The NBA & Match Quality

The best NBA teams are the best investors. They understand where they get the most return on their investments and choose to go all-in.

From the 2013-14 season through the end of the 2017-18 season, the two most valuable areas to shoot from were within a few feet from the rim and right around the 3-point line.

A 3-point shot is worth 50% more than an 8 foot jumper despite the 8-footer going in less than 4% more often.
Total points divided by total shots = Points per shot.
Clearly, shots within the restricted area and the corner 3 are the best investments for an NBA offense.

Playing the law of percentages, NBA players would be foolish to shoot in less-efficient areas of the court. They choose to invest in areas that provide better returns than others.

An NBA game looks significantly different now than it did at the start of the 21st century.

As this message has made its way down from the quant office and into the hands of today’s players, they’ve changed their on-court behavior patterns. These changes can be understood with an idea from economists.

Match quality is the term economists use to describe how the work a person does matches who they are. I first learned of this idea in David Epstein’s latest book, Range, and I see its application in this discussion of the NBA.

Since the NBA introduced the 3-point line in 1979, players have gradually shifted their skill sets to get the best results in The Association. If you can get to the rim and drain three-pointers, you “match” the needs of your environment and will likely be compensated in accordance with that match.

Think about the legends of the game. Mikan, Chamberlain, Robertson, Alcindor (Abdul-Jabbar if you’re not a Bucks fan). They all earned their legendary status by dominating defenders with their back to the basket.

In contrast, today’s best players are a different breed. The best players in the game spend the majority of their time hovering around the court’s suburbs. Last year’s MVP, Giannis Antetokounmpo, added a 3-point shot to further his dominance. That wouldn’t have been a thought for the greats of yesteryear.

The game has changed. The game’s best match their skill sets to the demands of the game.

In a highly specialized industry (like the NBA), workers benefit from extremely high match quality. Each off-season, the league’s general managers make that known by paying a premium for a stretch five or a 3-and-D wing that would have been a role player two decades ago.

NBA players can improve match quality in two ways: 1) doing more of what will get them the best results or 2) improving their ability to score from in-demand spots on the floor. And a funny thing happens when you are able to do what the industry wants: your playing time and bank account tend to get bigger. Funny how that works.

All images in this post come from Kirk Goldsberry’s book, Sprawlball.

Rhinophobia: Why Humans Don’t Like Having Extra

No, Rhinophobia isn’t the fear of rhinos.

It’s not even a general term describing the fear of animals you’ll find in the safari.

Instead, rhinophobia describes a psychological state of investors. It’s a term that is rooted in Wall Street but has enormous implications for everyday life when applied broadly.

I first learned about rhinophobia in Buffett: The Making of an American Capitalist. (Which is a marvelous biography, by the way.)

To provide context, Warren Buffett had made some good financial decisions and accumulated cash. A lot of cash. More cash than you or I have probably ever conceived of.

When you have a lot of cash, a natural question arises.

“What should I do with all of this?”

Enter Buffett’s own rhinophobia.

With the stock market soaring, Buffett (who was just buying his last Coca-Cola shares) was on the sidelines there, too. But he needed someplace to put his cash. And this had become a much tougher problem with Berkshire’s greater size. Ever since the early years of the Buffett Partnership, Buffett had been prophesying the day when the law of averages would finally catch him — prophesying it, yet somehow putting it off. But as he warned his stockholders, “A high growth rate eventually forges its own anchor.” To have any chance of continuing his gravity-defying act he had to put his money to work.

Such a compulsion to invest can be dangerous. It has been wittily defined as rhinophobia, an investors’ disease meaning “the dread of ever having any cash.” Buffett admitted to such feelings; having cash around was “an enormous temptation.”

There is an itch that comes about, and I get it, I confess. There is an itch to do things, particularly when you haven’t done anything in a while.

Why would Warren Buffett and all the investors around the globe occasionally loathe cash?

To them, cash is a signal that they should make another investment.

Step inside their shoes.

They just made a smart business decision. As a result, they made millions of dollars. The new money is theirs to work with as they please, and they all have a bias to action. They want to put that money to work for them.

What happens when there aren’t any prospects out there that intrigue them? Will they hold out, or make an investment into a company they’re not entirely sold on? If they hold out, how long will they be able to as the effects of rhinophobia eat at them?

Rhinophobia is addressing the human trait of impatience. It’s putting a term on our natural tendency to want to do something. Anything.

Investors dread having cash because they want to do things. They want to purchase stocks, make deals, do investor things. Yet they know a fundamental truth.

There won’t automatically be a slam dunk investment at the exact moment you acquire the cash. At this moment, the investor needs to decide whether he will choose to just do something or if he will find the right opportunity.

Will the investor wait to find the right opportunity or will he investor grow impatient and make an investment to satisfy their craving for action? It seems easy to make the right decision now, but things are more complicated when you’re the one with the decision-making power.

At the end of it all, rhinophobia comes down to patience. If an investor can feel the weight of rhinophobia and make the mature decision to exhibit patience, they will be much more likely to succeed in the future. If they can’t, they’re more likely to fail.

Rhinophobia and Your Life

As I mentioned earlier, I believe that rhinophobia isn’t isolated to investing. Instead, it’s a useful mental model that will help you make better decisions.

You may have already begun to see how rhinophobia could apply to your life.

The #1 way I see rhinophobia applied to our life is through it’s application to excess time. We all feel busy, but what if we simply don’t know how to handle extra time?

The Dread of Excess Time

We live in a world without boredom.

Any moment of time can be filled by scrolling through our phones. The moments that used to invite boredom — waiting in line at the grocery store, standing curbside for the bus, riding through open country — are now filled with pictures, tweets, posts, podcasts, and feeds that are engineered to keep us scrolling.

We’ve been sold on a lie that every moment of our day needs to be filled with something. We can’t imagine a moment where we are just alone with our own thoughts. Time to decompress. Time to truly recharge.

Rhinophobia — in this context — refers to our internal urge to do something with my time. If we have any extra time in my days, we must find something to fill it with. Most of us turn to social media feeds, but it’s dependent on the individual. On a personal level, my boredom urge is to open up Pocket and read through blog articles I’ve saved from across the web.

Since we feel this inner unrest to do something with our time, we have choices to make.

Like the wise investor, we can choose to wait out for something worthwhile. We fought hard to have extra time in our day. We shouldn’t be so ready to give that away.

Conversely, we can choose to give ourselves to anything that seems remotely interesting. To stay on the topic of social media, do you close out your nights with a final scroll through the Big Three — Facebook, Twitter, Instagram? You know, just gotta make sure you didn’t miss something BIG before you go to bed, right?

But it’s not just social media. We can choose to give our time to plenty of poor options simply because we feel we must do something with the leftover time we have. TV (The average American watches 5 hours per day, apparently), various supbar causes, unnecessary meetings, addicting iPhone games, and infinite other things.

I would like to propose a better way.

We must be slow to give away our most valuable resource. In a world that is fighting for our time and attention, we must decide what to give our time to.

If you’re giving too much time to social media, start by deleting the apps off of your phone.

If you get sucked into commitments that you later dread, take a commitment vacation. It gives you an excuse to say no.

If you spend too much time watching meaningless content on glowing boxes, pick up a book — a real book — that interests you and read it. One side benefit is that you might actually learn something useful.

It comes down to identifying the right thing to invest in. Think of your time like the investor would money in the stock market. Find the right fit for you. It’s either a resounding yes or a no. If the right fit doesn’t exist, do not give away your resources.

Because the worst thing that could happen is for the right opportunity to finally arise and you don’t have the resources to invest.