The Divine Ponytail
It’s the bottom of the ninth inning, two outs. The bases are loaded, and my team is down by three runs. I step up to the plate with the world series on the line. The world is watching. And it’s all up to me. I can’t tell you how many times I imagined that scenario when I was a kid. I could feel the intensity. I could see the crowd ready to erupt. Then I’d toss a tennis ball up into the air, swing my bat through the air, and crush it over my backyard fence.
The truth is, I was never that good at baseball. I fell short of even making my junior high school team, let alone the major leagues. There are only two people who have ever felt the thrill of hitting a home run to win the world series. Joe Carter won it for the Blue Jays in 1993, and Bill Mazeroski hit one over the wall to help the Pirates beat the Yankees in 1960 (yes the Pirates were a good team once). One of the reasons we love sports is the powerful emotions that come from the intense and dramatic moments. These come in the form of walk off home runs, last second field goals, and buzzer beating shots. Of all of the worlds sporting events however, there is one that carries the most weight. It has the most eyes watching, and it has the hopes of entire countries riding on it. The World Cup.
Roberto Baggio, aka the “Divine Ponytail” is one of the greatest Italian soccer players of all time. He scored over three hundred goals, earned the footballer of the year award, and represented Italy in three World Cups. Put lightly, he was exactly the person you would choose to take center stage in one of the most pivotal moments in Italian soccer history.
After playing 120 minutes in the Southern California both the Italians and Brazilians had failed to score. For the first time on over 60 years, the world’s most coveted trophy would be won in penalty kicks. Baggio stepped to the penalty spot with Italy down 3-2 in the contest. The phrase make it or break it has never been more accurate. A goal would tie the score for the final round. A miss, and Brazil would claim the title. It does not get any bigger than this moment.
Baggio wasted no time after the whistle. He sprinted to the ball, cocked his knee back and sent the ball screaming towards the goal. His aim was for the top left corner of the goal. A spot where, even if the keeper guessed correctly, would never be able to be reached. Baggio’s shot careened toward the net like a rocket. He had put everything he had into that kick. So much so that the ball made it halfway up the Rose Bowl Bleachers as it passed three feet to the left of the goal post. Baggio could only watch helplessly as the Brazilians celebrated. One of the greatest players in his county’s history. And this is the moment history would remember him by.
For weeks, commentators lamented that if his kick had only been slightly to the right. If he had taken just a little bit off and placed it better. Years later however and Israeli psychologist would argue that the problem had not been anything to do with the execution of the kick. The problem was entirely about where he was aiming.
Michael Bar-Eli and his team of colleagues looked at decades of penalty kicks from various leagues. Their goal was to study an effect known as action bias, and what they found was stunning. Non surprisingly in all the kicks they analyzed, on third went left, one third went right, and one third went dead center. The data suggested that no matter which direction the keeper chose to move, they had about a one third chance of blocking the kick. Statistically speaking, they may as well just stay put every time. What they did, was quite different. 93.7% of the time, the keeper chose to dive either left or right. Why do keepers dive far more often than they should? Because diving is the norm. It is much less embarrassing to dive to the side – like everyone else – and watch the ball go into the opposite corner, than it does to stay rooted to the spot and watch the ball sail past.
The action bias that Bar-Eli and his team were studying is one of the most common human biases. The idea is that we feel better about our circumstances by doing something, than by doing nothing, even if doing nothing is the best course of action. We see this with lane changers in gridlock traffic, doctors prescribing countless tests when simple observation would suffice, and perhaps most commonly of all investment portfolios.
Trading volume refers to the number of shares of stock being traded on a particular day. It sees its highest spikes during market drops. Why? Do investors all the sudden know something they didn’t know yesterday – no. Did the CEO of the company get caught up in a scandal – hopefully no. Most of the time it comes down to simple action bias. Investors’ portfolios are dropping so they HAVE to do something! Let me give you a little tip. Quality investments are quality investments regardless of what the market is doing. Companies with positive cashflow, good growth prospects, and competent leadership, will still have all those things even if the market is dropping. If one of those (or many other factors) changes and it no longer looks like a quality investment, then sell it. But don’t get caught up in action bias and sell quality investments simply because you feel like you must do something. Learn to have the discipline to do nothing at all. Even when doing nothing, is the hardest thing to do.