Does Word Count Matter?

Rarely a week goes by when a nervous financial professional doesn’t reach to me for help with a last-minute guest column for the business media. With a deadline bearing down, the thrill of being a guest contributor has been replaced by the anxiety of “what am I going to write about and how will I/we get it done on time!?!”

Inevitably thoughts turn to word count. They’re typically upset because the editor’s assigned word count is either too long (i.e., how will I ever fill up that much space?) or too short (i.e., how can I jam my entire life’s work into such a tight space?!?!). Ahhhhhh. They joys of being an author.

When it comes to word count, there’s no hard and fast rule for how long a blog post, article, white paper or even a book should be. Don’t believe me? Ask your favorite search engine or AI tool and you’ll see “recommended word counts” ranging from 300 to 2,500 words for blogs and 800 to 5,000 words for articles. That’s not very helpful, is it?

Less is more

At HB, we lean toward the “less is more” approach. But, as Mark Twain famously quipped to a friend: “'I apologize for such a long letter - I didn't have time to write a short one.'

Twain could get away with that logic because he was one of the greatest authors in our country’s history. So, the short answer is this: If you’re an exceptional storyteller and can keep your prose compelling, go ahead an air it out. But for the rest of us, shorter is generally better as long as you don’t “dumb down” the complex topics you’re frequently asked to write about.

For business and financial topics, we’ve found that 600 to 900 words scores best for blog posts and 1,000 to 1,500 words (including the Key Takeaways) tends to get the most engagement for articles. Most financial editors will assign word lengths in this range. Of course, there are exceptions. Most word processing software generates about 400 words per page, so an ideal blog post is 1.5 to 2 pages and an ideal article is about 2.5 to 4 pages. For white papers and book chapters, we’re seeing that 2,000 to 4,000 words works best (think 5 to 10 Microsoft Word pages).

Here are some tips for keeping concise:

1. Read your work aloud before submitting it for publication. Most people read at 200 to 300 words per minute. So, an 800-word blog post is a three to four minute. A 1,250-word article is about a four to six minute read. If someone was listening to your piece on their headphones, could you hold your interest for that long? Does it seem to be dragging anywhere? Are you being redundant or vague? These are clues to where you could tighten up or cut.

2. Use short sentences. If you see any instances in which your sentences are more than two lines long, that’s a likely sign of a run-on sentence. Break your prose into shorter more digestible chunks of information, especially if you’re writing online. It’s okay to start sentences with “determiners” such as “And” , “But” and “So” these days. Your high school English teacher would be horrified, but I’ll write you a note to exempt you. Your readers will thank you, too.

Here’s a recent example from one of our clients:

ORIGINAL (one sentence, 65 words): “The sliding scale depends on which of the four “pools” your business falls into, but for many of you, the schedule starts at 40% of cost in the first year the equipment is placed in service; rises to 56% in Year-2, and then declines steadily from 42% in Year-3, all the way down to 18%, and Year-6 and to 15% in Year 7 and beyond.”

REVISED: (4 sentences, 53 words total) The sliding scale depends upon which of the four tiers your business belongs. The schedule starts at 40% of cost in the first year your equipment is placed in service. But the rate rises to 56% in Year-2. Then it declines steadily from 42% in Year-3 to 15% in Year 7 and beyond.

3. Tell ‘em times 3.  As my old boss at the AICPA used to tell us before every presentation, make sure you get three things across to your audience:

a) You tell ‘em what you’re going to tell ‘em (INTRO).
b) Then you tell ‘em (MAIN BODY).
c) Then you ‘em what you just told ‘em (CONCLUSION).

Same goes for your written communication.

4. Key Takeaways. Whether you call them Key Takeaways, Hot Takes, Key Learnings, Summary Bullets or simply Takeaways, those hardworking bullet points at the top of your content should provide readers with an instant summary of what they will learn from you. Here’s more on Key Takeaways.

5. Call to action. You don’t need to overwhelm readers with everything you know about a topic. Financial professionals frequently suffer from Smartest Kid in the Class Syndrome. You just want to stimulate their interest and have them reach out to you for more information. Make it easy for them to find you to set a time to discuss with you in more detail. Then you can share more of your lifetime body of work.

Conclusion

Just keep these simple tips in mind and you’ll be fine. At the end of the day, it doesn’t matter how well you know the numbers, without a solid command of the English language, you won’t be taken seriously. After all, You're an Elite Professional; Don't Sound Like a Jamoke.

