The Idle Search for Perfection
It is only the swing we make in the here and now that counts. Not the shot that just failed or the difficult hole seven that is still ahead of us. Focus is crucial.
In 1995, sports psychologist Dr. Bob Rotella published the book 'Golf is Not a Game of Perfect'. In this work, Mr. Rotella describes how important the mental attitude is on the course. Mindset makes the difference between success and failure. Golf is not a game that can be permanently brought to perfection. It is played by humans. And homo sapiens make mistakes. Not every misstep can be avoided. Not everything is under our control. However, one aspect can be controlled, the appropriate reaction to mistakes.
The 'game' within the financial markets is very similar. Following Dr. Rotella's work, we can say 'Investing is Not a Game of Perfect'. No matter how much we plan and study, there will always be surprising developments and these do not always have positive consequences. Nonetheless, that in no way excuses a sloppy approach. Only those who work hard and are well prepared can prevail in an extremely competitive game. The third president of the United States, Thomas Jefferson, is credited with the following quote: “I am a great believer in luck, and I find the harder I work, the more I have of it.”
Unlike golf, the game on the exchanges is like a three-dimensional board game. A game in which the rules, the playing field and the opponents are constantly changing. On the flip side, we could all go to the “Investment University”, graduate and win money on the stock exchange at will until the end of our days.
The courage to contradict
Good investing is a contradictory mixture of unwavering principles, of permanent learning and adapting. This is true regardless of how much the game changes. Since there can be no consistency in achievable investment results, stable investment principles are extremely important. The fact is that any strategy will be fruitful in some periods and not in others. This is true without exception. Nevertheless, firm convictions are necessary to survive weak phases.
At Gutmann Portfolio Management, we are great advocates of fundamental analysis. The world may change and new business models may emerge. Yet, there are immutable principles, for example in the world of equities: the value of a company is equal to the sum of all future net cash flows discounted at an appropriate interest rate.
The various Gutmann teams work hard to improve their analytical skills and processes. Even if perfection is not possible, it leads here and there to the necessary bit of luck that President Jefferson already appreciated so much.
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