If Investing were a Game of Cricket
On an mundane weekend while I was flipping through TV channels I chanced upon some old cricket highlights followed by more business media noise. That’s when a quirky thought crossed my mind.
As I pursued this rabbit hole even further, I could see some parallels between the game of cricket and the world of Investing. This is by no means a perfectly rational analogy but a mere fun exercise in trying to recognize patterns and seek order in a world full of chaos and replete with randomness.
On the basis of ones time horizons the participants in the game of cricket or in the craft of investing can be split into three categories. Long (Test), medium (ODI) and short term (T20).
Just as there are three formats in the game of cricket, three types of men and women flock the world of investing.
Test Cricketers and Value Investors
These are folks who are a purists delight and epitomize excellence in their respective domains. They focus invariably on the process and believe that the results take care of themselves. Patience and perseverance are necessary ingredients in the making of a successful test cricket or value investing career. While the former credits his performance to technical proficiency and deliberate practice in the formative years the latter attribute their massive wealth creation to rigorous fundamental analysis and fortitude to go against the herd when required.
Both are perpetual learning machines and humble to a fault. Of course, there are exceptions to this rule. Every now and then you come across individuals who are cocky as hell and believe they know it all. Only to realize soon, how gravely wrong they were. Maybe there’s a reason why test cricket made Sir Don the game’s greatest and the value way made Warren one of history’s richest ever.
T20 Superstars and Day Traders (Dreamers)
This is the risk of the realm of the adrenaline junkies and the get rich quick seers of short cuts. Higher risk and lower room for error writ large in this unguarded adventure. While the former is all about sheer power and thrives on glitz & glamour, the latter counts on margin money to make them rich. While most aspiring T20 greats have their careers cut short by wrong technique and lack of discipline the speculators lose their shirt and throw-in the towel. Both are sore losers and blame the game and the markets for the disaster they brought upon themselves.
Heard of the likes of Lasith Malinga and Jesse Livermore? One lost his career while the other lost his fortune and tragically succumbed to suicide. Though on balance T20 has done more good to the game than trading has done to man’s mission for wealth creation.
Then comes the third category, which possibly includes some of us or so we hope.
The Moderates on the Middle Path
These are people who don’t fall into either of the extremes. While the players hang around for 8 hours to get a result, the investors (if you can call them that) pull the trigger sometime between three months to three years. These are people who are neither play with fire nor are boring to the bone. Both the length of the game and the investing horizon is temperamentally palatable for most people. But then the preferred duration for a game of cricket and the turn-around time for stocks are hitting new lows with each passing day.
Remember Michael Bevan? He was a quintessential ODIer. In investing, if you have held stocks, now’s the time to hold up a mirror:)
Forth and Final – The Rarest Breed
Then there is the rarest crop that harvests not too often in the history of any human endeavor. These are the true masters of the game endowed with an abundance of god-given talent coupled with an incredible work ethic which makes them truly great. Our very own Virat Kohli and Rakesh Jhunjhunwala are active specimens of this finest breed.
Wednesday May 18, 2022