#grammar; #wordcount; #businesscommunication; #thoughtleadership

When to Use i.e. Instead of e.g.

Sometimes I regret that I didn’t take Latin in high school. But there was only one Latin teacher to choose from in our small school. Supposedly he was a monster, i.e., he was a brutal grader, with a bad temper and breath to match. Still, it would have been good to know the derivation of so many words used in modern languages, e.g., English, Italian and Spanish. If nothing else, I wouldn’t be second-guessing myself about misusing these small, but powerful “interrupting” words such as i.e. and e.g.

Here’s how I keep them straight.
I.e. stands for the Latin id est, or 'in other words,' and is used to introduce a word or phrase that restates what has been said previously.

If your portfolio has a high beta, (i.e., higher-than-average risk) then you can expect outsize performance during bull markets, and worse than average performance during bear markets.

E.g. means “for example.” (It stands for exempli gratia in Latin.) It is used the way you’d use 'for example,' coming before an item or a list of items.

The summer associates rotate through many departments (e.g., tax, audit, planning, payroll, bookkeeping and advisory services).

 

It may help to remember that both 'that is' and 'for example' work in English the same way as i.e. and e.g. Still not confident? Try substituting ‘that is’ for i.e., or ‘for example’ for e.g.; if your sentence still makes sense you’ve used the right one.

Punctuating i.e. and e.g.

Your AI or spellchecker will usually catch this, but make sure you have a period after each letter. It’s best to have a comma following the last letter. Without those punctuation symbols, it’s distracting to the reader and your software may try to fill in a more complete word such as “egg” or “leg” or “peg” if it just sees “eg” without punctuation.

Conclusion

I don’t love grammar and punctuation any more than you do. English is a devious language with more exceptions to the rule than the U.S. tax code. Just keep these simple tips in mind and you’ll be fine. At the end of the day, it doesn’t matter how well you know the numbers, without a solid command of the English language, you won’t be taken seriously. After all, You're an Elite Professional; Don't Sound Like a Jamoke

#grammar; #businesscommunication; #thoughtleadership

Where vs. In Which?

A well-known financial professional seemed to be hedging her bets in a recent piece she sent to us for review. Right off the bat, three sentences rubbed me the wrong way (but apparently not her Marcom team): 

·       *  It's a win-win situation where the firm can provide higher-quality services, and the clients achieve better financial outcomes.

* In an age where economic uncertainties are more prevalent, clients seek advisors who can provide more than just compliance services.

·        * Visual learners find value in well-structured presentations such as PowerPoints or PDFs, where a picture can convey more than a thousand words.

Which sentence above do you think is correct? If you said “None of the above” then you’re right. In each instance, no specific place or location is specified. The author is referring to more abstract terms or concepts. She should have gone with “in which” as in: “It's a win-win situation in which the firm can provide higher-quality services …..”  The situation is NOT a place you can see or visit.  

Again, I’m no grammarian and don’t aspire to be one. I just try to keep things simple when writing or editing. Here’s how I keep “Where” vs. “In Which” straight:

·         Use "where" when referring to a specific, physical place. For example: "the city where I was born" or "the building where the conference is being held."

·         Use "in which" when referring to something more abstract or conceptual, rather than to a specific physical location. For example: "the circumstances in which the accident occurred" or "the era in which this style of art thrived."

So, don't write about a situation where…, a theory where…, a case where… a legal dispute where. Those are all cases to use “in which.”

But if you think “in which” is too formal or stuffy, you can bend the rules a little and use “Where” to refer to the status of a situation or circumstance. For instance:

·        Where do you see this relationship going? Or

·        “He took a plane to Morocco, where he met his cousin for the first time.

The above instances are okay to use “Where” and I won’t tell Mrs. McGillicuddy, your 8^th grade English teacher.

Quick quiz: Fill in the blank

“Using a spreadsheet when a data warehouse was required created a situation _______ effective analysis was impossible.”
a. where
b. in which

Correct Answer: b (in which).  The situation is not a physical location, it’s a scenario. You might find it easier to default to “where,” but when reviewing your work, please make sure you flag the “where” and then ask yourself if you’re referring to a physical location or a scenario. See, it’s easy.

Speaking of reviewing your work, I’m all for Grammarly, Spellcheck and AI, but there’s nothing more effective than reading your work back to yourself, preferably aloud. You’re a skilled professional with a personal brand to protect. With a little practice, you ear will usually help you arrive at the correct answer.

