07 September 2021 · Issue #924 · View online
I have played on a lot of teams in my life. Along the way, there have been a number of winning seasons, but just a few that ended with a championship.
The winning seasons were nearly always a matter of talent. If we had more of it, we typically won more than we lost. If we had less, we did not.
Since talent tends to be the defining factor in most competitive pursuits, this should not come as a surprise. What is less obvious, however, is what drove those special championship seasons.
When I played little league baseball, football, and hockey growing up, the gap between the best and the worst players was enormous. Some kids could barely swing a bat, throw a ball, or skate, while other kids could hit a curveball, throw a perfect spiral, and/or skate backwards with ease.
As I got older though, the gap narrowed….a lot. Many of the weaker players quit and some of the best players regressed, but the biggest difference was that the competition increased dramatically as those who kept playing got better and a crop of talented younger players kept emerging.
This pattern happens in nearly every sport and each generation. Just look at U.S. swimming legend Michael Phelps. At his peak, he held close to 30 world records.
Today, just a decade later, that number is down to 4, including just 1 individual record. I did not give this dynamic much consideration when I was younger, but it is something I think about a lot as an adult.
As we age, it becomes increasingly clear that talent only gets us so far. Whether it is in sports, school, business, investing, or countless other competitive pursuits, the increase in the concentration of talent makes it more difficult to differentiate ourselves on talent alone.
Look no further than Harvard’s class of 2024 class. Among its 29,000 applicants, it included 8,500 perfect GPAs, 3,500 perfect SAT math scores, and 2,700 perfect SAT verbal scores, despite the fact that Harvard only accepted ~1,700 students.
Or at the fact that there are over 12,000 college football players in a given year who are all heavier, faster, and stronger than the vast majority of the players that came before them, yet still only ~200 will be drafted into the NFL (~1.6%). Intelligence and athleticism at the highest levels are no longer enough.
This creates an interesting dilemma. While someone may be improving on an absolute basis, they are often getting worse relative to their competition.
Michael Mauboussin refers to this concept as the “Paradox of Skill”, which simply means that even though people may becoming more skilled at a certain pursuit, it is often more difficult for them to succeed because their competition is also becoming more skilled.
This means that eventually the most talented people end up competing against one another, making it very difficult to become a bonafide superstar. Hence the paradox.
Given this reality, what should talented people in competitive industries do?Mauboussin suggests they should “pursue easier games”. Intuitively, this advice makes a lot of sense. If you seek out less talented people to compete against, your chances of success should increase.
But what if there are no easier games to play? Or, what if you are not able to or want to play a different game?
If I told one of my sons to quit playing soccer, lacrosse, or flag football and go play tiddlywinks because they would have a better chance of being a star, they would tell me to go pound sand. The same goes for public equity investors.
Sure, there might be less competition selling residential real estate, coaching football, or investing in private companies in more remote parts of the world, but are these types of options realistic or desirable? For many, I would guess not.
So, if either my sons or a public equity investor were to recognize that talent alone may not be enough, easier games are not a realistic option, and/or they want to keep playing their current games despite the challenge, what would I tell them?
*Feature post photo credit: Ciel Cheng on Unsplash