The Art of Doing Nothing

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Saving a penalty kick is considered one of the most challenging feats in sports. The kicker stands 12 yards away and fires an 80mph shot at an oversized target. The odds are stacked against goalkeepers. And with milliseconds to react, it’s no surprise that 80% of all penalty kicks go in.

What would you do? If you’ve been watching the World Cup, you’ll notice a trend in goalkeeper’s strategies — they pick a side and dive. A group of researchers in Israel came up with a different strategy.

They analyzed a few hundred penalty kicks from the world’s top matches to get a general idea of how both the kicker and goalkeeper approach these crucial moments.

As for the kickers, shots were about evenly distributed across the left, middle, and right sides. Yet the goalkeepers dove left or right 94% of the time, rarely staying in the middle of the goal. Think about that - kickers were five times more likely to fire it down the middle than goalkeepers were to stay there.

The study found that by choosing to stay in the middle, a goalkeeper could expect to save 1 in 3 penalty kicks, over twice as many as if they dove to the left or right.

So if the odds say doing nothing is superior to everything else, why do goalkeepers dive almost every time? Because they don’t want to look bad. At least if you dive and it’s to the incorrect side you can say, “Oh well, I gave it my all and got unlucky.” Standing in the middle doesn’t look like giving it your all. It looks like you didn’t try, seemingly paralyzed by the pressure. And it feels awful to stay put while someone blasts a shot past you. Plus with diving, there’s the potential bonus of looking like a hero after making the save.

The term for this goalkeeper phenomenon is action bias. Humans have an impulse to act in order to gain a sense of control over a situation. Allowing a goal is perceived to be worse when it follows inaction rather than action. By taking action, we feel we’re improving an outcome. It’s why some people feel safer behind the wheel of their car than as a passenger on an airplane. Despite the fact we are nearly 100 times more likely to die in a car crash, hands on the wheel gives a sense of control.

In investing, a sense of control comes from tinkering with your portfolio when things get rocky. Our bias towards action tempts us to change something. Two common options are to sell their shares (action) or do nothing (inaction). If investors choose to do nothing and the decline continues, “not doing something” may be a tough pill to swallow. No one wants to be the financial advisor who tells a client they sat on their hands while that person’s portfolio was in freefall.

Today's conditions have investors wanting to change something. We're in a bear market, geopolitical risks are everywhere, and as always, the future is unknown. Losing money sucks and our bias toward action kicks in. Do you dive? Or do you stand still?

As Buffet said earlier this year, "These periods are never pleasant; they are also never permanent."

Long term investing is inherently boring. It’s too straightforward for people to take seriously, so they make it more complicated. There’s a very powerful idea in investing that there should be a correlation between effort and results. Because in most fields, there is. There are stories of Tiger Woods hitting a thousand golf balls at the driving range and Kobe Bryant refusing to leave the gym until he made 800 shots — an insane amount of effort that led to insane results. Investing just isn’t one of those areas. People want to take action with this idea that their actions will lead to better results.

We’re simply hardwired for action. And doing nothing in a bear market is uncomfortable in the same way staring down Ronaldo at the penalty spot is. But statistics say you’re better off staying put.

Easier said than done.

Sam

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