Conclusion

I know English is a maddeningly perverse language with more exceptions to the rule than the U.S. tax code. Just keep these simple tips in mind and you’ll be fine. Because at the end of the day, it doesn’t matter how well you know the numbers, without a solid command of the English language, you won’t be taken seriously. After all, You're an Elite Professional; Don't Sound Like a Jamoke

#grammar; #businesscommunication; #thoughtleadership

That or Which?

A well-known financial advisor recently asked us to update the manuscript for a book she published a few years ago. In the opening acknowledgements, three sentences using the word “which” didn’t seem right to me:

1) “There are still a myriad of products which simply must be purchased through traditional selling methods.”

2) “We can only sell selected products which will require value added services.”

3) “This book offers many insights which can help you.”

How many of the three sentences above are not grammatically correct? If you said “none” then you’re correct.

Not to embarrass anyone on this distribution list, but many people including highly educated financial advisors, use “that” and “which” interchangeably. But, the two words are NOT synonymous and you should really pay attention to the distinction.

·         “Which” introduces a non-essential clause.

·         “That” introduces an essential clause.

I admit I’m not a great proofreader or grammarian. Here’s how I try to remember the difference between That vs. Which (your spellchecker won’t always get it right):

·         If the clause is essential to the meaning of the sentence, you use “that.”

·         If you could drop the clause and leave the meaning of the sentence intact, use “which.”

For example:

· The building that opened last week is still unoccupied.

· The building, which opened last week, is next to Starbucks.

In the first sentence, the clause “that opened last week” is essential because it identifies the building that is still unoccupied. Without the clause, we could refer to any building. With an essential clause like the one above, use the word “that.”

In the second sentence, the clause “which opened last week” is non-essential because it’s unnecessary for identifying the building. Without “which opened last week,” the sentence would still make sense. Since it’s a non-essential clause, use the word “which.”

That vs. Which Quiz (commas deleted)

Q1) My calculus assignment__ I handed in yesterday got an A!

Q2) My tuxedo__ I wore last week has a hole in it.

Q3) Jupiter __ is next to Saturn is the largest planet in our solar system.

See end of post for answers*

Conclusion

It doesn’t matter how well you know the numbers, without having a solid command of the English language you won’t be taken seriously. After all, You're an Elite Professional; Don't Sound Like a Jamoke

 To paraphrase philosopher, Friedrich Nietzsche, “That which does not kill us makes us stronger.”

*Quiz answers:  1) which 2) that 3) which

 

#grammar; #businesscommunication; #thoughtleadership

Are You Getting These Common Words Wrong?

Not to embarrass anyone on this distribution list, but I came across this in a client’s guest column the other day. He was a big proponent of AI, Grammarly and SpellChecker, by the way:

“In principal, the judge’s decision should not effect the outcome.”


Affect vs. Effect: These homophones confuse many, especially when writing quickly. "Affect" is typically a verb meaning to influence, while "effect" is typically a noun meaning the result or consequence of an action.

Principal vs. Principle: Many financial folks trip over this one because "Principal" refers to an initial amount of money or investment, or to a person with controlling authority. "Principle," on the other hand, pertains to a fundamental truth or belief.

So, if you’re keeping score at home, the correct version of this sentence should be: “In principle, the judge’s decision should not affect the outcome.”

Speaking of judging, we often see “Judgement” and “judgment” confused. I know it seems logical to use judgement (with an “e”), but in the U.S. we always drop the “e.” In the U.K. and Australia, both are used, judgement (with an “e”) is predominant. Same goes for “judgmental” vs. “judgemental.” Play it smart and drop the “e.”  

 

Compliment vs. Complement: These words sound alike but have different meanings. "Compliment" refers to a courteous expression of praise or admiration, while "complement" denotes something that completes or enhances another thing.

Examples:
“The color of your outfit complements your eyes.”
“Receive a complimentary cup of coffee with any purchase!”

Login vs. Log in: When spelled as one word, “login” only functions as a noun or an adjective. However, when spelled as two words, “log in” functions as a verb. The word with a hyphen (log-in) has generally faded from use.

Examples:
“You can log in using your password.”
“Don’t forget your login information.”

Site vs. Cite: Not to be confused with someone’s ability to see (i.e., sight), a “site” refers to a place where something is located, such as a jobsite or website. On the other hand, “cite” is used as a verb whenever you reference something as an example or source.

