Investing Lessons From Brazilian Jiu-Jitsu

You can become a better investor by studying fields outside of investing. People study psychology, history, politics and other fields.

Jiu Jitsu impacts all areas of a practitioner’s life.

Long term thread on the common lessons between Brazilian Jiu Jitsu and investing. Over time, pieces will be added.

Capacity to suffer predicts long term success:

In Brazilian Jiu-Jitsu, your progress comes from training frequency and consistency. Inevitably you will become injured. Your ability to adapt around and manage injuries keeps you in the game. And you have to train consistently, including the days when you’re hurt and don’t feel like it.

In investing, your capacity to suffer directly correlates to your ability to hold positions that compound over long periods of time. The more you can bear short term losses, the more you can endure looking foolish to others, the better your ability to hold positions and the better your long term outcomes.

Compounding growth is slow, almost imperceptible:

Progress in BJJ accrues slowly. Per beltchecker.com’s database, it takes on average over 12 years for someone to earn a black belt. Skills accrue slowly. Variation in performance varies widely day to day and week to week. Sometimes you’re sick. Sometimes you’re working on a weaker part of your game by fighting from your back or by intentionally putting yourself in bad positions. These are good training ideas, but the long term benefits are obscured by short term variation.

Long term investment returns also accrue slowly. An investor who can earn 15% per year for 25 years would be one of the best in history. That equates to 0.038% per day. Over short time frames, such as a day or a week that is imperceptible. Combine it with short term variability. The stock market can easily go up or down 2% in a day. Short term variation drowns out the visibility of short term progress.

Quality execution of fundamentals (under stress) wins

“A genius is the man who can do the average thing when everyone else around him is losing his mind.” — Attributed to Napoleon

Both investors and Brazilian Jiu Jitsu practitioners are naturally drawn to the exotic, and the complex. However, in both cases, much of success is driven by more basic fundamentals.

Jeff Shaw in conjunction with USGrappling examined over 3900 grappling matches from 2015–2017 to understand the most common and successful submission holds. About 10 submission holds account for most finishes. While gogoplatas look cool, only 3 matches out of nearly 4,000 were finished with a gogoplata. In contrast, over 1,000 were finished with an armbar. Over 300 were finished with a rear naked choke.

Executing basic fundamental movements with precise detail is supremely important in grappling. Importantly, you have to be able to do it under stress. It’s one thing, doing the right details against a passive partner. It’s entirely different under stress against someone who is actively attacking you.

The same idea applies in investing. Executing relatively fundamental ideas with precise detail and high quality determines much of your outcome. Hurried decision making under duress is usually bad decision making. Advance contingency planning, premortems, rehearsals and other training techniques increase an investor’s ability to execute these fundamentals at the most important time: when under stress.

Your strategy should be individualized to your attributes and circumstances:

“When someone’s a complete beginner (in jiujitsu) most of the questions . . have an obvious right or wrong answer.” The higher you go the less that is the case. Many of the answers you give depend on your individuality as an athlete and the context you’re in” -John Danaher

Investors have different attributes, strengths and weaknesses. A $100 billion public pension plan has scale to customize portfolios, negotiate fees, and to internalize certain investment functions to reduce costs further. A $1 billion endowment has little of those advantages. However, that $100 billion public pension plan must deploy enormous amounts of capital. A small endowment can invest in many strategies that are sub scale for its larger peer. A small investor can often act with far greater agility because it usually has a smaller organization with fewer layers. The optimal strategy for a $100 billion public pension plan has few overlapping attributes with an endowment 1% of its size. The difference in tactics between these two types of institutions leads to an investing game that often doesn’t even resemble the same sport.

In grappling, a featherweight and a heavyweight have the same repertoire and knowledge base. However, tactics and techniques vary. At the advanced level, movements are taught with different adaptations for body type, and historical injuries. Individualization also occurs based on athletes’ skills and preferences. Individual athletes become known for sequences and systems of attack that are “his game” or “her game.” Just as a small investor shouldn’t imitate the strategy of an investor 100 times its size, athletes should seek to develop and play their own game.