Investing is Not a Game of Perfect

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When I was a freshman in high school, my golf coach was 82 years old. He was also the baseball coach, which tells you something about the size of our school. On the day I made the varsity team, he walked over to me before our practice round and said, "Ian, I'm going to play with you today. And I'm going to play one-handed. I bet I can beat you."

I shot a 92. About ten strokes worse than my normal round.

He shot an 89. With one arm.

After we walked off the eighteenth, he looked at me and said something I've thought about for thirty years. "I knew I had you the second I said it. I saw it in your eyes on the first tee. You were thinking, there's no way I can let an 82-year-old man beat me with one arm. If I'd kept my mouth shut, you'd have beat me nine times out of ten. But I got in your head. This is a mental game."

A year before that round, in 1995, a sports psychologist named Bob Rotella published a book called Golf Is Not a Game of Perfect. I didn't read it until 2020, when another investor sent it to me in the mail. By then I'd been picking microcap stocks full-time for over a decade, and I'd accumulated the kind of scar tissue that only comes from having your own money on the line for that long.

The book is ostensibly about golf. But on almost every page you can cross out the word "golfer" and write in "investor," and the sentence still works. Rotella himself uses the language of risk, reward, and margin for error. Most great books about one thing turn out to be great books about something else.

This book is about golf and investing.

Here's the central idea, and I think it's the most important sentence anyone actively managing a portfolio will ever read:

The professional golfers Rotella worked with, and we're talking about players with hundreds of tournament wins, and dozens of majors combined. Those golfers, the best in the world, could remember only a handful of times when they felt they played their best in two out of four rounds of a tournament they won.

Read that again.

These are the best in the world. They win by playing badly less often than the other guy. They win ugly.

There's a story in the book that captures this. Tom Kite and Rotella were playing a casual round with two University of Texas golfers, ranked third and fourth on their college team. They all shot within a stroke or two of each other. Afterward, one of the kids said, "Tom, we hit it as well as you did today. When you missed a green, we got it up and down too. Why are you the leading money winner in PGA Tour history and we're number three and four on a college team?"

Kite's answer: "When you guys play in a tournament, you'll lose your concentration on four or five shots a round. Over four days, that's sixteen to twenty strokes. That's the difference between being #1 in the world and losing your tour card."

That's it. That's the whole game.

Most investors I know spend their lives looking for the next great winner. They want the home run, the ten-bagger, the trade that changes their life. And those matter. Over a forty year career, you might have ten or twenty companies that produce ninety percent of your gains. But the difference between a great career and a forgettable one isn't the winners. It's how you handle the rest. The hundreds of imperfect ideas. The mistakes you don't compound into worse mistakes. The four or five moments a year when you almost did something stupid and didn't.

I look at my portfolio every day with two questions. Which of these is the next big winner? And just as important, which of these are the losers I haven't yet identified? The hundreds of stocks that quietly drain your time and capital aren't the dramatic blow-ups. They're the slow disappointments you should have cut a year earlier. Those are the bad shots that turn into double bogeys. They take you mentally out of the game, and then you bogey the next hole by playing too aggressive trying to make up for past mistakes. 

Rotella spends a lot of time on the pre-shot routine. The pros, he says, don't think about mechanics during the round. They think about target and swing. Target and swing. No overthinking. All the grinding, the technical adjustments, the practice happens on the range, not on the course. By the time they're on the course standing over the ball, the decision is already made.

I think the equivalent in investing is a consistent due diligence process. Not necessarily a rigid checklist that locks you in, but a way of looking at the world that you've sharpened over decades. The ability to benchmark a new idea against everything you've seen before, in roughly the same way, every time. After enough reps, you don't need six months and eighty-five expert calls to know whether something is interesting. You usually know in thirty minutes.

That sounds reckless. It isn't. The thirty minutes are sitting on top of twenty years of looking at companies. The pre-shot routine is short because the practice was long.

What's underneath the routine is even less glamorous. Raymond Floyd said that if you want to be a great golfer, practice six-foot putts. Get really good at six-foot putts. The short game is seventy percent of the score, and almost no amateur practices it, because hitting drivers is more fun than rolling the same short putt two hundred times in a row.

The investing equivalent is reading financial statements. Learning accounting. Understanding how different industries actually make money. It's boring, and most people will find a thousand reasons to skip it. But you cannot fake your way past the six-foot putt. Either you sink it or you don't. Mastering anything requires mastering the basics. 

The other thing Rotella teaches is confidence isn't optional.

There's a passage where he talks about hot streaks. Most golfers, when they string together a few great rounds, tell themselves they got lucky. They wait for it to end. Rotella's point is that the hot streak is your true ability. The bad rounds are the noise. What you're doing when everything clicks isn't an accident. 

I've had stretches in investing where two or three positions ran at once and I caught myself thinking, that was lucky. I don’t think that way anymore. If I did the work. If I formed independent conviction and held through volatility and the thesis played out, that wasn't luck.

A hot streak is the best version of you. It’s God giving you a glimpse of who you actually are when you mentally get out of the way.

Imposter syndrome after a few wins is the same disease as overconfidence after one. Both pull you off-center.

Which brings me to the hardest part. The longer you stay in this game, the more scar tissue you accumulate. You took a brutal loss in 2008 and never quite trust a balance sheet again. You sold a stock that ten-bagged after you walked away. The wins start to look like luck and the losses start to look like character flaws. So you tighten up. You take less risk. You stop swinging.

The way I try to manage it is the way Rotella suggests managing a bad round: don't let the early holes jerk your strings. After a big win, when you're feeling like a genius, go on a vacation. Take time to come back down to Earth before the market does it for you. After a big loss, when I'm second-guessing every decision, same thing. The vacation is cheaper than the dumb trade I'd have made instead. You don't make good decisions at the top of the confidence band or the bottom of it. You want to be in the middle.

And whatever you do, stop looking at other people's scoreboards. Comparing your worst quarter to someone else's best is the most toxic thing you can do to yourself in this business. They're playing a different game. We all win and lose at different times. Find your own swing. Your swing is your fingerprint, and the long-term compounding is the only thing that decides whether the art form was beautiful or ugly. Jim Furyk's swing looks like a man falling down a staircase. He's won seventeen tournaments on tour.

The last line of Rotella's book is the one that's stayed with me the longest. He writes that even at our best, we will never come close to mastering this game. In the end, you'll realize you love golf because of what it teaches you about yourself.

Same with investing. The market is the most expensive psychiatrist's couch you'll ever sit on, and it will tell you more about who you are than any therapist could. Five years in, you'll start to see it. Twenty years in, you can't unsee it.

Investing is not a game of perfect. None of the companies are perfect. None of the decisions are perfect. None of us are perfect. The freedom is in admitting this on the first tee and swinging anyway.

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