Examples:
“You can find that information on our site’s homepage.”
“Whenever you use data from a report, make sure you cite your sources.”

Their vs. They're vs. There: These homophones often trip up even seasoned professionals.

Their (pronoun). A form of they that shows possession as in The dog walker feeds their dogs everyday at two o’clock.

They’re (contraction). Joins the words they and are. They’re the sweetest dogs in the neighborhood.

There (adverb). Indicates a particular place. The dogs’ bowls are over there, next to the pantry.

There (pronoun). Indicates the presence of something. There are more treats if the dogs behave.

Further vs. Farther:  Use “Farther” when you’re referring to physical distance, as in someplace that is far away. (Think “A” for actual distance). Use “further” for metaphorical or figurative distance.

Examples:
“The drive to the client’s office was much farther than I anticipated.”
“I didn’t feel I needed to take the conversation any further.”

Ensure vs. Insure: Ensure: To make sure or safe. The company will ensure that all affected employees receive compensation.

Insure: To obtain insurance. The new office is insured against any damage caused by fire.

Stationary vs. Stationery: One letter makes all the difference. "Stationary" means unmoving or not changing position, while "stationery" refers to writing materials.

Everyday vs. Every day:  When businesses try to communicate the value of their brands, there’s a big difference between “everyday low prices” and “low prices every day.” When spelled as one word, everyday is an adjective used to describe things that are common or occur daily. When spelled as two words, every is an adjective that modifies the noun day, and the phrase functions adverbially.

Examples:
“The corner grocery store is known for its everyday low prices.”
“Bill stays active by going for a walk every day on his lunch break.”

"I Couldn't Care Less" vs. "I Could Care Less”: If you say you "couldn't care less" about something, it means you don’t care about it at all.
Sometimes you will hear people say "I could care less" in the same way such as: “I could care less of that stock drops. I don’t own it anymore.”

Grammarians will say that "could care less" is wrong because it should mean the opposite of "couldn't care less." Logically, if you could care less, it means you do care some, so always go with “couldn’t care less” to make your point.

Conclusion

Not to be your high school English teacher, but having a solid command of the English language matters if you want to be taken seriously. After all, You're an Elite Professional; Don't Sound Like a Jamoke

#grammar; #businesscommunication; #thoughtleadership

 

Do You Struggle With ‘For Example’ When Writing or Presenting?

Smart people often have difficulty explaining things simply. They may have a deep understanding of the subject matter and find it difficult to distill that knowledge into layman's terms. They may be so familiar with the problem that they assume others understand it as well, and fail to realize that they need to explain it more clearly. Additionally, some people may have difficulty breaking a complex problem down into smaller, more manageable pieces that are easier to understand. Finally, smart people tend to fall back on jargon or technical language that the other person is not familiar with, making it hard for them to understand the problem.  Sound like anyone you know?

Early in my career I worked in marketing for an Israeli-backed startup that made competitive intelligence software for pharmaceutical execs. The founders – all engineers, programmers and former Israeli military intelligence officers – were convinced that the more complicated they made their software sound, the more impressed people would be. The VC’s were too embarrassed to admit they couldn’t understand how the software allegedly worked, but most of the sales team, pharma companies and industry analysts were left scratching their heads.

One day, after the founder rejected our new marketing brochure for the tenth or eleventh time, I suggested we simply describe ourselves as “Bloomberg for pharma execs.” I was almost fired on the spot, but eventually my suggestion found its way to the sales team who suddenly started closing deals. Then the engineers started firing on all cylinders. Then analysts started to pay attention and the trade press started writing generally favorably. All because they could suddenly understand what we were trying to do in terms they could understand. Everybody knew what a Bloomberg terminal was and suddenly, what we were trying to do had some context that was relatable.

The power of “For example”

As I explained in my post Overcoming ‘Smartest Kid in the Class Syndrome’ When Writing or Speaking, Research shows that most humans can’t multitask. But that’s essentially what you’re asking people to do when you introduce two, three, even four distinct themes into your writing and speaking. Instead, just focus on one theme per content piece, and get your thoughts down really well.

Making a statement without using examples can make your argument muddy, as well as create more work for the reader or listener. Using examples to back up statements of fact can add value to your writing. Examples make statements clearer, give readers more information, and decrease the chances that the fact or idea to be wrongly applied to real-life situations.

