

Day Two

As we met at the docks, I noticed a new determination in the faces of our crew. We discussed strategy and the mistakes of the previous day. We were resolved not to repeat them. We also picked up the right sails so we wouldn’t suffer the disadvantage of being under-horsepowered. As we sailed out to the ocean, we were a different crew. While the other boats gathered around the Race Committee Boat, we took a practice run on the racecourse. Like a battlefield commander surveying the “lay of the land” before battle, my tactician was doing his reconnaissance, gaining knowledge of wind and sea conditions. He noticed that the wind favored one side of the racecourse. This was valuable intelligence as the race began. We also spent time making sure our lines were clear, the spinnaker was set up properly, and our instruments and other equipment were functioning properly.

Day Two – Race 1

As the first race began, we immediately tacked away from the rest of the boats and headed for the spot on the racecourse where the winds were strongest. The rest of the pack headed in the opposite direction on a course than was actually closer to the first mark. The advantage of our inspection paid off. We were sailing faster than everyone else. We were also executing our tacks, jibes, and sail changes flawlessly. Everyone was focused and we were functioning in unison as a team. As we approached the finish line, another boat was heading from another angle for the line at the same time. It was going to be close, but the other boat had the right-of-way. Within seconds of crossing the line, it looked like we were sure to have a head-on collision with the other boat. (Remember, they had the right of way.) That’s when experience paid off. Moments before crossing the finish line, we executed a tack putting us on the same wind angle as the other boat. We now had the same right-of-way. In tacking the boat just before crossing the line, we put ourselves in front of the other boat, and stole his wind. The result: we finished in first place by only a couple of feet. Remarkable comeback!

As other boats crossed the finish line they stared over in our direction. Weren’t these yesterday’s losers? While we waited for the next race to begin, we were definitely in high spirits. However, my tactician did not allow for any celebration time. Wally congratulated us, but told the crew we were far from winning the regatta. Instead, we discussed what went right and went out and surveyed the racecourse; while the other boats again socialized.

Day Two – Race 2

The winds were building and still favored the same side of the racecourse. We decided to employ the same tactics. When the race began, we immediately tacked in the direction of the stronger winds. The other boats were herded in the opposite direction oblivious to the stronger winds on our side of the course. We seemed to be doing everything right ­- from our tacks and jibes, to hoisting our spinnaker, to steering our boat. The result was that we came in first place again. But this time, just to underscore a “real” win, we won by a wide margin.

Day Two – Race 3

The winds were still holding up, so the Race Committee opted to hold another race. This time the other boats followed us. There were a few mistakes made, but we still managed to come in third place. By the end of the day we were tied for third place overall with last year’s winning boat. There would be another race tomorrow that would determine the outcome.

At the yacht club that evening, we held our heads a little higher and there was a new respect given to my crew. Winning one race could be a fluke. Winning two races took some talent. We were now tied for third place, so there would be two battles on the racecourse the next day. The first battle would be between the first and second place boats and the two of us that were tied for third.

Reflections on Day Two

As I drove home, I again reviewed the day. I thought about what went well, why we had won, and what lessons I’d learned. The first thing I thought of was the preparation done before the race began. It was no different than in the world of investing where knowledge of the condition of the markets can give one considerable advantage. There were other things such as paying attention to detail and remaining focused on our objective. Too many of today’s investors plunge into the market without having an objective or goal. If they have set goals, they often change them with the whims of the market. When you invest, you need to remain focused on your objective. That means paying attention to detail and ignoring the noise of the media. Talented investors such as Warren Buffet, Jimmy Rogers, Phil Fisher, or George Soros ignore the crowd and follow their own instincts. Wally demonstrated this clearly. He scoped the battlefield and his instincts maneuvered us away from the herd.

Buffet’s success in the market came from adhering to a long-term strategy. You don’t abandon it if short-term conditions go against you. So much of what goes on in today’s market is superficial. Investors trade stocks like poker chips. They ditch their investments the minute the stock goes down. Hold to the strategy if your assumptions were right in the first place.

Even though we were discouraged by the results of the first day, we learned from our mistakes and remained focused on our objective. Wally had told us before the race that we were going against world-class sailors. Our objective wasn’t to be number one. Given the competition, he set our realistic goal as placing in the top three. As an unseasoned racer and some team members with only a little more experience, we could have set ourselves up for failure by trying to be number one.

