Improving performance through the aggregation of marginal gains

Inspiration from the British Olympic Cycling Team

What a summer in the UK. The inspiration from the Olympics still lives on permeating its way into ways that we can improve our every day lives. BpH Partner, Simon Brown looks at how ‘marginal gains’ underpinned the success of the British Olympic Cycling team and how it compares to creating investment success.

Not only was I inspired by our incredible summer of sport in the UK, I’ve found the post event coverage analysing the success of our hugely successful Olympic Cycling team fascinating, particularly that relating to Dave Brailsford, their performance director. There was much speculation in the media (as always) about what was contributing to the team’s success. Brailsford’s French counterpart even said it was due to magic wheels, but there was no magic; instead there was an incredible master plan based on the theory of “marginal gains”. The success was not by accident.

In an interview with BBC Sport Brailsford said:

The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together. There’s fitness and conditioning, of course, but there are other things that might seem on the periphery, like sleeping in the right position, having the same pillow when you are away and training in different places. Do you really know how to clean your hands? Without leaving the bits between your fingers? If you do things like that properly, you will get ill a little bit less. They’re tiny things but if you clump them together it makes a big difference.

The plan was to improve performance through the aggregation of marginal gains. The belief being that the sum of many small improvements is a big performance leap.

Scientific examination

So British Cycling’s sports scientists and engineers harness an athlete’s raw talent by examining every single physical, psychological and mechanical factor that contributes to achieving peak performance on a bike – and seeking to improve them all by a small amount. This means hours of training in wind tunnels to perfect the most aerodynamic position; wearing muscle-warming “hot-pants” between races; using lightweight track tyres on the road; and taking your own mattress, pillow and chairs with you so that you can sleep and relax in familiar surroundings that are good for your posture and health.

The cyclists don’t have to worry about anything but cycling, their focus solely on their own unique ability.

How does this apply to investment success?

Just as the “marginal gains” theory goes beyond the athlete to look at the whole cycling life experience we need to do that in our investment lives too.

First of all it’s about having a financial master plan, one that focuses on all the elements that you can control and thereby make incremental improvements along the way. It would be a waste of time just to chase out performance which would be down to luck and an overall losers’ game.

Then if we breakdown the key things we need to consider when investing:

  • Life goals and objectives and your associated time horizons and income requirements
  • An investment strategy that encompasses the whole market and not today’s best performing part
  • Controlling emotions when markets rise and fall, when you win or lose, a long term focus has more chance of success
  • Training your portfolios to tilt towards dimensions of higher expected return. In any given period, the additional gain derived from this tilt might be small, or even negative, but over an investment lifetime these dimensions have repeatedly helped investors achieve better returns
  • Keeping the overall cost of investing and tax liabilities low. Just as our cycling gold medalists wear streamlined all-in-one track-racing suits rather than the traditional pocketed jersey and shorts which can cause aerodynamic drag, fees and expenses do the same as the pocketed jersey and drag on net investment performance.

It’s the attention to all the details no matter how slight that over the long-term, contribute to the difference between success and failure and that give you a more balanced approach to both cycling and investing.
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