Let’s look at some instances of how “for example” can help make it easier for the reader or listener to understand what you have to share:

INSTANCE #1: “Studies have shown that sentences with clauses nested in the middle take longer to read and cause more comprehension mistakes. Ditto for most sentences in the passive voice.” Huh!?!?

Instead, try: “For example: If you write ‘Profits are loved by investors,’ instead of ‘Investors love profits,’ you’re switching the standard positions of the verb and the direct object. That can cut comprehension accuracy by 10% and take a tenth of a second longer to read.” Oh, Now I get it.

INSTANCE #2: “Smart people sometimes devalue other skills, like relationship building, and over-concentrate on intellect.” Okay I guess?

Instead, how about: “For example, an individual who finds workplace diplomacy difficult might write this off as an irritation rather than as a core skill required for their role. Similarly, they might see it as critical for a secretary to be personable, but not an executive. Therefore, they don’t invest time and effort in developing these skills.”  Yeah, I can relate to that!

 

INSTANCE #3: “When creating a portfolio, an investor (and their financial advisor) should understand what risk factors come with each type of asset, as well as any unknown factors that could also come into play.” What???

Try this approach instead: “While risk is inherent to the market, not all risks are created equal. For example, fixed income instruments such as bonds are generally considered safer than equities (stocks), but a blue-chip stock may be less risky than a poorly-rated junk bond.” Okay, I think I got it.

INSTANCE #4: “Again, we highly recommend contacting your Medigap provider before traveling to understand exactly what is (and is not) covered.  If you’re not covered, traveler’s coverage is relatively cheap.”  Really? How so?

Instead, try: “For example: a one-week trip for someone age 55 with $0 deductible and $1M medical limit would be $44 for the entire trip. For a family this might be somewhere in the range of $100 to $150.”  Now I’ve got it. Thanks.

Conclusion

Your readers and followers are busy. Don’t make them work too hard to get what you’re trying to convey to them. “For example,” is one of the best and most efficient ways to make complex concept relatable to the reader. Just us "for example" judiciously. Overusing it can make your writing repetitive or disrupt the flow of your text. Use it only when you genuinely need to provide an example to support or clarify your point. Your readers and followers will thank you.

Got something bugging you about your writing? I’d like to hear more.

You Don’t Have Writer’s Block

Over the past week, I’ve had several conversations with clients about why they haven’t been able to get the ball rolling on their next content piece. I get it. You’re busy closing out the month. You’re trying to get some R&R over the Holiday weekend. Just don’t tell me you have “writer’s block.”

Most of you on this distribution list are highly motivated, well-organized professionals. I certainly wouldn’t accuse you of procrastinating. What you’re most likely suffering from is perfectionism.

Voltaire, the renowned French writer and activist famously said: “Perfect is the enemy of good.”

What this means is that you’re so busy striving for perfection—as you are with most other things in life—that you become your own worst enemy. Even worse, you don't notice the progress you’re making toward being a better communicator and thought influencer.

In the 140-year history of Major League Baseball, pitchers have thrown only 23 perfect games out of roughly 235,000 games contested and none since 2012. Pro golfers hit a hole-in-one about 0.04% of the time. So, what make you think you should be perfect?

I’ve been in the content game for over 25 years. I’ve never written a perfect article or blog post. If I ever do, I’ll send it to you. Sure, English is a maddeningly complex language with more exceptions to the rule than there are actually rules (kind of like the IRS tax code). So, the best thing to do is just think about the SINGLE most important thing you want your readers to learn from your communication piece. Then focus on the best way to get the message across simply, quickly and concisely.

Don’t worry about being clever. Don’t worry about stuffing your content with the right keywords or links. Just get to the point and stop clearing your throat when you write. If you find yourself freezing up at the keyboard, step away from your desk and try another way of composing your thoughts.

Take out a legal pad and pencil (not a pen) and scribble away on your favorite deck chair. Or, you could dictate your thoughts into the voice recorder of your smartphone while hiking or walking the dog. Or you could try composing on your iPad while out at the beach. Anything to get your subconscious from thinking: “I’m stuck at my desk again staring into a blank screen -- and I have nothing to say. Oy!”

