Toby’s 2024 Reflection: How Do You Lose?
An often overlooked question when dealing with new opportunities
Opportunities are usually limitless in quantity. They are opportunities because if done or executed successfully, we will be in for a reward. But what should our mindset be like when presented with an opportunity (a new job, an online course, an investment)?
I am grateful that in 2024, I have had the chance to think more about it.
So to reflect on this matter, let’s look at a sport we all love playing: tennis.
Toby and Andre watched Wimbledon on TV and they want to play tennis
Being a competitive person, both know that the objective of playing tennis is to win a tennis game.
So undoubtedly, they need to know two things:
The rule of the game (how to gain points and eventually win) and
the strategy to win (what course of actions we need to do to better our chances to win)
The easy part is the rule of the game. You gain points if:
You hit a ball where your opponent can’t return back to you or
if your opponent hits a ball and it goes out (so you don’t have to return back the ball to your opponent’s field).
Now the strategy of the game is also quite simple. There are again, two main options:
You hit the ball harder to your opponent’s half so that it is harder for your opponent to return
You hit the ball with greater chance that it will not go out, but easier for your opponent to return
Going for option 1 means that you win the point by winning the point. Going for option 2 means that you win the point by not losing the point.
Toby, being a competitive person chooses option 1
He also happens to be driven by his ego to look cool when he can subdue his opponent by scoring a nice shot.
So he works by YouTube-ing a video on how to perform an ATP forehand shot that ensures the ball velocity is super high when it lands on the opponent’s court. He also works a lot on his serves. He aims to get aces every time its his chance to serve.
Andre, also competitive but a calmer person, chooses option 2
So he focuses on a shot that will always go in. He doesn’t work so much on the advanced techniques. He simply works on the basic approach of hitting the tennis ball right so that the ball lands nicely on the opponent’s half.
He also tries his best to handle difficult shots. Doesn’t work every time, but practice makes his handling better overtime.
Toby and Andre’s match
It was dazzlingly fun.
Toby managed to serve hard and scored a couple of points. Toby definitely looks way more professional. His forehand shots were harder and more beautiful to watch, sincerely.
But Toby also lost the match.
Why? Because Toby focuses too much on winning. While his forehand and backhand quality are much much better than Andre’s, he hits the net way more often. His spins makes his opponents rattle, but it also caused the ball to go out of control and out from the court. His advanced strokes also makes him lose more balance from his tennis stance, so Toby has a more difficult time to recover from his shots.
Andre, on the other hand, focuses way more attention on not losing. He focuses a lot more on getting ready to receive the shot from his opponent. He does this by making a simple shot that he can recover easily from. Focusing on running back to the center of the court, so that he can react more timely. His shots are almost always aimed at the center. But in the off chance he aimed it to the sides, it will always catch Toby off guard. Andre would win that point because Toby ended up making a sophisticated shot and fail to return the ball.
Key lessons from this tennis game
Some questions that we want to ask ourselves:
Do we play tennis to win or to make nice forehand shots?
Is winning more important, or not losing more important?
Andre might be lucky for winning against Toby who is more skilled at producing more beautiful shots, but can we discount all the luck?
Relating it back now to the real world when a new (anything from investment, job opportunity, business, etc) opportunity comes about.
Should we grab this opportunity to really make the most out of this opportunity and gain benefits? Or do we grab this opportunity because it will look cool?
It is a simple yet often forgotten objective that we play a game to win, not to look cool. So if we could win that game, maybe we should participate. But if we are only attracted by how much that game makes us look cooler, maybe it is not the right game to play.
Often times, in the games we play, not losing is a way more potent strategy than winning. This is because focusing our energy on winning usually cause us to make riskier decisions. On the contrary, focusing on not losing prepares us to be more prudent and careful with our decisions.
We usually underestimate and downplay the power of luck. But luck essentially is the factor that leads us to eventual victories. We don’t know when luck is going to come, but prudence, patience and persistence are usually key to be prime beneficiaries of luck 🙂
After reflecting and knowing all this, so what?
Not losing is the key guiding principle for us when doing our investments. People might be enticed by our performance-based subscription fee that we want to charge, but a key to doing this well is by not losing.
A potent way to not lose is to understand the downside risk of a company we choose to invest. How much can we potentially lose? How discounted is the price relative to its fair value? How (un)realistic is our expectations toward the companies we choose to invest?
The answer to the above requires a simple logical framework that is focused, not swayed by the noise that other market participants make. And if you are curious on how to invest more logically, to reduce the chances of losing, we are happy to talk to you.
Schedule here and we promise not to sell you investment service or force you to buy obscure insurance products. The moment that we do, you can leave the call.
Happy 2025 and stay compounding!