Even if you aren't a subscriber to Apple's Apple TV+ streaming service, you've probably still heard of one of its hit shows. Ted Lasso -- the fish-out-of-water story about an American football coach who finds himself in England as the skipper in a sport he knows nothing about -- just wrapped up its third season on the platform.
The show is known for the main character's aw-shucks personality, steady stream of silly and self-deprecating jokes, and underlying theme of optimism and hope. Star Jason Sudeikis describes it as "about two things Americans hate: soccer, and kindness."
Sure, it's corny. But it's hard not to appreciate the message in a world where division and negativity seem to garner so much attention. Any web search will deliver countless lists of the valuable leadership lessons throughout the show. But there are also plenty that investors can take away. Here are three of my favorites, with a little bit of the supporting science mixed in.
Image source: Getty Images.
1. Acknowledge your emotions, and have a plan to deal with them
Ted Lasso often seems unflappable in the face of angry fans, a backstabbing assistant, or struggles in his personal life. But bottling up those emotions takes a toll until he gets help confronting them.
In investing, emotions can be a formidable obstacle to making good decisions. Based on what Kahneman and Tversky called "prospect theory," losses will hurt more than gains. And studies by Stanford scientists confirm that the relevant region of the brain registers twice the reaction for negative outcomes as it does for positive ones.
One of the easiest ways to control your own emotions is to match your style of investing with your personality. If you are prone to snap decisions or changing your mind often, you might enjoy better returns simply buying an ETF with broad diversification, like the Vanguard S&P 500 (VOO -1.04%) or the Vanguard Total International Stock Index Fund (VXUS -0.22%). Making regular purchases and continuing to add over time eliminates the opportunity to let your emotions get the best of you.
For those with an even temperament and an interest in businesses, investing in a diversified group of individual companies might be the way to go. The key is recognizing how you are likely to react when facing painful losses.
This chart of historical drawdowns in different asset classes shows that, if you invest, you will eventually face them.
2. Don't confuse luck with skill
Sometimes gambling pays off. That doesn't mean the bet was wise. Stocks go up for all kinds of reasons, many of them unforeseen. And they go down for all kinds of reasons too. By prioritizing how the investment decision is made, an investor can develop a repeatable process rather than obsess over an unpredictable outcome.
It's also helpful in a sometimes random world. You aren't rewarded every time you do the right thing. Nor are you punished every time you make the wrong choice. It's best to focus on what you can control.
Similarly, coach Lasso doesn't dwell on wins and losses. He works hard each day to develop his players into better versions of themselves. After all, wins and losses are the outcomes of all the work that goes into preparing for and playing the game.
For investors, that means doing research, calculating future cash flows, anticipating new products, or poking holes in management's assumptions. It never hurts to get lucky. But as Lasso says, the harder you work, the luckier you get.
3. Accept that you might be wrong
For many, one of the hardest things to do is accept that they might be wrong. That's especially true if some part of their identity is tied to the belief.
But everyone has their own perspective. Different people may consider the same set of facts and reach different conclusions. That's why a stock like Tesla (TSLA -4.95%) can have so many sanguine shareholders and skeptical short-sellers at the same time.
Ted Lasso makes plenty of mistakes. But one of the central storylines was born from him giving the locker room equipment manager an opportunity to design plays as the team struggled. In the latest season, he dreams up a new offensive scheme, only to watch it fall flat. The team then flourishes when he lets someone else tweak the strategy.
This brings me to one of my favorite Lasso-isms. "A lot of times, the right idea is just hiding behind a couple of the wrong ones." It's usually by making mistakes and learning from them that we can ultimately adapt and achieve success.
But that requires accepting the mistakes to begin with. Psychologists have shown that some people are so incapable of acknowledging a mistake, that their perception of reality is actually distorted. Instead of seeing and hearing what exists, their brain alters it to conform to what they believe. This happens even in the face of overwhelming evidence.
It's hard to imagine succeeding in any walk of life with that approach -- and it's likely impossible as an investor.