Understanding the underlying causes can help writers find effective strategies to overcome or prevent writer's block. Here are some of the other mental minefields that derail accomplished professionals:

1. Fear of Failure or Criticism: The fear of producing subpar work or receiving negative feedback can hinder the creative process. This fear can create self-imposed barriers that prevent writers from freely expressing themselves.
2. Overwhelming Expectations: External expectations, such as meeting deadlines or fulfilling certain requirements, can become overwhelming. The pressure to deliver can result in stress and mental blocks.
3. Self-Doubt: Doubting one's abilities or questioning the value of their work can impede the writing process. Self-doubt can make it difficult to generate ideas or find confidence in one's writing.
4. Perceived Lack of Time: Feeling overwhelmed by other responsibilities or perceiving a lack of time can create a mental block. The sense of not having enough time can hinder focus and creativity.
5. Distractions: Noise, interruptions, or a cluttered environment can disrupt the writing flow. External stimuli can divert attention and hinder concentration.
6. Lack of Structure or Direction: Uncertainty about the structure or direction of a piece of writing can create confusion and make it difficult to proceed. Without a clear roadmap, writers may feel stuck or unsure of how to continue

How many of these mental barriers sound like you?
Here are some additional tips from breaking through your perceived writer’s block:

1.       Free-write: Set aside a specific time to write without any constraints or judgment. Write continuously for a set period, allowing your thoughts to flow freely. This can help break through the initial resistance and stimulate creativity. Don’t worry, your first draft is supposed to suck.

2.       Outline: Create an outline or structure for your writing project before diving into the actual writing. Having a roadmap can give you a clear direction and make it easier to start and continue writing.

3.       Set realistic goals and deadlines: Break your writing project into smaller, manageable tasks and set realistic goals and deadlines for each one. This can help you stay focused and motivated, as well as give you a sense of progress.

4.       Eliminate distractions: Turn off notifications on your phone, close unnecessary tabs on your computer, and create a dedicated writing space that is free from interruptions.

5.       Write at your most productive time: This is my personal favorite. Pay attention to your natural energy and productivity patterns. Some people are more productive in the morning, while others find their creative flow in the evening. Schedule your writing sessions during your most productive time of day.

6.       Take breaks: Take regular breaks during your writing sessions to relax and recharge. Engage in activities you enjoy, such as reading, listening to music, or practicing mindfulness. Don’t try to push your way through a mental block. Most people can’t.

7.       Seek inspiration: Read books, articles, or blogs related to your topic or genre. Surround yourself with creative works that inspire you. Attend writing workshops, conferences, or join writing groups to connect with other writers and gain fresh perspectives.

Conclusion

Screenwriter and TV producer John Rogers may have said it best: "You can't think yourself out of a writing block; you have to write yourself out of a thinking block." Contact me any time for my tips and inspiration.

 

#practice management, #writersblock, #effectivewriting

What March Madness Teaches Us About Investing Bias

Hard to believe, but the annual NCAA men’s Division I basketball tournament is upon us. The national championship of college basketball (aka “March Madness”) is the ultimate three-week long reality show. Where else can little known universities (aka small cap growth stocks) such as St. Peters, Loyola of Chicago, Murray State, Weber State and Florida Gulf Coast suddenly jump into the national limelight alongside powerhouses Kentucky, Kansas, Duke, Villanova, UCLA, and North Carolina (aka the mega cap blue bloods)?

Bracketology is not an exact science 

As many of you know, filling out your NCAA tournament brackets can be great for office morale, despite the drop in productivity. It's not like picking stocks in which there are over 10,000 companies to choose from. There are only 68 teams, playing a total of 67 games. Every team’s record, roster, statistics, and injury status are out in the open. Like the markets, the Vegas oddsmaker instantaneously digest and “price in” all new information that could materially impact the outcome of each game. It’s all publicly available and free of charge.

While an estimated 20 to 30 million people painstakingly fill out their tournament picks every year, there has never been a verified perfect bracket. The closest to perfection came in 2019, when a Columbus, Ohio, resident correctly chose the winners of the first 49 games of the tournament only to see his picks unravel in the third of six rounds. For years, Warren Buffett has offered his employees a $1 billion prize for picking a perfect bracket and he’s never come close to paying out.

So why are we so bad at it?

It turns out our bracket-picking prowess gets clouded by many of the behavioral biases that derail investors: Recency Bias, Confirmation Bias, Following the Herd, Familiarity Bias, the Halo Effect and more. Filling out your brackets is like constructing a diversified investment portfolio. You’re trying to find the right balance between the “safe picks” (the top seeded, blue-chip stocks) and the “upset picks” (the undervalue lower seeds, aka small cap growth stocks) that will earn you bonus points separate you from the other players in your pool.

