Playing to win over the long term takes strategy - in investing and football
It’s my favorite time of year: college football playoff projection season. Anyone who meets me quickly learns that I am a die-hard college football fan. I played defensive line in the Big Ten for the University of Illinois in the late nineties and early 2000s and, believe it or not, we were a formidable foe back then. We were 2-1 against Ohio State, won the Big Ten Championship in 2001, and played LSU in the Sugar Bowl. Those were the good ol’ days.
The last decade, on the other hand, has been a bit rough for the Fighting Illini, but this year, with Bret Bielema as the new coach, things seem to be finally turning the corner. Sure, Illinois has lost some games where the fan base believed we were the front-runners, but they’ve also won some games where they were the underdogs. They beat number 7 ranked Penn State by two points in nine overtimes. (Yes, NINE). They also beat number 20 ranked Minnesota at Minnesota. I’d like to note that the last time Illinois had two road wins against top 20 teams was way back in 2001, back when I played. Okay, I may be touting and giving a history lesson on Illinois football, but I do have a point.
Illinois’ defense has been stellar over the last few weeks—which I’d argue is the reason for their recent victories. Their offense has been rough, however, except for the run game. This makes me think of a quote from Nick Saban where he said, “Good defense doesn’t beat good offense anymore.”1 Pondering the truth of that statement, I thought of my time playing at Illinois. I remembered how lucky I was to play for Illinois when we took on offensive schemes the likes of Tom Brady, Antwaan Randle El and Drew Brees. I thought about our victories and losses. After all this reminiscing, I realized I really don’t agree with Nick’s statement because, in all my daydreaming of my glory days, one thing stood out more than anything: it wasn’t just our quarterback, Kurt Kittner, that brought our success, it was also our defense. Arguably one of the best NFL coaches of all time, Bill Belichick, recently responded to Nick Saban’s quote and said, “We won a Super Bowl scoring 13 points. That’s not a bad thing.”2 It made me think of Illinois’ last victory against Minnesota, where they only scored 14 points. But more importantly, it made me think of what we do here at Frontier Asset Management.
You can probably tell I’m passionate about Illinois football, and I’d say I’m equally passionate about my job at Frontier and what we offer. Maybe it’s because my time playing for Illinois and working for Frontier have something in common: a defense first approach. Defense first – man, I love that. I played defense. I understand its purpose. I know how important it is to a football team, and I also know how valuable it is when investing. Everyone hates to lose. In football, the defensive scheme wants to give up as few yards as possible and force the opponent to give the ball back. By doing so, they have a better chance to add some points to the board because there is less distance to go to score. The team knows if they can control the field position and get the ball back in their territory, they likely have the best chance at scoring and controlling the game. I believe the same thing is true for investing, with the approach being to give up less return in down markets. I believe that by giving up less, there’s a higher probability to gain more in the end – and have a better chance of reaching the desired financial goals.
At Frontier, this defense-first philosophy of losing less to gain more is what we believe in. It’s called our Downside First Focus. And I’d argue that this approach helps create better outcomes for investors.
Players, fans, and investors hate to lose and prefer to win every single game, but remember, it’s the entire football season or investment time horizon that really matters. For a college football team, the focus should be on the net result of 12 to 15 games. For investors, the focus should be on the net result of their investing lifespan—whatever the time horizon may be. Sure, there may be some upsets or disappointments along the way, but the key to success requires focusing on the end game – and I believe defense is a critical factor in that success.
Sorry Nick Saban, I believe the best offense is still a good defense. And I think Bill would agree.