By Nyle Bayer, Helios Quantitative Research

I’ll be the first to admit; I did not watch many football games this year. Not for political reasons or any other reason than that at this point in my life, I have too many competing priorities on the weekend. To be specific, I have three of them, and their ages are ten, four, and two. However, like the 54 million viewers who tuned in to the AFC championship game, and the 44 million viewers who watched the NFC championship game earlier this month, I was miraculously able to finesse my way into witnessing the drama unfold on the gridiron.

If those viewership numbers sound high, it’s because they are. The NFC championship between the Rams and the Saints created a 13% increase in viewership over last year’s game, while the AFC championship between the Patriots and Chiefs garnered a 27% increase over last year’s AFC championship. Both games served as a ceremonial passing of the torch from one generation of quarterback to another, where the fresh faces of Patrick Mahomes and Jared Goff collided with the future Hall of Famers Tom Brady and Drew Brees. However, the battle of the generations didn’t stop at the quarterback position, it all found its way into the playbook of 33-year-old head coach of the Rams. Sean McVay, who by leading his team to the NFC championship victory, is now only one game away from becoming the youngest head coach to win a Super Bowl.

As an avid strategy enthusiast, Sean McVay is to me the most interesting variable in this playoff scenario. Football is a high stakes game of decision making, where a coach can distinctly diminish or amplify the accomplishments of a team more than any other sport.

In her book Thinking in Bets (it’s great, buy it), former poker professional Annie Duke highlights how quality decision making is more important than the quality of outcomes. If you google her biggest interviews, you’ll find she highlights another NFL coach, Pete Carroll of the Seattle Seahawks, who once made a high-quality decision which resulted in the worst outcome possible (losing Super Bowl XLIX). Due to the nature of that outcome, Carroll was ruthlessly criticized by the media and abandoned by fans.

From Duke’s book, “Pete Carroll was a victim of our tendency to equate the quality of a decision with the quality of its outcome.”

When analysts broke down Carroll’s decision-making process which resulted in a negative outcome, they learned that it had a high probability of success, and the unfortunate result had more to do with randomness than his coaching.

Sean McVay represents the next iteration of Pete Carroll. For him, quality decision-making means countless hours spent researching and mitigating any and all avoidable risks. Enter, Ted Rath, AKA the “Get Back Coach” whose sole purpose during games is “standing right behind Sean and ripping him out of the way when the official’s about to run into him just so we don’t get a penalty.” Don’t believe me? Just watch the clip embedded in the tweet below.

Clemson University recently won the College Football National Championship, and would you guess it? They have a Get Back Coach as well.

If success is derivative of quality decision-making, and outcomes are merely a function of reducing avoidable penalties such as walking into a referee on accident, then we should all consider who our own Get Back Coach is.

When it comes to investing, we know that our behavior is most likely our biggest enemy. Markets go up and down, and many times we lose peripheral vision and step straight into an avoidable setback such as changing our investments without a predetermined process.

At the beginning of 2016, the stock market experienced its largest loss to start the year for any year since WWII. Many investors were spooked and moved to more conservative investments. By the end of 2016 corporate earnings pulled out of six consecutive quarters of decline, and the positive movement resulted in a fast 10%+ rally in about 25 trading days. In a year that experienced a 10% drawdown, 2016 ended with about a 12% return and was only -1.4% off its all-time high.

Then 2017 happened, where US stocks posted nearly 22% returns with virtually zero volatility.

All of a sudden, conservative investors increased their risk tolerance only to compound the problem as 2018 began with a 7% rally, then lost 10% in what felt like overnight, the rallied back to a new all-time high in September, and then retreated to bear market territory by December.

Now investors are rethinking their risk tolerance for the third time in three years. Is this because they are not smart people? Not. At. All.

I would argue that it’s because they don’t have a Get Back Coach who ensures their strategy doesn’t deviate from their game plan.

In business I’ve learned that even though you can do the hard things right, it doesn’t matter if you can’t do the small things right too. Sean McVay understands this well. It doesn’t matter how good of a coach he is if he walks into the referee and gets a penalty. As simple as that sounds, it’s obviously hard for him to do on his own. Investors should think the same way.

It doesn’t matter how good a portfolios asset allocation is if the manager accidentally penalizes the returns in a way that is avoidable.

An investor’s Get Back Coach doesn’t exclusively have to be a person; it can be a financial plan, a predetermined risk appetite, a systematic approach to investing, an ongoing pursuit of self-development, or all of the above. For Sean McVay, he studied the tapes, learned from his mistakes, and hired someone to make sure he quite literally keeps in line. That’s what Annie Duke would consider quality decision making. Who’s your Get Back Coach?

Nyle Bayer, follow me on Twitter @nylebayer

This article was written by Nyle Bayer of Helios Quantitative Research, a participant in the ETF Strategist Channel.

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