And that’s where the human mind gets sidetracked by our behavioral biases. Let’s look at some of the most common ones:

Recency Bias. Investors believe that last year’s top performing stocks and funds will repeat their success in the current year. In reality, last year’s top performers are usually in the middle or bottom third of the pack the following year. Remember how well tech stocks did in 2022 or how poorly energy did? What a difference a year makes.

Same goes for March Madness. Last year’s Final Four teams were all blue chip programs that appear in the tournament almost every year. Defending champion, Kansas is back and looking strong. But North Carolina and Villanova didn’t even qualify for the tournament and Duke had to win nine of its final ten gams just to break into the top 20. And what about St. Peters, the tiny (micro-cap) commuter school from Jersey City, NJ that made a Cinderella run into the Elite Eight? The Peacocks didn’t even have a winning record this year and failed to qualify for the NCAA tournament.

Familiarity Bias. It’s amazing how many people pick their alma mater to do well regardless of the team’s record or who else is in its bracket. People also tend to over-pick teams that are in their geographic area because they hear about them all the time on the news, or because many family members are alums. The reciprocal of Familiarity Bias is Unfamiliarity Bias. That’s the tendency to ignore promising investments because you’re not familiar with the company or industry. Same goes for March Madness. West Coast powerhouses UCLA and Arizona are having superb seasons, but because their games are on too late for most East Coast fans, they’re far less likely to make the Final Four in brackets filled out east of the Mississippi. Likewise, West Coast hoops fans are far more likely to overlook UConn and Marquette, even though both programs have been in the national top 10 and make it to the Big Dance almost every year.

Overconfidence Bias is another derailer for both investors and bracket players. Most pool participants have massive confidence is top-ranked teams. Yet, only once in the history of the tournament (2008) have all four No.1 seeds made it to the Final Four. Some years only one of the four No.1 seeds will make it that far—you never know which one.

Anchoring is another common fallacy known to affect millions of investors and NCAA Tournament pickers. It’s the misguided belief that “Duke or Kentucky ALWAYS get to the Final 8” or that “Kansas and Purdue NEVER win the big games” regardless of the team’s record or tournament readiness in a given year. Considering that star players often don’t stay more than one or two years at the elite programs these days, anchoring based on brand name or reputation is even more dangerous today than it was in the past. Following the Herd. Oddsmakers love it when the American public stampedes over itself crowding into the same bets. Even though history shows all four No.1 seeds almost never make it to the Final Four in the same year, guess which teams have the majority of votes to make it to the Final Four this year: Alabama, Kansas, Purdue and Houston (the four No.1 seeds in 2023). If you’re keeping score at home, three of the four No.1 seeds (Houston, Alabama, and Purdue) have never won a national title. Hmmmn.

The “Halo Effect” comes into play when investors blindly follow the recommendations or investing choices of gurus such as Bill Gross and Warren Buffet. It’s the same when bracket pickers blindly follow the wonky statistical models of KenPom, 538, and RPI, or blindly pencil in the “sleeper” picks of their favorite TV analysts. As with the stock gurus on TV, the picks of the expert hoop heads on TV rarely pan out.

Then there’s the fallacy of “getting back to breakeven” a mental accounting trap that has plagued gamblers and investors alike for centuries. How many times have you held on to a losing stock for years, just waiting for it to get back to the original purchase price before you can convince yourself to sell it? Likewise, how many people keep selecting BYU (30 tournament appearances without a title); Missouri and Xavier (29 appearances without a title), Tennessee (25 appearances without a title); Alabama and Creighton (24 appearances without a title) to advance far in the tourney because they have a national following and win most of their regular season games each year. 

Then there’s Gonzaga University, formerly a little-known microcap from eastern Washington and now a mighty mega-cap. The Bulldogs have qualified for the NCAA tournament an amazing 24 straight years and have never won fewer than 23 games in a season over that span. They have an impressive 28-5 record this year and are currently seeded No.3. Just about everyone has the Zags penciled in for a deep run in the tournament despite having never won the NCAA championship. EVER.

Conclusion

Whether investing, gambling, or taking part in the friendly office pool, always check your emotions at the door. Working with an objective, independent advisor is one of the best ways we know to prevent your intuitions from causing you to stray from your plan and making costly mistakes you’ll later regret. Who’s your pick to win it all and why? I’d love to hear from you.

#marchmadness, #behavioralfinance, #bracketsbusted