One trophy won but City FA Cup loss confirms Pep’s outside view

It is fair enough that a Manchester City footballer should believe his team could win four major trophies in one season but his manager’s more objective ‘outside view’ of the situation proved correct



Andrew Evans
Fund Manager, Equity Value

To pull off an unprecedented footballing ‘quadruple’ – and so confound their own manager Pep Guardiola’s ‘outside view’ suggesting such a feat would be highly improbable – Manchester City needed to win a specific series of matches that, at the time of our piece in mid-April, comprised a quarter-final, two semi-finals, three finals and a handful of league games. In the event, the team fell at the second hurdle.

After seeing off Borussia Dortmund in the second leg of their Champions League quarter-final, a somewhat anticlimactic 1-0 loss to Chelsea at the FA Cup’s semi-final stage banished all hope of winning that historic foursome of titles – at least for this season. As we wrote a few weeks back, though, City defender Oleg Zinchenko had been tempted by reporters at a pre-match press conference to wonder: “Why not?”

Stepping up next to the microphone, Guardiola had immediately answered his player’s romantic speculation with the rather more blunt observation: “I am older than Mr Zinchenko, I have more experience and I don’t agree with him. The only thing he has to be worried about is trying to do a good game and try to go through. This is the only way.

Inside view v outside view

“Four titles is a utopia. It never happened before and I think it’s never going to happen.” As we suggested, Zinchenko’s and Guardiola’s competing assessments of their team’s chances of pulling off a historic first were neat representations, respectively, of Nobel laureate Daniel Kahneman’s idea of the ‘inside view’ and the ‘outside view’ in the context of decision-making.

In his 2011 best-seller Thinking, Fast and Slow, Kahneman – a founding father of behavioural economics – discusses an academic project he undertook in the 1970s for the Israeli Ministry of Education. After a year of what he and his team felt was good progress, Kahneman suggested they all write down how long they each thought it would be before the project was completed.

The estimates all fell between a very promising 18 months and two and half years. It then occurred to Kahneman to ask one expert on the team how long comparable projects had taken to complete – and was dismayed to discover the only instances his colleague could think of that did not drag on for between seven and 10 years were the 40% or so that never actually finished at all.

Optimistic consensus

This came as a complete surprise to the whole team, writes Kahneman – including the expert, “whose prior estimate had been well within the optimistic consensus of the group”. “Until I prompted him,” he continues, “there was no connection in his mind between his knowledge of the history of other teams and his forecast of our future. We should have quit that day.”

And yet they did not quit – “Facing a choice, we gave up rationality rather than the enterprise” – and the project was duly completed after eight years, which was four times as long as the average ‘inside view’. Kahneman argues the fact it was so squarely in line with the ‘outside view’ was surely a fluke but concludes: “If the reference class is properly chosen, the outside view will give an indication of where the ballpark is.”

Put simply, the outside view is the prediction, decision or opinion you would reach given the bare facts about a situation – for example, ‘No English football team has ever won the Premier League, Champions League, FA Cup and League Cup in the same season’. For its part, the inside view grows as you acquire more specific information – such as, ‘I’m playing in a team that has largely been winning games at will since November’.

The trouble is, this extra data brings with it extra scope for internal bias and thus misjudgement and is why, here on The Value Perspective, we continue to incorporate the outside view into our own investment decision-making process – weighing up the margins, returns and other metrics of stocks versus their peers in a bid to protect against the internal biases to which even one of the leading lights of behavioural finance fell victim.

Subscribe to our Insights

Visit our preference centre, where you can choose which Schroders Insights you would like to receive.


Andrew Evans
Fund Manager, Equity Value


Behavioural finance
The Value Perspective
Follow us

Please remember that the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

This marketing material is for professional clients or advisers only. This site is not suitable for retail clients.

Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England.

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.

Schroder Unit Trusts Limited is an authorised corporate director, authorised unit trust manager and an ISA plan manager, and is authorised and regulated by the Financial Conduct Authority.

On 17 September 2018 our remaining dual priced funds converted to single pricing and a list of the funds affected can be found in our Changes to Funds. To view historic dual prices from the launch date to 14 September 2018 click on Historic prices.