Last week I was asked, only half in jest, how Test cricket fans can spend hours watching a sporting contest that is so excruciatingly slow that it needs to be played over five days – and even then, may still end in a draw.
“Easy”, I said, “Test cricket is the only sport where choosing to do nothing on a regular basis is critical to your success.”
In baseball, tennis, soccer, hockey, rugby and other team sports, the rules of the game and time constraints necessitate action. If the ball comes your way, you must do something or lose.
By contrast, success in Test cricket relies heavily on the art of “doing nothing” – or to put it into cricketing vernacular, “letting the ball go through to the keeper”. And since time is not a binding constraint in test cricket, you can literally let hundreds of balls go through to the keeper.
For this reason, Test cricket is the ultimate business metaphor.
To bear this out, take a look at the Test batting statistics of one of the masters of the modern game, Sachin Tendulkar. (By the way, virtually identical statistics apply to Ricky Ponting’s test record).
Three things jump out from the statistics:
- Of the total number of balls faced, Tendulkar didn’t score from almost 60% of them. The vast majority of these dot balls he either blocked (batted away defensively) or let go to the keeper.
- Of the total number of runs scored, Tendulkar scored almost 55% from boundaries (fours and sixes). Despite accounting for more than half the runs scored, boundaries accounted for only 7% of the total number of balls faced.
- Tendulkar makes a costly error (dismissal) approximately once every 100 balls.
These statistical averages are surprisingly similar to the statistical laws that apply to investment out-performance.
Dot balls are the business equivalent of deals that you choose not to examine in any detail. At EG, of the deals that come our way, we let about 60% “through to the keeper”. In other words, we choose to “do nothing”, thus conserving our energies for the better deals.
Test cricket is the ultimate business metaphor
Striking boundaries is the business equivalent of a great deal. At EG, of the deals that come our way, we really gun for about 10% of them and typically win about half of them. In other words, we strike a boundary on about 5% of the deals we look at.
Dismissals are the business equivalent of doing a bad deal, that is a deal where you lose some or all of your capital. Dud deals are the ultimate enemy of the great investor. As Buffett says: “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” To become the Tendulkar of investment, you have to keep dud deals to a minimum: ideally, not more than 1 in 100 deals examined. Knock on wood, EG is yet to lose money on a single deal, though we know that this is ultimately a fate no mortal can avoid (only minimise).
So success in Test cricket – much like the field of investment – is very strongly linked to patience and a highly disciplined approach to risk taking.
Moreover, this doesn’t just extend to the great art of which balls (deals) to play at and which to let go. I once attended a lunch function where Steve Waugh was the guest speaker and he said something that really struck a chord with me: “The secret to scoring centuries in test cricket is what you do between deliveries [balls]. You have to maintain your concentration for such a long period of time, so you need to find a way to switch off and relax between deliveries – otherwise you will play at balls that you should let go and you’ll eventually get out.”
The same is true of investment. If you can’t switch off and relax when there are no or very few deals to look at, boredom and frustration set in and mistakes are bound to follow. You start to seriously consider deals that you ordinarily would refuse to look at and, if you do that often enough, you will eventually dabble and fail.
So there it is: that’s why I find Test cricket so fascinating. I love watching the balls Tendulkar decides to let go to the keeper almost as much as the balls he bludgeons to the boundary.
No doubt this is all an over-elaborate justification of my vice – but the next time you’re taunted for watching too much cricket, try telling them (with an enigmatic smile) that you’re merely reinforcing your knowledge of the statistical laws of investment.