Arguably there is no richer source of metaphors than sport. We admire the skill, effort, dedication and endurance of the contestants. Sport mirrors certain aspects of our lives. But what can investors learn from sport? In his 1958 book The Art of Cricket, Sir Donald Bradman writes about several important lessons for cricketers from which investors can draw three parallels: placing the ball, building an innings and being judged by results instead of decisions.
Placing the ball
Indecision is a batsman’s worst enemy. The batsman who cannot decide whether to play off the front or back foot will soon walk back to the pavilion. What, then, should be a batsman’s approach to scoring runs?
Bradman cautions that “it is unwise for a batsman specifically to make up his mind before the ball is bowled where he will hit it”. He advises that “batsmen should always have prominently in their minds the thought that they will take advantage in the field if opportunity occurs.”
A batsman must have a mental picture of the field before the ball is bowled and be prepared to act. As Bradman explains “this is very different from deciding on the shot before you know where the ball will be pitched.”
Similarly, an investor forms a mental picture of the potential returns offered and the risks run in targeting them. But having an estimate of fair value is quite different to investing with a fixed strategy. It is the same as a batsman with a premeditated stroke in mind – he will only score runs if the bowler delivers a ball that suits his plans. Otherwise, at best he fails to score and at worst he loses his wicket.
In contrast, a skilled batsman plays each ball on its merit. This is exactly what a skilled investor does when evaluating opportunities, executing and adapting his actions when circumstances change.
Bradman writes that a batsman “should not waste time playing the unprofitable stroke.”
Building an innings
A great innings is built one ball at a time. A batsman combines aggression and defense, knowing when to take the quick single, hit a drive for four and bludgeon a bad ball for six. More importantly, he also recognises when the bowler has his measure, patiently defending the wicket until there’s an opportunity to score.