There is No If
- Patrick Rial
- 9 hours ago
- 3 min read
I try to play tennis a few days a week. I also watch lots of matches on YouTube. My favorite player to watch is Nick Kyrgios. If you don't know him, Kyrgios is an Australian player with one of the best serves in the game. His first serve averages 130mph, 10mph better than the average pro, while he barely slows down for the second serve at 124mph, exceeding peers by 25mph.
He is also the poster child for unfulfilled potential.
Despite his dominating serve and incredible skill level, Kyrgios has been pro for 12 years and never won a major. His obstacle is temperament. He implodes and throws tantrums with regular frequency, leading to losses against players far below his level. In a way, he is an extreme example of what you should avoid in tennis (and investing) regarding allowing emotions to rule you, and from that perspective is very instructional.
His 2022 Indian Wells battle with Rafael Nadal is a classic example.
When he gets frustrated, he starts making sloppy or lazy shots. A drop shot when your opponent is at the base line is enough to best average players, but against Rafa, you should know he will run it down and hit a winner. There is no room for trick shots when you are going up against the best.
Rafa beat Kyrgios in Round 2 of the 2019 Wimbledon in a tight game. Kyrgios reportedly said that if only he could maintain his focus, if he could play hard on every point, he would be a champion like Rafa. Perhaps even #1 in the world.
Rafa's response at the press conference was spot on: "If, if, if doesn't exist."
If, if, if doesn't exist in investing as well. When we underperform, the natural instinct is to blame exogenous factors - large caps are in favor, speculation is rampant in the market, banks and semiconductors are the only sectors driving index returns, etc.
These excuses contain a kernel of truth. But over the long term, if we are not delivering performance, then the problem is not exogenous factors, but our own process and skill level.
Taking Control, Taking Responsibility
In my view, a bout of poor performance is an opportunity to look inward, reflect, and improve. That said, there is a lot of noise in markets, and we should also be careful not to “overlearn” from an investment that didn’t work out.
Sometimes bad luck really is bad luck.
But I prefer to minimize the role of chance wherever possible. That is why I prefer an engaged, constructivist approach. Our success or failure depends much more on our actions compared with classic investing, where the role of luck is substantial. That locus of control may produce favorable or poor returns, but there is no blaming the "if, if, if" scenarios when things don't work out, which suits my personality.
How a Constructivist Can Unlock Value
My experience with Japanese companies is that management tends to "do right" by employees, by themselves, by customers, and by suppliers, in that order. In the equation of how corporate value creation is divided among stakeholders, shareholders are generally the “remainder” in the equation.
My approach advocates to put shareholders on equal footing with other stakeholders (and potentially reduce excess customer-centricity.) That generally represents a vast improvement vs. the status quo. In a best case scenario, the company slims down its balance sheet and re-evaluates its business portfolio to focus on products where customers are willing to pay for the value added.
It might not work in every situation (or at all), but you won’t hear me complaining about “if, if, if.”
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