I’m a huge fan of NCAA basketball. Every year, I get consumed by the excitement of March Madness, the 64-team tournament that determines the national champion. Over the past two years, the women’s games have enjoyed more coverage and attention. As a fan of the game, I’m thrilled because the women play a purer version, in my view, with outstanding passing and exceptional shooting.
The biggest star of the women’s game has been the sensational Caitlin Clark. Sometimes, she seems able to score at will. An incredibly high percentage of her shots are made – often from very long distances – and her opponents can’t seem to do anything to stop her.
What I am especially intrigued by is not the mechanics of her shot or the obvious evidence that she has practiced a great deal. Those are what I’d call “tangible” reasons for her success. Impressive yes. But not as intriguing as something intangible. Her confidence.
When she takes a shot, she looks so relaxed; there is such conviction in her approach that it seems effortless. It’s as if she would be amazed if the shot didn’t go in. And of course, sometimes they don’t and it doesn’t seem to bother her one bit.
I think she is so confident in what she is doing that she recognizes that it won’t come with perfection; that missing some shots is how it works. It’s part of the process. And missing some shots doesn’t dissuade her from trying again because she knows that most will go in and her effort will contribute to the team and move them toward victory.
I’m intrigued because this approach to success applies to other things, including investing. The process is very similar. There is a great deal of tangible effort that is involved upfront. Strategy, research, discipline and portfolio structure are akin to Caitlin Clark’s mechanics and practice.
When you have put that hard work in and you know you haven’t cut any corners, you can proceed with confidence, conviction and resolve. You trust the process. You understand that there are setbacks and that things will not go your way 100% of the time. You’ll miss some shots or even have a bad game once in a while. But the percentages are in your favour. Stick to your game and you will move toward your desired goal.
Let’s continue the basketball metaphors. Another insight came to mind about the nature of success. As the tournament progressed and fewer and fewer teams were left, the pre-game commentary featured panels of experts who opined on the outcome of the games. It struck me that there are three elements that can determine who wins.
First, involves the science of the game. This is very statistical. Team A has shot 65% from three-point range. Team B has a 7-foot-tall player. Etc. etc.
Second is the art of the game. Do you think Team A can build on the momentum of the last few games? Can the coach of Team B adapt and change the tempo to prevent Team A from playing their usual fast-paced game. It’s basically about the art of execution.
This is where the analysts stop. They build a case based on the technical data (the science) and the balance of intangible factors (the art) to predict whether it will favour one team over the other.
But they leave out a third element because it can’t be reasoned or predicted. But it is just as important. Randomness.
You see, despite all the talent, practice and strategy that goes into the equation, there are things we don’t know and can’t predict. We don’t know if a team’s hot shooter is going to be on that night. We don’t know if a key player will get injured. We don’t know if a team’s chemistry will make them bring their best or if it will just not be their night. There is a certain randomness that is at play.
Now, let’s say the first two elements add up in favour of Team A. They could randomly stink one night and lose the game despite what seemed to be their superiority. But if they played Team B ten times or one hundred times, chances are they’d win the vast majority of the games.
The same is true for investing. You need to do the technical work that is the science of investing. You need to know yourself – your sensibilities and values. You need to manage your behaviour. This is the art of investing. But there is a randomness that will impact you at times. Despite your efforts, there are things outside of your control that may set you back. Geopolitical events. Economic factors. Even weather in some industries. But if you do the first two things well, the odds will be in your favour. Randomness won’t defeat you and you will have success.