As I sat watching the final round of the 2020 US Open on Sunday, I was struck by the reaction on social media to what we were collectively watching. In case you didn’t watch, Bryson DeChambeau won his first professional major. The issue wasn’t that he won (he was a highly ranked amateur and now top 10 in the world as a professional) but rather how he won it. He won by following a formula of hitting the ball as far as he possibly can off the tee and trying to overpower the golf course. He laid this formula out earlier in the week and was met by snickers from naysayers.
Responses were basically to laugh at this strategy and predict failure (MC=Missed Cut for non-golfers reading this)
The reaction after he won the tournament was pearl clutching of the highest order. “The ball goes too far!” “The equipment is too technologically advanced!” “The course is no longer challenging the best in the world!” These were all themes I saw parroted across social media yesterday. I think this has more to do with reaction to who won (Bryson) rather than the facts. For example, Tiger won the 2000 US Open at Pebble Beach in much the same way. Jack Nicklaus was the best player on the planet for 10-12 years in no small part because he hit the ball so far. Bryson is quirky…like a mad scientist. He plays rather slowly and that turns a lot of people off.
But what I didn’t see in the initial reaction to Bryson’s victory was how he got to that point and why. It all started with the publication of Mark Broadie’s seminal book Every Shot Counts in 2014. Basically Mark discovered using data that the winningest professional golfers were more often than not the best drivers of the golf ball. They tended to hit the ball the farthest off the tee and, thus, had the shortest second shots to the greens. While this may not seem revolutionary it was at odds with the conventional wisdom taught to golfers for decades.
When I grew up playing and learning the game it was common to hear things like “Drive for show and putt for dough”, “Swing slow and steady to control the club”, “Layup to your favorite yardage”. Broadie’s research based on millions of shots hit on the PGA Tour proved these statements to be false or at least not entirely accurate. The truth is the longest and best drivers generally perform best over a large sample size. The players whose swings generate the most clubhead speed hit the balls longest. And getting the ball closest to the hole should almost always be the goal rather than laying up to a certain yardage.
So what did Bryson do? He digested the data in Broadie’s book and realized that his goal should be to hit the ball as far as physically possible. He used data to inform his improvement decisions. He decided to bulk up and add considerable strength and weight to his frame (ultimately adding 40 lbs of weight). He made a conscious effort to practice swinging as hard and fast as he could. And the results followed. He has won twice since the PGA Tour restart in June 2020. He jumped from 34th in 2019 to 1st in 2020 in measured driving distance. He has rocketed up the Official World Golf Rankings from 14th in late 2019 to 5th currently. A pretty good improvement in the highly competitive world of professional sports.
And golf is not alone in embracing the data…all sports league teams now have internal teams whose sole job is to research and analyze data. This data helps the teams determine trends and make the best decisions they can with the information they have at their fingertips.
Data and Investing
So what does this have to do with business or financial planning you ask? Well plenty in my opinion. There has been a similar shift in thinking about investing and markets. Anecdotes and narratives no longer make as much sense when thinking of where to allocate your hard earned money. The data should dictate that decision. The data tells us that the longer one is invested the less likely a fund manager is to beat their respective market index. Few will, MOST won’t. And identifying the few that will ahead of time is virtually impossible.
If we accept ahead of time that beating the market over the long term is extremely difficult at best we can simply embrace market returns by investing in funds and ETFs that mirror those indexes. It’s one less thing we have to worry about. The market index will do whatever it will do and we, as investors, will return as close to that index as possible (after minimizing expenses). It frees us up as planners to focus on the really important things: What are our client’s goals? What are their risk tolerances? When will they need to access their saved funds? Questions that really impact the lives and finances of our clients and their families.
Up until about 10 years ago, the investment world was full of big name fund managers. They were treated like rock stars with magazine covers, TV interviews and salaries and benefits commensurate with that status. While there are still good fund managers out there the data has told us that there are far fewer of them than we once believed. The numbers don’t lie. Beating market indexes is incredibly difficult. Of course there are some very smart, very savvy fund managers on Wall Street and beyond. But even with all of their smarts the data tells the story….beating market returns is next to impossible.
The data tells the truth.
Lessons I and millions of other golfers had learned were incorrect. Narratives and anecdotes are simply no match for the data. Embrace the data and make better informed decisions. This is true in investing just as much as it is in sports. If this approach sounds appealing to you, please contact us to discuss our planning processes and methods.