Inside the Corner - March 26
What Investors Can Learn from Sports – and This Month’s Portfolio Update
Today’s piece borrows a framework from elite sport to work through a couple of biases we’ve run into. And as always, there’s a Portfolio Update at the end.
But first, a quick note. It’s been exactly one year since we launched the paid tier, and we wanted to say a genuine thank you. We’re now at 3,500 total followers and 60 paid members — something we don’t take for granted.
While we’ve been quite busy over the past six months running two businesses, one of which was founded this January, things are now settling. Our next piece will be an update to our most-read Serial Acquirer writeup, and we’re hoping it’s something worth waiting for.
One heads-up: from the 1st of April, the annual price moves from $60 → $80. If you’ve been considering a paid membership, now is a good time to lock in the current rate.
Thanks again for being here.
All the best, Ole
What we learned about Investing from Sports
The Bench
A winning sports team rarely stays at the top forever. Over time, two things tend to happen: competitors catch up, or the players grow too comfortable.
Within any soccer team, there’s a starting eleven.. If those players feel their place is guaranteed, the small edges may start to slip — fewer extra sprints, a bit less intensity, slightly later mornings. Nothing dramatic, but it adds up. At the other extreme, you can turn over the entire squad with hungry players every season but lose the continuity that made the team strong in the first place.
The best teams strike a balance. They consistently introduce a few hungry new players each year, and suddenly the starting eleven has to earn their place again. The same applies to individual sports, where a deep pool of athletes pushing for limited spots forces even the best to go the extra mile, because their position is never secure.
I’ve seen this firsthand after years working in and competing in elite sport. And we believe applying the same lesson transfers well to portfolio construction.
Portfolio Allocation and Bias
If you’re newer to investing, it’s worth spending time understanding the biases you carry. They’re easy to underestimate early on, but you eventually realize they quietly shape almost every decision you make.
Two I’ve personally struggled with: the constant pull toward new ideas (“grass is greener on the other side”), and almost the opposite: constraining myself by thinking we always have to be long-term, even when something better exists.
This is where the sports lesson applies. My portfolio should have a bench.
The purpose isn’t to trade more. It’s to introduce competition.
A bench forces comparison: why have X% in this company, when another option looks better overall? And hopefully, works the other way too — a new idea wasn’t as strong as you thought, and your existing holdings may have had qualities you hadn’t fully appreciated.
When writing about Latour last week, it made me appreciate better how strong Investor AB’s governance is. No real key-man risk, succession already solved, a portfolio structured for stable cash flows across cycles, and the Wallenberg Foundations providing long-term continuity in ownership and strategy.
Without something to measure against, it’s easy to forget why you own what you own. Your best idea may already be in your portfolio.
How we apply the Bench in Practise
In practice, 90% of our portfolio is rarely replaced. But the last 10% change more frequently, we might introduce a handful of new companies in a year, but only a few survive longer than twelve months. There are many ways to invest, and this is simply what works for us. Your approach may look very different, and your strategy should reflect that.
How would you approach sizing up a new idea?
We’ve noticed that conviction tends to grow once we own a business — you read the reports differently, pay closer attention to how management communicates, notice things you’d otherwise skim past. So when we got interested in Kontron recently, we didn’t open at 1% with the intention of sizing up later. We opened at 1% because that is the right size for this stage — enough skin in the game to follow it seriously, not enough to be committed before we’ve seen them execute. With earnings next week, that’s a meaningful data point in deciding what comes next.
We’ve made the mistake of sizing up too early, we didn’t open at 1% with the intention of sizing up later.. The cost of that discipline is occasionally being slow to add into a great opportunity. We think that’s a worthwhile tradeoff — moving carefully means fewer large mistakes, and on the bench, that’s exactly the point. Most of these positions won’t make the cut. That's exactly what the bench is for.
If you find interest in the topics discussed above, you would probably love the book: What I learned about investing from Darwin, by Pulak Parsad. If you’re too busy for that, check out his very quick lesson summary in half a minute below.