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Investing Lessons Learned From Watching Lance Go


Mmmm, Lance!

Perhaps it is because I once tried my hand at cycle racing that I find Lance Armstrong's efforts on the Tour de France so inspirational. Greg LeMond, who wasn't a particular credit to his sport, was my first cycling hero. He was followed by a few mountain bikers. But Lance's epic performances (particularly in 2003) in the Tour go beyond all of that.

I don't know how many of you follow the Tour or if you do, how many of you realize how closely it parallels the world of investing. I found this year's event to have some specifically compelling parallels I thought I'd share to illuminate the differences between amateur and champion investors. These are in no particular order, except for the last one.

Training is a year-round occupation
Lance trains all year long whereas most of his opponents only train just prior to the race. The physical training is just part of it. He also trains mentally for the race by a fanatical attention to detail. Average investors work very hard on developing a strategy or performing initial research in the few weeks leading up to taking the initial position. After the trade or strategy is implemented, the average investor coasts, thinking the work is done. The champion investor knows the work is only just beginning. To steal a phrase from my first real boss, the first 95% of the work is done before the trade is triggered. After that comes the second 95% of the work to make the trade profitable.

You need a good team, focused on a single goal
Lance Armstrong surrounded himself with great people and treated them well. From the team manager to the riders to their support team, all were focused on the goal of winning the yellow jersey. The investing business is hard and getting harder every day. Average investors surround themselves with other people. Champion investors surround themselves with a great team, all focused on one goal.

Look forward to success on the uphill path
It is impossible to win the Tour without doing well in the mountains. Mountain stages are the most physically demanding, demoralizing the average rider. Lance looked forward to mountain stages because his superior preparation gave him an advantage. For professionals and nearly all non-professionals, outperformance is your goal. Your best chance to outperform the market is when it turns ugly - when the road in front shoots straight uphill and everyone else is demoralized. Amateur investors can only make money on the flat and downhill stretches because that is the only thing they prepared for. Champion investors prepare for the uphill legs, knowing that is where real opportunity lies.

Personal integrity gets you ahead
I find the sportsmanship on display in nearly every stage of the Tour fascinating. Lance's main rival goes off the road on a downhill segment. Lance not only slows himself, but demands the group he was riding with at the front slow as well. His rival returns to the group, obviously shaken. When he recovers, Lance resumes the race. When Lance went down himself, the very same rival acted in exactly the same manner. In the investment business, lack of personal integrity will catch up with you - regardless of how much coin you bank. The lure of money promotes an overdeveloped ability to rationalize sketchy behavior in our business. A strong track record of personal integrity will pay dividends in the long run and is a hallmark of champion investors.

When the team falters, it's your responsibility to win anyway
In this Tour, the conventional wisdom is that Lance's Discovery Channel team faltered twice. I believe it was a race tactic, but that's not the point I want to make here. Those of us who have primary responsibility for things need to understand even the best team will not always perform miracles. Sometimes the miracles need to come from the top banana. Average investors fold when their group folds. Champion investors know this is the time to validate your team's prior efforts by getting the job done solo.

Humility and grace
For all of Lance's press to the contrary, he is a gracious and complimentary participant regardless of where he crosses the finish line. How many people do you know who would remain humble after posting top-of-class returns three years in a row? Five years? Seven years? I submit only a champion investor would have a chance to make it seven straight in the first place because an average investor would distract him/herself crowing about the third straight "victory." The one consistent factor in the market is its ability to embarrass those who gloat too much about returns. I've watched too many gloaters get dismantled to discount the value of humility and grace - especially when on a winning streak.

When you've done enough, hang 'em up
Lance likely has one or two more yellow jerseys in him, particularly with a strong team. He hung it up early, in my view, because he had little left to accomplish. What could balance the thrill of being the best at something in the world? Spending more time with his son and twin daughters. He decided the challenges of being a father and his charitable organizations were more interesting than a 2000+ mile, four-week cycling race against the best cyclists on the planet. The rough analogy to our business is when you've made "enough" money. At some point, the hours you spend making your n+1 million could be better spent. What's better? Most families could use the parents around more often. Most neighborhoods, cities, counties, states, and nations could use the assistance of very smart people with some spare time on their hands. I think the best hallmark of a champion investor is understanding when to hang it up.
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