Many of today’s investors set themselves up for failure by trying to “score big” on an investment in an all-or-nothing game, rather than let patience run its course. In his book Winning the Losers Game, Charles Ellis counsels professional investors and novices don’t try to hit the home runs. Instead Ellis advocates that hitting consistent singles produces better long-term investment results.

Our first-place advantage in the first two races of Day Two was the fact that we’d done our homework first. As the other boats were congregated together, we separated ourselves. The herd instinct is definitely seen in today’s stock market. I call it the “Pile Up Mentality”. Everyone piles up on the apparent winner. By developing our own strategy and staying our course, we beat the herd. I found it interesting that by the third race, they were following Jimmy-J! Nothing beats an informed investor who knows his stock and sticks with it.

Day Three – Race 1

It was now the third and final day of the regatta. There would be two battles on the racecourse that day. The number one and number two boats were only a few points apart. The outcome of today’s race would determine who went home with the gold or the silver. The other battle was between last year’s champion and Jimmy-J as we were tied for third place. Wally reiterated our objective. We won’t attempt to seize first or second place. We were too far behind in points. Instead our objective was to beat last year’s champion who was tied with us for third place.

Wind and sea conditions that day were not conducive to racing. Because of that, we only had one race. We headed out to the ocean in heavy fog. You could barely see the boat in front of you.  We had to use our GPS to guide us to the racecourse because the fog was so thick. We finally found the Race Committee boat and spent the next few hours waiting for the fog to lift. In the early afternoon, the fog began to lift, but because of the marine layer, there just wasn’t any wind. We had one false start, but they called off the race because the winds had died down. Slower wind conditions make racing more difficult because you don’t have the force of the wind to propel you forward. It takes considerably more skill in each move that you make. You have to search for patches of wind on the water, maneuver your boat, and milk it for all you can get. Light air sailing separates the amateurs and the pros.

The wind speed finally picked up to six knots and the race began. The moment the starting gun went off, we were first off the line. Our objective was to take an early lead and watch our main competitor. At no time could we afford to allow him to pass us. In light air you may never get another chance to regain your momentum if you make a mistake. We had a strategy and we stuck to it. We were on the lookout for any patch of wind and we fought for every tenth of a knot.

Even with the fog and light winds, we achieved our objective. We let the number one boat pass us as he was in his own battle. We only concentrated on our competitor. We out-maneuvered him on the water and found patches of wind that kept us in a lead position. We finally crossed the finish line seconds after the number two boat. We won third, and we won our original objective: to place in the top third. Considering our competition and lack of experience it really was something to be proud of.

For me it was a thrilling and valuable learning experience. At the yacht club that evening, as skipper I received the award for the team. They announced it was my first regatta and I saw the look on many faces. Who is this guy and where did he come from? If the truth were told, it was the brilliant coaching and tactics of Wally Henry and the hard work of my crew that won the race. I was just the skipper.

Final Reflections

When I considered this last day’s race, I was reminded that at times in the market there are days, weeks, and even years, when there isn’t any “wind” in a sector or investment vehicle. You learn to simply stay out and wait for the right moment. It was very foggy. We couldn’t “see” the racecourse. We had to turn on our GPS (Global Positioning System) to find our way. There are times in the market when all you have to go are the technicals. Remember when the fog lifted and there was a marine layer? It was no different than a sideways stock market where stocks drift aimlessly, rising one day and falling the next day. In a sideways market, you look for opportunities that the crowd doesn’t see. It may be that slow ripple you see off the bow that sets your course to make the most of the potential wind.

I mentioned at the beginning of this article that our perception of the world is tempered by our vocation and avocation in life. This may have been just a sailboat race, but participating and winning a place taught me quite a bit. Goal setting, knowledge, training and practice, staying focused and never giving up, when applied with intestinal fortitude, breed success. These lessons apply to any sport or any achievement that is worthwhile. In all of my reading, whether it was about successful investors, top athletes, famous generals or political figures, they all had these attributes. The same principles that made this race a success are universal and can be applied to any endeavor be it investing or sailing.