“The man who will come out on top is the one who is constantly looking for scoring opportunities – who does not neglect to pick up the singles when nothing better is offering – and who is always waiting to punch the ball through holes in the field which the opposing skipper leaves open.”

The same is true of portfolio construction. A skilled investor combines a diverse mix of investments: some defensive, others aggressive, some short term and others long. Such an investor takes a variety of risks, but only those he can reasonably expect to be rewarded for. He recognises when the market has them beaten and responds by focusing on defense. In so doing, he builds a track record of lasting performance.


Decisions and results

Discussing captaincy, Bradman notes that “problems on the field of play involve judgement and experience.” A captain is faced with decisions that affect the course of the match. For example, if he wins the toss, he has to choose whether to bat or not.

This decision involves all sorts of conditions: the state of the pitch; the number of runs the team needs to score and the weather.

Investors daily face the challenge of making judgements based on experience. These decisions can result in more than one outcome. An investor must evaluate the possible risk and return of each possible scenario and it is unlikely he will have all the facts. The best he can do is estimate probabilities and invest in what he judges to be most likely.

Unfortunately, Bradman explains, “credit is seldom given to the wise move which smoothes the later path”. Instead, “the critics always adjudicate after they see what did happen, but the unfortunate captain is given no such license. He is often judged by the result, not the wisdom of a decision.”

Suppose, for example, that a captain decides to send the opposing team in to bat after he has won the toss. One of the openers is caught off the first ball. The second opener give a slips catch off the fifth ball of the innings, but it is dropped and he proceeds to make a century before lunch.

The skipper is now in trouble. The opposition is 1/185 and both batsmen are settled at the crease after having seen off the new ball. The stage is set for big first innings score. But what if the slips catch had been held? Our skipper might have been a hero. It was not the captain’s decision that mattered but the result. Sometimes there are exceptions. Who can forget the underarm bowling incident in the 1981 World Series final?

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