Punting and the Tyranny of Risk Memes

Last Sunday, with just under six minutes remaining on the clock in overtime, the Dallas Cowboys faced a 4th down and 1 from their opponent’s 42-yard line. Jason Garrett, the Dallas coach, sent out his punting unit. In a matter of minutes, they would go on to lose to their in-state rival Houston Texans.

It was a monumentally and objectively bad coaching decision. It would have been a bad decision for any team in the league. It was an even worse decision for the Cowboys, a team with a quarterback/running back combination with a historical success rate of 94.7% converting 4th and 1 situations. As ESPN pointed out later that evening, that is a marginally higher success rate than the rate at which kickers have converted extra points since they were moved to the 15-yard line. If you are not a fan of American football, the extra point is typically regarded as a mere formality – an early chance to visit the restroom.

Because of their location on the field, the punt’s value was also lower. A punt into the end zone would cause a touchback and yield only 22 yards of field position. Because of this risk, punters in this situation are often accordingly more conservative, targeting higher punts that terminate around the 10-15 yard line to avoid the touchback. For the Cowboys on this day, a well-executed kick still netted only 32 yards of field position. In exchange for those 32 yards of field position, the coach of the Dallas Cowboys rejected a play which – for this team – had the success rate of an extra point, and which would have provided multiple additional opportunities to advance into scoring range. You could spend hours mining historical scenarios, splits and advanced statistics for some kind of support for the decision. You won’t find it.

The press conference that follows is inevitable and all too easy to predict. The coach will explain away the decision with the sort of milquetoast response we simultaneously demand and bemoan from entertainers. You know you will hear a variant of ‘We believed in our defense’. It’s a nonsense statement, of course, since the defense could just as easily make a stop at the 42-yard line if they failed to convert. You will hear an appeal to experience and being ‘on-the-ground.’ You will hear a plea that ‘every situation is different’ and a vague allusion to what was ‘unique about that situation’. But that isn’t the point. The point, like with so many memes and narratives, is to make us sit down and shut up. The meme used to produce this response was field position!

The coach who summons this meme wants to be seen as wise – a sage, prudent leader. And it works. Every time. No one ever got fired for punting for field position! Oh sure, the media and fans will criticize him for 3-4 days. It will get mentioned the following Sunday, and then never again.

Risk-related memes are everywhere in the investment industry, too. Like the memes in football, most are built on sage-sounding ideas.

The risk management! meme is probably the most popular. It shuts down discussion by subtly implying that others in the conversation are not sufficiently focused on prudently managing risk. If you want to get someone to stop arguing with you in an investment discussion, just imply that they aren’t being prudent. One senior investor at a prior stop in my career loved responding to well-considered investment recommendations from younger investors with some variant of, ‘It’s not about the doing all the good deals, but avoiding all the bad ones.’  It’s not that there isn’t some shred of truth in this. It’s that everyone in the room who hears this knows that the discussion is over, ended by someone who wasn’t prepared to discuss the actual merits of the investment.

Most others are built around the client’s best interest! meme. Want to get a sharp, ethical professional on your team to sit down and shut up? Imply he or she isn’t considering what is best for the client. It doesn’t have to be true. Once this meme enters the room, other discussions stop. Other considerations end. Don’t you care about the client? 

These memes are so powerful because our true obligations to prudently manage risks and act in clients’ best interests are so sacred. Like any other meme or narrative, they force us to take a side. To signal.

But make no mistake. When we take score – and we do – the institutions that allow executives and PMs to use risk memes to get staff to sit down and shut up will be the losers.

Every time.