In this superb guest post for the Collaborative Fund, Ted Lamade explains – using examples from sports and business – why teams with less talented players often triumph over teams comprised of superstars. The first interesting point that Ted makes – and you should pay close attention to this if you are, like many of us in Marcellus, a middle aged professional – is that as we get older, the gap between the best player and the average player narrows significantly: “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…As we age, it becomes increasingly clear that talent only gets us so far.” If you have any problem understanding this, think of the ageing Sachin Tendulkar or the ageing MS Dhoni or the ageing Kapil Dev.
The second thing that Ted highlights is what Michael Mauboussin calls the ‘Paradox of Skill’ i.e. “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.”
Anyone who has given a competitive exam or tried to get admission into a well known university intuitively understand this paradox: “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.”
So if you fancy yourself as a talented individual what should you do? How can you attain success in an increasingly competitive world? Ted’s recommendation has relevance for all of us but even more so for middle-aged professionals: “…keep pursuing what they love, but to seek out teams with great “locker rooms” to pursue them with. Doing so will give them a long lasting edge that isn’t talked about nearly enough.”
So what are teams with great “locker rooms”? Ted quotes celebrated ice hockey coach, Herb Brooks: ““The key to my recruiting was that I looked for people first, athletes second. I wanted people with sound value systems because you cannot buy values. You are only as good as your values. I learned early on that you do not put greatness into people…but somehow try to pull it out.””
Then for ordinary mortals like you and me, Ted contextualises what Herb Brooks is saying: “If you have ever played athletics, you know exactly what Brooks is talking about. A great locker room brings out the best in people. It elevates the true leaders, convinces those with selfish streaks to put them aside, and enables a team to play beyond their talent level. Most importantly, when things are not going well, a strong locker room is what allows you to look each other in the eye and know you are going to turn things around. When you are in one of these locker rooms, it is obvious. You can feel it.”
Ted goes on to give examples from the world of business of how companies with great locker rooms (as opposed to superstars) went to achieve great success. We will cite one of those examples here since in features an investor whose thinking has helped us enormously in Marcellus: “In business, a firm’s culture is its locker room and, I would argue, the most important determinant of long term success. Look no further than a discussion AirBnB founder Brian Chesky had with Peter Thiel. Chesky recounted that,
“After we closed our Series C with Peter Thiel in 2012, we invited him to our office. Half way through the conversation, I asked him what was the single most important piece of advice he had for us. He replied, ‘Don’t f*ck up the culture.’“”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
