What Rick Barry and the Atlanta Falcons can teach us about risk management?

“Something about the crowd transforms the way you think” – Malcolm Gladwell – Revisionist History

With 4:45 remaining in Super Bowl LI, Matt Ryan, the Atlanta Falcons quarterback, threw a pass to Julio Jones who made an amazing catch. The play did not stand out because of the way the ball was thrown or the agility that Jones employed to make the catch, but due to the fact that the catch easily put the Falcons in field goal range very late in the game. That reception should have been the play of the game, but it was not. Instead, Tom Brady walked off the field with the MVP trophy and the Patriots celebrated yet another Super Bowl victory.

NBA basketball hall of famer Rick Barry shot close to 90% from the free throw line. What made him memorable was not just his free throw percentage or his hard fought play, but the way he shot the ball underhanded, “granny-style”, when taking free throws. Every basketball player, coach and fan clearly understands that the goal of a basketball game is to score the most points and win. Rick Barry, however, was one of the very few that understood it does not matter how you win but most importantly if you win.

The Atlanta Falcons crucial mistake and Rick Barry’s “granny” shooting style offer stark illustrations about how human beings guard their egos and at times do imprudent things in order to be viewed favorably by their peers and the public. It is this protective behavioral trait, rooted in the fear of being different, that frequently weighs on our ability to make decisions that are in our best interests. As equity markets climb to levels that have previously been associated with historic financial bubbles, and portend massive drawdowns, this article is another way of reminding investors that the ability to suppress the ego is needed if one is to mitigate the potential consequences of the current market bubble. As previously discussed in Limiting Losses, controlling drawdowns is paramount to compounding and long-term wealth accumulation.

Dan Quinn

The story of Super Bowl LI will go down as a miraculous comeback and one of the greatest games ever. It could have easily been a relatively boring blow-out, with the commercials and halftime attraction garnering the fans memories. When Julio Jones completed his astounding catch to give the Falcons a first down on the Patriots 23 yard line, Falcons coach Dan Quinn had a decision to make. It was not really a football decision but a basic judgement of risk and reward. He could conform to the conventional path and keep the drive alive in an effort to score a touchdown or he could have had quarterback Matt Ryan take a knee for three straight plays, force the Patriots to use their timeouts, and kick a field goal. With either decision, a score would have, in all likelihood, sealed a victory.