Estimated reading time: 3 minutes 8 seconds
"It is all about timing!" The protagonist Chesley Sullenberger says in the movie 'Sully'.
Captain Sullenberger (known as Sully) landed the US Airways flight 1549 on river Hudson in New York when the plane got hit by birds after taking off from La Guardia airport on January 15, 2009. The survival of all 155 people on-board was nothing short of a miracle as "people do not survive water-landing". Sully was hailed as a hero before the National Transport Safety Board (NTSB) initiated an investigation and public hearing on the whole episode.
If you have not watched the movie 'Sully' then I will highly recommend it to you. It is one of my all-time favorites because I see parallels in the world of investing. The NTSB investigation focused on computer simulation with the same parameters and what the simulations showed is that the plane could have landed on La Guardia or Teterboro airports without risking the lives of all people on-board. The same was confirmed by human-piloted simulations conducted in Toulouse, France Airbus facility. The cool demeanor the pilots maintain during the simulations, having practiced 17 times, and turn towards the airports after the bird-strike makes it look like they were just going to "buy milk" and did not have the nervousness of dealing with a life and death situation in the actual incident.
Hindsight being 20-20, the simulations could work out best solutions without losing any time and presented a much better picture. The harrowing moments everyone went through especially the captain, the first officer, and the crew and the life-risk that the situation carried was totally ignored in the simulation. The analysis in the aftermath of volatile market movements is akin to computer simulation. Expert analysts from the comfort of their chair have the benefit of all the past data being available and arriving at the most desirable solution. Risk management and saving lives (portfolio) are not given so much importance.
Captain Sully tells his First Officer Jeff Skiles "I've delivered a million passengers over 40 years in the air, but in the end, I'm gonna be judged on 208 seconds". Investors have a similar tendency where they tend to focus on only investments where there are making a loss rather than the overall portfolio.
At one point, Captain Sully says, "You are looking for the human error, so make it human". There is a reaction and decision time when an actual disaster happens. The investigators decide to add 35 seconds to the decision time. Lo and behold, human-piloted simulations show crash for every landing. Market investments are similar. Events - some of the proportion of bird strike - are happening every day. Decisions are taken considering the overall risk management and avoiding crash-landing of portfolios.
One of the investigators in the panel says to Sully "After speaking to the rest of the flight crew, bird experts, aviation engineers, after running through every scenario, after interviewing each player, there is still an X in this result and it's you, Captain Sullenberger. Remove you from the equation and the math just fails". Similarly, your Adviser plays the role of the X-factor in achieving your Life and Financial Goals. Remove the Adviser and the math may just fail in terms of achieving your Financial Freedom.
Investors need to keep in mind that markets do not move linearly so return comparison with Fixed Deposits and Savings Banks is not at all a fair comparison. Post-mortem analysis should be done but keeping in mind that decisions are taken with future uncertainty not past certainty. Human decisions do not always follow mathematical algorithmic pattern. Your Adviser is that X, if removed from the equation, the math may just fail!
The writer is the Managing Director of Mitraz Financial Services Pvt. Ltd and can be contacted at email@example.com