Football and Trading: There’s a Lesson In Everything (Part 1)

Over the past few weeks, The Wall Street Journal published several articles on football, beginning with the playoffs as teams started the process of optimizing their lineups. We can find and increase our trading wisdom from many different sources, including football.

As a firm believer that we should glean wisdom from every possible source, I’m going to delve into this competitive world. Not surprisingly, there are several aspects of the football—the game itself, the coaching, and draft process that are applicable to trading.

We encourage you to keep this quote in mind as you review the following:

“I keep six honest serving-men, They taught me all I knew; Their names are What and Why and When And How and Where and Who.” ― Rudyard Kipling

On January 3rd, Stu Woo wrote on how the Smartest NFL Teams Spend Money. In the article, he tackles the notion of spending caps. Woo argues that since teams have limits on how much they can offer players, a level playing field is automatically created. Says Woo, “… The NFL is basically a form of competitive economics… by looking at the financial decisions teams make, you can learn a fair bit.” He goes on to cite a study by the Wall Street journal that was aimed at determining how the 12 playoff teams make spending decisions.

The three conclusions arrived at are:

Spending money on talent from other teams does not guarantee a positive result.

Lesson: New resources, in most cases, are not a large factor in success. Trying to optimize your existing process while looking for new ways to do things is, in many cases, counterproductive.

Pricey quarterbacks are not the answer.

Lesson: It’s not singular, it’s collective. Success or failure is rarely determined by a single factor. Instead, it is the synthesis of many parts: your market knowledge, your self-understanding, your trading process, your support team and your tools.

It pays to allocate resources to sectors of the business that are generating ROI.

Lesson: Invest the time needed to determine where you have the highest probability of generating a return you seek. Generally, you will have to prioritize your allocations of your time, energy, and money.

On January 8th, Kevin Clark penned an article in the Wall Street Journal entitled, Why the Seahawks Like Confrontation. The piece is explores the confrontational—sometimes aggressive—feedback that teammates throw around the locker room. The key takeaway from the article is that the straight-talk improves the team’s performance.

Lesson: Open, candid feedback framed within pre-determined guidelines can increase the quality of one’s performance.

Less than a week later, Clark collaborated with Daniel Barbarisi on an article entitled, Bill Belichick: The NFL’s Scary Alex Trebek. The takeaway: the Patriots are one of the best-prepared teams overall due to Belichick’s unique coaching style. The team’s preparedness is its driving force.

Additionally, Belichick is the authority over the Patriot’s operations as well as head coach and considered something of a taskmaster. Several players have remarked on Belichick’s fondness for using spontaneous quizzes as a teaching tool. Players are regularly grilled at the team’s regular meetings and even when passing him in the hallway.

Here’s an example of Belichick’s querying format:Who lined up off of what player in last week’s game, and what was the outcome of the match-up?” Another “It’s third down, and we’re on X yard line. What is Y team’s favorite defense pattern for a situation like this?

This quote says it all:

“There’s no limit to the knowledge Bill expects you to have on an opponent and the craziest part is that he has the answers to all of it.”

Our second favorite quote from the article:

“Team meetings in the NFL are always deep dives into the schemes and personnel of the upcoming opponent. Coaches study game film and detail formations or tendencies they expect to see that Sunday. But according to current and former Patriot players, no one commands a depth of know-ledge quite like Belichick, who has a habit of blurting out obscure yet crucial questions. These typically come in midweek meetings, but they can happen anywhere in the team facility on any day.”

The article goes on in great detail about the breadth of the questions, some of which are focused not on plays, but on the psychological traits of frequent opponents. Clearly, Belichick knows that a trained mind coupled with a trained body creates a rare edge.

Lesson: For trading strategies and tactics to have a high probability of success, they must come from within the trader. They must be the product of the trader’s internalization and ownership of his or her trading process and methodology.

Lesson: Kyle Arrington said it best: “Practice execution means game reality.” The subconscious doesn’t know the difference between what is real and what is fabrication. Consequently, mental drills are extremely powerful. By dropping yourself into a scenario, you begin programming neural nets that are optimized to deal with that scenario when and if it comes up in real life.

The 14th also saw the release of an article entitled, How the NFL’s Final Four Were Built. This article was also by Kevin Clark. Clark emphasizes the concept of “not changing much” while maximizing resources. Take the Indianapolis Colts, for instance. The team is known for two key strategies:

 Seeking undervalued assets.

Sticking to old-school concepts such as using ‘big’ players on their offensive line.

The Green Bay Packers, meanwhile adhere to these strategies:

Putting resources into proven offense players.

Playing the draft by holding on-going auditions.

Finally, the New England Patriots follow these strategies:

Developing each team member mentally and physically.

Establishing an atmosphere of on-going learning.

Lesson: Continually review your strategies and build on what works for you and continually consider discarding what doesn’t work.

A few parting thoughts:

Only you know what works best for you.

Embrace the acronym F. O. C. U. S—Follow One Course Until Successful.

Until next time . . .