Winning point: Roger Federer’s value take among lessons for life
The Wimbledon championships feels like a good moment to highlight some distinctly value-oriented wisdom tennis legend Roger Federer dispensed at a recent graduation ceremony in the US
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It is three years – almost to the day – that Roger Federer played his last competitive match at Wimbledon where, between 2003 and 2017, he won eight of his career total of 20 grand slam titles. Still, with the 2024 tournament now in full swing in south west London, it seemed an appropriate time to highlight some distinctly value-oriented wisdom the tennis great dispensed to graduates of Dartmouth College in the US last month.
Now 42, Federer picked out three lessons gleaned from his quarter of a decade playing professional tennis and which he has relied on since. The first is “‘Effortless’ is a myth” – that, as he put it, “most of the time, it’s not about having a gift. It’s about having grit” – while the last is “Life is bigger than the court”, with Federer noting he had realised at the start of his career “tennis could show me the world but tennis could never be the world”.
‘It’s only a point’
It was Federer’s middle lesson, however, that really caught our eye, here on The Value Perspective – an idea he encapsulated as “It’s only a point”. “Perfection is impossible,” observed one of tennis’s most sublime ever practitioners, before offering a couple of statistics – one impressive, the other jaw-dropping. Of the 1,526 singles matches he played in his career, Federer said, he won almost 80% – effectively four in every five.
He then asked his audience what percentage of points they thought he had won over the same timespan and, after a brief silence, answered his own question – it was 54%. “In other words,” Federer continued, “even top-ranked tennis players win barely more than half the points they play. And, when you lose every second point on average, you learn not to dwell on every shot.
“When you are playing a point, it has to be the most important thing in the world – and it is. But when it’s behind you, it’s behind you. This mindset is really crucial because it frees you to fully commit to the next point and the next one after that with intensity, clarity and focus.” And, for good measure, he concluded: “You want to become a master at overcoming hard moments. That to me is the sign of a champion.”
Countering behavioural bias
Regular visitors to The Value Perspective will be well aware value investors are no strangers to hard moments – indeed, hard moments come with the territory. That is why we work so hard ourselves at identifying systems and strategies to at least deal with, if not overcome, them. How for example do you counter the very human behavioural bias against the broader, more fact-oriented ‘outside view’ and towards the so-called ‘inside view’.
As we have discussed before in the context of numerous sports, such as football, racing, sailing and indeed tennis, that involves making predictions based on a narrow set of inputs, which may include anecdotal evidence and misperceptions. A classic financial example is the way company managements are always so convinced a planned acquisition will add value even though history suggests some two-thirds disappoint.
Nor should investors believe they are immune from the inside view – after all, every professional is adamant they will outperform their benchmark index even though the cold statistics show that, over three years, the average mutual fund manager does not. In which case, you might reasonably ask, what makes us believe, here on The Value Perspective, that we will outperform in the long run if the numbers suggest otherwise?
Right side of the averages
To offer one answer, every January – so, more Australian Open than Wimbledon – we look to see what lessons we can learn from the previous year’s investments. We analyse what we did right in our portfolios – and what we did wrong – and, while the great majority of people would say that all comes down to what made and lost us money, the great majority of people would be completely wrong.
For us, the right lesson to take from the process is, if I took a particular decision 100 times, would I make money on average? As value investors, we want to make investments that make us money 60 or 70 times out of 100. As such, if an otherwise sound course of action turns out to have been one of the times we lose money, the lesson is not ‘never do that again’ but ‘just keep doing it – over and over and over’.
That, in essence, is what value investing is: a set of rules that helps keep you on the right side of the averages so that, instead of being caught out by your own emotions – how ‘probable’, at the time, you believe any event is to happen or decision to play out – you put yourself in the best possible position to exploit the emotions of others, pick investments that should, on average, succeed over the long term and thus make those hard moments you experience along the way worth suffering.
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