Investing & Cricket analogies

One of the primary ways the human mind learns is by analogy. We tend to form models of the world based on our experiences and keep relating each new experience to an existing framework. As sports are ubiquitous in many cultures, a lot of sporting analogies have crept into many facets of life. One of the popular baseball analogies that Warren Buffet used was

I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it

Along those lines, here are some cricket analogies / parallels.

(1) There is a distinct importance to placing a price on your wicket and pacing your innings. Playing a couple of rash shots then getting out may give you an adrenaline rush and thrill the crowd, but at the end of the day you have a total to set or chase down. Similarly in investing, protecting your capital matters more than achieving the highest return possible in the quickest amount of time. You only need to get rich once, and so long as you don’t lose money, compounding works for you and not against you.

(2) Every batsman has a bread and butter shot, and an arc in which he can score well. Ganguly was a maestro square of the wicket off the outside. Tendulkar made the straight drive seem effortless. Sehwag punished anything wide of off stump. Part of shrewd batting is waiting for that loose half volley you can punch through the covers. Similarly, in investing knowing your circle of competence and waiting for an easy opportunity to present itself is essential.

(3) Analyzing your game and that of others is important. Cricketers today spend countless hours watching footage of their game to figure out their weaknesses, working on their technique and studying other players to see what they can learn from them. There is a lot of value in investing as well from studying your mistakes and learning from them rather than admitting they didn’t happen. In fact, learn from others mistakes as well. Reading widely helps immensely in this respect.

(4) Develop your own style of playing the game. Cricketers are often heralded as the next incarnation of some previous superstar, but each cricketer is unique. Yes, Tendulkar drew comparisons to Bradman but they played in different times with distinct styles. Sehwag’s managed to craft his swashbackling strokeplay based on a model of Sachin from the 90s, without aping him. There can be only one Lillee, Mcgrath, Tendulkar or Lara, similarly there can be only one Warren Buffett, Peter Lynch or Charlie Munger. We can draw inspiration from them, learn and adapt aspects from their playbook but we must develop our own investing style that feeds off our strengths and temperament, similar to how Buffett built on Ben Graham’s ideas.

(5) Watching the playing field, not the scorecard. A batsman needs to concentrate on playing each ball on its merit, and work on a strategy to neutralize the bowler’s tactics and field settings. He needs to have a general sense of where he is and what the required rate is, but watching the scorecard after every ball is counterproductive and may lead to unnecessary pressure to score off every ball. Similarly, one needs to understand that much of what happens over the markets is noise. Learning to filter it out and focus on important business and economic developments is what will lead to success in investing.

(6) You will have periods of good and bad form: There will be periods in a player’s career where nothing goes right – a batsman hitting shots straight to a fielder, a bowler goes wicket-less despite bowling a good spell while his on target deliveries are carted around the park, a normally outstanding fielder dropping absolute sitters in the outfield. Persevering through the bad times and not letting the good times go to your head are essential to having a long and fruitful career. This is also true of investing, because of the way capital markets work. You may be right about a company, but the market does not agree yet. A stock does not care that you own it, and the market is a voting machine in the short term. Sticking to having a disciplined process and what works for you is important. During the 2000 tech bubble Warren Buffett was called a dinosaur by many for refusing to participate in the craze for internet companies. Guess who had the last laugh?

Perhaps most important to remember, on the cricket field as well as in the investing world, are the words of Marilyn vos Savant –  “Being defeated is often a temporary condition. Giving up is what makes it permanent.”

 

 

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