Insights on strategic investing from professional athletes

Matthew Syed, a former English table tennis player and current journalist and writer, shared an interesting experience in his book Bounce—The Myth of Talent and the Power of Practice. Syed recounts a time he played tennis with Michael Stich, a retired German tennis player. He asked Stich to serve at maximum pace, curious to see whether his table tennis instincts would enable him to return the serve.

To Syed’s surprise, Stich served four straight aces without Syed even noticing he had slowed down the last two serves to give Syed a fighting chance. This led to the realization that skills in one area aren’t necessarily replicable in another similar area. This distinction is clear in sports, but many fail to realize it in other areas, such as investing.

When it comes to investing, many people believe they have the skill to emulate some of the most successful investors. However, the final result of an investment isn’t always immediately obvious, unlike in sports. This lack of skill and understanding leads many retail investors to make investment decisions based on stock tips from social media, friends, and acquaintances.

In today’s stock market, where prices seem to continuously rise, this strategy seems successful in the short-term. However, it’s important to realize that tomorrow might not be like today, and making investment decisions based on tips and short-term results is not a strategy for long-term success.

The important takeaway from Syed’s experience is that success and skill in one area don’t guarantee success in another. This applies not only to sports and investing but to many areas of life where individuals may think they have the necessary skills without truly understanding the intricacies and complexities of a different field.

In the end, Syed’s experience with Stich serves as a valuable lesson in understanding the limitations of one’s skills and the importance of not assuming success in a different arena.