Thib's firing and investing (weekend thoughts)

Every now and then I’ll mention on the blog (or podcast) I’m a basketball fan. My team is the Pelicans, but they are just awful so I spend most of my time cheering for my eastern conference team, the Knicks.

It’s been fun to be a Knicks fan the past few years, as the combination of Jalen Brunson (star point guard) + Tom Thibodeau (head coach) turned the team around and turned them into one of the most likeable teams I’ve watched and a perennial fringe contender. After going “all-in” and trading away all of their draft picks for two all-stars, the Knicks made a deep playoff run this year that culminated with them getting eliminated in the eastern conference finals…. after which they promptly promptly fired Thibs (their head coach).

If you look at it from a thirty thousand foot view, the Thibs is firing is kind of weird. The Knicks were fresh off their deepest playoff run in 25 years, and the Thibs era has provided the Knicks’ most successful run of basketball since the 90s! Outside of the Thibs years, the Knicks have generally been a laughing stock for all of the 21st century. It’s pretty rare for a coach to completely change an organization’s culture, take them on their deepest playoff run in literally decades, come two wins (and one epic choke in part caused by Thibs getting outcoached) away from the NBA finals…. and then get fired.

So why did the Knicks fire Thibs? If you read their press release, it leads off noting that the Knicks are “singularly focused on winning a championship.” Clearly, they don’t think Thibs is a coach who can get them to a championship.

Why?

There’s a theory around Thibs that he’s a “floor raiser.” If you bring Thibs in, he’s going to maximize your team’s regular season. He’s going to play his starters heavy minutes, he’s going to install a winning culture, and he’s going to implement a system that the team can run reliably night after night in the long slog of an NBA season. The stats back that up: Thibs is one of the ~30 winningest coaches of all time by win percentage¹.

That’s all great…. but along with raising your floor critics will suggest Thibs will lower your ceiling. Because he plays his starters such heavy minutes, his teams never have struggle to develop properly; young players get mothballed, and fringe players never develop (which limits flexibility if a certain match up would call for a skillset one of his core guys doesn’t have or if someone gets hurt / in foul trouble). And his adherence to a system that works in the regular season means that Thibs can’t adjust and be flexible in the playoffs when certain match ups might not be favorable to his preferred system. You’d frequently hear Thibs critics call him “stubborn” or “inflexible”; yes, he had a system that worked and he could use to win at a high level, but his stubborness or inflexibility meant he couldn’t adapt that system and that held him back from winning at the highest level.

Anyway, why do I mention all of this?

Obviously because I was thinking about the lessons of Thibs when it comes to investing! It caused three somewhat interconnected but also opposing thoughts / stories to pop into my head. Let me go through them all:

• In some senses, investing is a competitive game: every buy or sell of a stock is zero-sum. But it’s not like sports where there’s only one winner at the end of every year: if one investor compounds at 25% for 15 years, and another compounds at 20% for 15 years… yes, the first investor has “won” in that they have better returns, but they’re both legends! Pretend the second investor is running a “thibs” system…. it’s producing at a very high level! Could it produce at a higher level? Of course; the first investor is evidence of that! But, in sports, it probably makes sense to switch from one strategy that’s working to another one if the other one works better. In investing, I don’t think it would make sense to switch.

  1. Obviously this was a huge simplification…. but, again, just interesting to think about!

• You’ll read about a lot of investors who have a decent track record, but it’s kind of mixed into two areas: they way outperformed from ~2000-2011, and they’ve way underperformed from 2011-2025. They’ve been running the same strategy / style the whole time, and for the past ten years they’ll be decrying that the market is propped up by the fed and fiscal spending, that the indices are being driven by a lot of froth, and that their strategy of buying super cheap stuf will reward them in the long term. I don’t say any of that to be mean; my view on the world / investing style can edge a lot harder into that camp! But I do wonder: when a style does well for ~10 years and then underperforms for 10, and you stick to it with no adaptation the whole time… are you really learning, or is your stubbornness in refusing to adapt your style impacting your returns / ability to see opportunities?

• Mix thought #2 (what if your style has underperformed for years) with thought number #1 (should you switch from a successful style just becasue another style is more successful)…. what do you do if you honestly look at the market and say “my style can no longer work?”

  • For my most recent book club, we reread the Snowball (Buffett’s biography). One of the things that jumps out to me is that every time Buffett underperforms / the market starts getting away from him, he writes a pretty honest letter that says “we’re doing worse than the market, but we’re not going to change a strategy we know and understand to try a new strategy, even if the new strategy is working and ours is underperforming.” That’s conviction in a strategy…. but at what point does conviction become stubbornness? At what point are you failing to incorporate the new data that suggests something is off with your strategy.

No good answers here, but just something I’ve been thinking about the past week!

PS- despite beating the Knicks two years in a row, I love this Pacers team and will be rooting for them in the finals (I actually like the Thunder too, but man this Pacers team is unique!)

1. The site has Thibs at #46, but I’m adjusting for interim coaches who only coached a handful of games. For example, the incredibly named Wah Wah Jones is the 41st winningest coach of all time thanks to going 7-5 in a 12 game coaching stint in 1951. I feel safe dropping him off the list!