Risk, Reward and the Masters

I confess to not getting as worked up about the Masters as many in our business, even though I am a golf fan and even though the golf and the golf course are typically brilliant.  This past week-end was no exception.  The racism that is barely concealed, the sexism that isn’t concealed at all and the phony mannerisms (like “patrons” and no “pins”) are simply too off-putting for me to enjoy the spectacle to its fullest. But, as usual, the golf was fascinating. 

The 15th hole at Augusta National, as nearly every golf fan knows, is a reachable par 5.  On Saturday, while making a charge up the leaderboard to contention, Phil Mickelson’s second shot hit the green and rolled off the back edge into a furrow well below the hole. It wasn’t a great leave, especially with the pin flagstick near the water and the green sloping away from Phil’s ball toward the drink.

But Phil Mickelson never lacks for confidence in his abilities.  As he is wont to do, Phil tried an incredibly risky flop shot wherein he opened up the face of his 64 degree wedge to try to propel a high, arching shot that lands so softly on the green that it stays near the hole. The risk of landing short was that the ball would trickle back to where Phil already was, and the risk of landing long was water. Flop shots are famously hard to control, and it’s not unreasonable to believe (with a high degree of certainty) that no other player in the field would have attempted that shot. But Phil has one of the best short games in the world and is a notorious gambler to boot. He hit the shot beautifully and sank the putt for a birdie.  You can see the shot and listen to David Feherty wax eloquent about its greatness here

This shot is reminiscent of Phil’s play on the 13th hole at Augusta, another reachable par 5, on Sunday in 2010, when Phil was leading the tournament by a stroke.  On that day, Phil’s tee shot found the pine straw amidst the trees and left him in a very tough spot. The smart move would have been to lay up and try to get up-and-down for a birdie, especially because the front of the green is guarded by a creek and the pin flagstick was set just a few feet from the water. He was leading, after all.  But Phil gambles and succeeds with a fabulous shot and wins the tournament (you can see it here).

But on the par 3 4th hole yesterday, Phil was 8 under par and just two shots off the lead. His tee shot hit a railing on the bleachers patron observation stand to the left of the hole and bounced into the woods, where it landed deep in some leaves. Instead of taking a penalty and re-teeing at the tee box teeing ground or dropping away from the obstruction, Phil gambled again.  A tree prevented him from hitting the shot normally (he’s a lefty), so he moved to the other side of his ball, turned his club head upside down, and tried to hack the ball out of the leaves right-handed. His first attempt went about a foot and stayed in the leaves. He then hit the same shot again — this time it squirted off the inside of his upside-down wedge and hopped out to a hard surface beyond a bunker. He tried to make the perfect shot from there, rather than playing it safe, and landed short of the green.  The ball then rolled back down into the sand. From the trap bunker, Phil went up-and-down for a triple-bogey 6. That triple bogey may well have cost him the championship since he ended up losing by just two shots (more here; video here).

That disaster had its own precedent.  During the 2006 U.S. Open, Phil had a 1-stroke lead as he stood on the 18th tee on the final day of the tournament. Despite hitting only two fairways all day, he pulled the driver again. And again, he missed — this time badly, as his drive hit the roof of a hospitality tent and bounced into the spectator area. Here too, Phil decided to go for the gusto.  He attempted a huge slice under and around tree branches. It didn’t work. The ball hit a branch and stopped about 25 yards in front of him. He then tried another big slice, but this one plugged in a back bunker, and not even Mickelson’s short-game magic could save him from there. He double-bogeyed and finished one shot out of a playoff (see it here).

“I am such an idiot,” he succinctly said afterward.

These profiles in risk and reward illustrate why and how golf can be so compelling to watch.  Mickelson’s willingness to gamble has helped him win but has also cost him dearly.  The connection to investing are obvious.  Unfortunately, most people don’t manage their investments as well as Phil Mickelson plays golf.  For them, taking untoward investment risk is particularly dangerous.  Moreover, retirement planning doesn’t offer a fresh start and new tournaments the next week or the next year.  That’s why providing guaranteed income for baseline needs is so valuable.  Investment risk is appropriate and even necessary, but risking a guaranteed minimum is a dangerous game — no matter how talented and confident you are in your investment acumen.

Don’t be an idiot.

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