UNIQUELY UNCONVENTIONAL

In 2005, the Philadelphia Eagles were playing in their second Super Bowl in franchise history. After falling one game short the prior three seasons, it was head coach Andy Reid’s first. At the time, Reid was widely considered unconventional. He called pass plays when other coaches called runs, sped up the pace when others slowed it down, and took risks when others favored conservatism. In Super Bowl XXXIX against the New England Patriots, it was more of the same. Unfortunately for Reid, it did not work as the Eagles lost 24-21.

Following the loss, Reid was widely criticized. Commentators lamented that, “This is why Reid will never win the 'big one'.” Despite winning his division six times, making the playoffs nine times, and advancing to the conference finals five times, Reid was eventually fired after fourteen seasons in Philadelphia. The Chiefs subsequently hired Reid, but there was a lot of concern in Kansas City and across the NFL that he was just too “unconventional” to achieve the ultimate success. Since then, this sentiment has changed dramatically. 

Last Sunday, the Kansas City Chiefs led the Cleveland Browns 22-17 and had the ball with less than two minutes to go in their divisional round game. On first down, they ran the ball. On second down, with reigning MVP Patrick Mahomes out with a concussion, Reid called a pass play for backup quarterback Chad Henne. The result? A sack and a six yard loss. On third and fourteen, conventional wisdom indicated that the Chiefs should run the ball. Doing so would “milk” more of the clock and force the Browns to drive the length of the field in a little over a minute with no timeouts. So what did Reid do? You guessed it...he called for another passing play. The 35-year old Henne with no playoff experience dropped back to his own 25 yard line to pass. Feeling pressure to his right, he made a dash (more like a lumber) to his left and took off for the first down line more than 20 yards away. With a defensive back converging on him, Henne lowered his head and dove at the first down marker. He came up inches short. The Chiefs were left with 4th and short from their own 48 yard line with 1:42 left. Not only did conventional wisdom say to punt, every other type of wisdom said punt. If the Chiefs did not get a first down, the Browns would have the ball in Chief’s territory with plenty of time to score. Reid didn’t even consider punting. He kept his offense on the field. 

With the decision to go for it made and with just inches to go for the first down, logic dictated that the next play was going to be a quarterback sneak or a run up the middle. However, Reid had the offense line up in a shotgun formation. Tony Romo started chirping, "They're not gonna run play. They won't hike the ball." Then, with a quick snap, Henne rolled out to the right and flipped a three-quarter arm pass to his slot receiver for a first down. Game over. Tony Romo exclaimed, “Only Andy Reid does that!” Jim Nance followed up saying, “I don’t know another head coach in the NFL that would have been that aggressive with a backup quarterback.” The CBS post game crew raved about how this was “Soooo Andy Reid” and that he is “One of a kind” and this was what “Makes him one of the NFL’s elite head coaches!” 

So, what had changed since Reid was lambasted after losing to the Patriots in Super Bowl XXXIX? Reid certainly hadn’t. He had always coached this way. So then, what changed? Simple. His unconventional style that had worked well for so many years finally succeeded at the highest level. The Chiefs had won the Super Bowl in 2019 and they had followed it up with a 15-1 regular season in 2020. The fact is, success can be defined in many different ways, but for whatever reason, people's opinion of success often hinges on the ultimate prize. In football, that's the Super Bowl. For investors, it's the top quintile. Whether this is right or wrong can be debated endlessly, but there is a bigger takeaway here. By sticking to his style, Reid highlighted how the idea of an unconventional approach is a widely misunderstood. As always, there is a lesson here for investors.

The Misnomer 

One of the biggest misnomers about being unconventional is that it is not synonymous with taking more risk. I’d argue, just the opposite. Being unconventional simply means doing something that “Does not conform to what is generally done or believed”. As a result, being unconventional can actually be less risky because it can help you avoid herd behavior and career risk-dictated decision making. Today, in a world inundated with instantaneous information, this is arguably more so the case than ever. 

Bill Miller, formerly of Legg Mason and now the head of Miller Value Partners, recently highlighted this pointedly when he said that,

 “Everyone tends to see the same things, read the same newspapers, and get the same data feeds. As a result, the only way to arrive at a different answer from everybody else is to organize data in different ways or bring to the analytic process things are not typically present.” 

In football and investing, everyone has access to the same data at the same time. Yet, the paradox is that both head coaches and investors are generally as conventional as they have ever been. In football, this means punting on 4th and short despite all the data telling you that going for it is the higher percentage play. In investing, this means de-risking a portfolio this past March and April when things felt unsteady and re-risking a portfolio today when things feel much better. The fact is, when everyone is acting conventionally, doing the same gives you zero edge.

So, what constitutes an unconventional stance for investors today? In a world in which portfolio turnover has increased dramatically, consider holding your positions longer. When conventional wisdom tells you to manage position sizes to a certain “reasonable” percentages, allow them to drift higher. When people say that the very best smaller companies are remaining private, go look for the small and micro cap public companies. When everyone is defining themselves as a “value investor” or a “growth investor”, why not focus on being a "middle of the road" investor? Instead of making bold "Run for the hills and go to cash" calls like GMO and Jeremy Grantham, be a little more rational. When everyone is either a Bitcoin perma-bull or bear, how about admitting you have no idea what cryptocurrencies are going to do or are worth?

A Way of Life

Being unconventional goes well beyond single point decisions. Andy Reid’s decision to have his backup quarterback throw a difficult pass on fourth down at the 50 yard line with 1:30 to go in the game was not an isolated event. It is emblematic of how he handles his team. Reid puts enormous faith in his players and lets them determine a game’s outcome. Anyone who has played competitive athletics knows this is the hallmark of a great coach because it instills confidence in your players. It shows you trust them. It shows you're willing to let a game ride on their shoulders. Look no further than Hall of Fame head coach Bill Cowher’s comments about Andy Reid after the game.  

“Andy did what a lot of coaches would not have done. Personally, I would have used the clock and I would have punted. I’ve got to be honest with you. Andy Reid is a unique breed and I think that’s why players play for him, that’s why they love him and that’s why he’s the defending world champion.”

When looking to give money to an investor or manager, this is always top of mind. Do they empower their colleagues? Do they trust them? Do they provide opportunities for them to take chances, and invariably fail along the way? If so, they are unconventional. The fact is, the conventional approach is to believe in things like "The buck stops here” and “Never forget who’s name is on the door”. On the surface, this makes sense. Most investors have healthy egos and want to be responsible for their performance. Dig a little deeper though and you will find that those with the longest track records of success often take a different approach. Reid took this approach with his players, Warren Buffett has taken this approach with his portfolio companies’ management teams, Julian Robertson treated his Tiger Cubs as such, and there have been countless others. Success is very often dictated much more by how much faith you put in others than how much you put in yourself. 

Worth It

Like many words in the English language, unconventional is interpreted in many different ways and taken to vastly different extremes. For me, it means adhering to an approach that occasionally deviates from the norm, places the odds in your favor, avoids the herd, and puts faith in those close to you.