Hi,
Today I am going to talk about some important Investing lessons which I learnt watching Netflix’s The Playbook: A Coach’s Rules for Life”.
The series showcases some of the most legendary coaches, their history, their motivations and their philosophies about their game and life. Since I love basketball, I got intrigued by Glenn Anton Rivers, aka “Doc”. Doc is an American basketball coach and former player who is the head coach for the Los Angeles Clippers of the NBA. In his more than 20 year of coaching and earlier as a pro basketball player, couple of things struck out, which I could correlate to Investing:
Considering the depth of wisdom in the playbook, I have divided this into a 2-part series; today being the first part.
- “I am going to play” -That is what Doc used to call it, when he used to practice as a kid. Rather than treating the practice sessions as something which implied drudgery and lot of hard work, he considered it to be a play. Reminded me of Warren Buffett’s book “Tap dancing to work”. If you love your work, no day seems to be a workday, it seems to be an act of play!
- Focus & Compounding – Doc knew what he wanted to become, i.e. a professional basketball player at a fairly young age. If you know what you want to become a fairly young age, it gives you such an awesome advantage. Everything from then on compounds!
USD 100,000 invested every year for the next 10 years at 12% rate of return would give you USD 1.75 mln; if, however the time horizon increases to 20 years at the same rate of return, the 20th year value becomes USD 7.20 mln. For the more patient, who is ok to keep investing for 30 years, the amount becomes USD 24.13 mln. in the 30 year and 40th year value, ceteris paribus translates to USD 76.71 mln.
| Years | Amount (USD in millions) |
| 10th Year | 1.75 |
| 20th Year | 7.20 |
| 30th Year | 24.13 |
So, “n” in the formula Amount = Principal (1 + Rate of return) ^ Number of years, i.e. A = P (1 + r) ^n
Is more powerful than r.
After all, compounding is the 8th wonder of the world!!
I had talked about compounding in my 6th podcast series: What good question did you ask today. You may want to check it out.
- Just Finish the race – While Doc’s father was called by his class-teacher because Doc persisted that he wanted to become a pro basket-ball player and was not willing to lower his ambition. Doc’s father gave him an important lesson which stuck with him: Whichever path you choose, just finish the race. Being focused is the key lesson here!!
In most of the occasions, a company which is focused on one business achieves far more success as compared to a conglomerate. Did you know Eicher Motors had more than 15 businesses at one point in time before it divested almost all of them and just started to focus primarily on two-wheelers. This catapulted the company to become what it is today, enabling it to become profitable thereby creating enormous shareholder value subsequently.
Most conglomerates trade at a discount as compared to other single-minded focused peers in the same industry.
Hope you enjoyed listening to this!!
For more interesting topics, you may check out my website, www.jaagrav.com. If you want to reach out to me, you may email me at vikas@jaagrav.com
Thanks!