Mind games: Phil Slade

A cricket match can show investors how to win the money game

Iam a self-confessed cricket nut. I love cricket. Part of the reason is that cricket is as much a game of strategy as it is a game of skill.

How the captain plays the game, and the decisions they make on the field, are as important to success as the individual skill of the players. Teams with superstar players are often beaten by teams whose captain plays a better strategic game.

The other thing I love about cricket is that I find it is a great analogy to teach people how to think more strategically about their finances.

Managing your investments and finances is like being the captain of the fielding team. You look at the context (the batsman, weather conditions, fatigue of your players, etc), make a plan with your bowlers and set the field strategically to create and catch opportunities. The more you catch, the more likely you are to win.

You have limited resources to catch opportunities (11 fielders to cover about 17,000sq m of field), so you need to be deliberate with how you allocate your capital to maximise opportunity. Putting all your fielders in one area hoping for a catch doesn’t make sense, nor does trying to cover the whole field – it’s impossible to do. The way to win is have a plan that maximises your resources and increases your odds of a win.

When a random ball is hit to an area not covered by any fielders, the last thing a captain should do is react by placing a person where the opportunity once landed to see if lightning will strike twice. If they did, they would spend all their time chasing missed opportunities, and not enough time and effort in creating the opportunities that play to the team’s strengths. Good strategy always beats short-term tactics.

When the context changes (a new batsman comes to the crease), a change in plan is also needed. The status quo bias in all of us makes us feel that if we repeat what was successful for us in the past, we are more likely to have success in the future. This is simply not the case a lot of the time. In cricket, if the same plan is maintained irrespective of a changing context, then you are also unlikely to win. You change your plan when either the context shifts or the current plan doesn’t seem to be working, rather than simply reacting to missed opportunities or mistakes in the field.

I see this reactive behaviour all the time when people hear a rumour about a stock that is exploding in value, or areas where house prices are going up, or of a company that is doing unusually well. People panic. They fear missing out on an opportunity and go chasing prospects rather than looking at the bigger picture and sticking to their plan.

Understanding the difference between changing your plan because the context has shifted and blindly following trends based on fear of missing out is the key. Respond, don’t react.

The other thing you consider is what type of game you are playing. The way to win a five-hour T20 game is different from how you play a five day test match. Play a T20 style during a test and you’ll probably lose. Play a test style in a T20 and you’re unlikely to win. If you’re playing a shortterm investment game, then you need to employ different strategies than if you’re taking a longer term approach.

Know the game you are playing, and change the field according to the batter – not just to where the balls are being hit.