Originally published by Cuffelinks
Football and investing are both incredibly competitive. As a professional footballer for 16 years, I spent the better part of most weeks training and working to be the best I could be. At the same time, though, I was preparing for life beyond the football field, first by studying for a Bachelor of Commerce then for a Masters in Applied Finance.
During these years of blending football and finance, I learned some interesting lessons that link two professions that many might think have little in common.
1. It’s better to be a hedgehog than a fox
There was a time in my football career that I tried to be able to play pretty much every position. I thought that I would improve my chances of being picked for the senior team each week if I could attack up forward and defend down back. After reading Jim Collins’ book ‘Good to Great’ in 2010, I changed my approach entirely. Collins builds on Isaiah Berlin’s famous essay, The Hedgehog and The Fox, which itself was based on an ancient Greek parable: “The fox knows many things but the hedgehog knows one big thing.”
Instead of aiming to be good at everything, l narrowed my focus to being the best defender not just in the team, but in the whole competition (the hedgehog concept). My football improved dramatically with this focus.
I believe investing is similar. It’s not about how big your circle of competence is but knowing what your strength is and being better than anyone at that.
2. More data doesn’t always mean better outcomes
Technology keeps providing new ways to analyse and measure player and team performance. However, diving too deep into data can distract from what is fundamentally important to a player and the team. At times, I noticed young players focusing a lot on GPS distances and average speeds, but that data was only useful if it complemented a review of their game. Instead, it was shifting their focus away from the fundamentals of what made them great footballers.
Finance often dives even more deeply into data than football, but it’s important to distinguish between what generates investment returns and what’s merely a distraction. There are key measures that deserve consistent focus but much of the data beyond this could be little more than white noise.
3. Humility trumps hubris
The best teams find ways to improve, regardless of the result of the last game. Humility can prevent hubris from ruining an individual’s career or eroding the culture of a team. Former All Blacks player Richie McCaw would write down the same words before each game – “Start again” – as a reminder that he needed to prove himself again that day despite every previous success.
By the end of my 16-year career, I could acknowledge that I was far from knowing it all. However, what I did know was that my approach to the continual process of training Monday to Friday would have the biggest influence on my weekly performance. I hope to be working in the asset management world in 30 years and, if I am, I should still be learning new things every day.
4. A healthy dose of paranoia is not a bad thing
Football and finance are intensely competitive, and a healthy dose of paranoia helps ensure you’re constantly improving, aware of risks, and pushing beyond your comfort zone. There’s a quote that’s relevant to both football and investing:
“If you don’t worry, then you need to worry. If you do worry, then you don’t need to worry.”
A former coach of mine, Essendon legend Kevin Sheedy, once said that a premiership can choke a player’s football career if they’re not careful. Sydney Swans coach John Longmire was often on edge with nerves during training sessions in November despite our first game being five months away and having had a good season the year before. He was always aware that 17 other teams were working hard to improve. In investing, your competitors are all working hard to find ways to outperform your team and it’s good to be aware of not only who’s ahead of you, but of who’s behind you.
As Andy Grove (CEO of Intel (NASDAQ:INTC)) once said, “Only the paranoid survive.”
5. Defence is more important than attack
AFL premierships are usually won by the best defensive teams, not the best attacking teams. There is a big difference. Good luck to your long-term performance if you just want to get into a high-intensity shootout each week with the other team.
In investing, too, there are differing approaches to diversification and uncorrelated returns and some focus on high risk. I’m not going to enter a debate about what’s right or wrong. What is consistent is that the best portfolios have a strong defensive element.
American investor Howard Marks said: “Avoid the losers in investing and let the winners look after themselves.” I think this is relevant to football too. At the risk of contradicting my third point, I’ve always said that in football the defenders will help win the premiership, while the forwards will help fill the salary cap!
Success in one week, one quarter, or one year in no way qualifies that the next time will be any easier. That’s what makes it hard, but that’s what makes it enjoyable. I think this constant challenge is why I am passionate about both football and investing. Each has helped me learn something new every day, and I don’t expect that to ever change. It was a privilege to play professional football and it’s a privilege to be trusted with someone else’s money.
Ted Richards is Director of Business Development at Six Park.