Golfers demonstrate a great deal of enthusiasm and passion for their sport but, all too often, a singular lack of skill. They also assume that throwing money at a problem will automatically make them a better player. Gross errors in decision-making on the golf course carried over into their everyday business affairs would be guaranteed to ruin them overnight.
Does this mean that good golfers are good at managing their financial life? This was a question asked in a recent focus group study that included three golf coaching professionals, academics with both an interest in golf and relevant finance and sport expertise, career investors and a sports masseur.
Here’s some interesting analogies that resulted from the focus group:
Set goals, plan and evaluate
People tend to be over-optimistic. They tend to over-estimate the frequency of favourable outcomes and underestimate the frequency of unfavourable outcomes a bit like birdie-ing the first and then assuming the rest of the round will be as good.
One professional golfer reflected that he had seen the same type of errors made in golf: “Golf is a game of discovery. It’s about learning what you can and cannot do.”
Consistency and emotional control
To reduce inconsistency, golf psychology research shows the role of mental fitness and emotional control to be important to maintain a great golf swing, once the technical aspects of the swing are known.
Unfavourable financial outcomes tend to occur when emotional judgements are made such as assuming that future patterns of returns will resemble past ones.
The focus group learned that golfers control their emotions by sticking to a refocus plan. They focus on one shot at a time and disciplined pre/post routines, such as their set-up, the follow through and direction, rather than dwelling on the leader board.
Focus on the target
For golfers, focusing on the target results in better performance than focusing on trying to avoid an action (i.e. landing in the water), which increases the tendency for the unwanted action to occur or causes over compensation (i.e. the golf ball lands too long or too short).
Analysis and quality advice‘Confirmation bias’ is the technical term in behavioral finance research given to people who turn a blind eye to the importance of quality advice. Instead, they explain away success as a function of luck and/or their lack of success was blamed on external factors.
When the golfer is unable to free themselves from a depressing hook they will seek advice from a golf expert. Similarly, without good financial advice, there is a tendency to repeat the same financial errors over and over again.
Of course, even though the golfer may have had a series of lessons the year before, there’s so much that can go wrong that you never stop learning.
Being a good golfer is not about hitting great shots, it’s about minimizing bad shots. It’s about getting the best you can from what you’ve got, rather than risking everything to win.
Julie Knutsen- Author and lead researcher of the focus group who worked on the content of this article.
Lecturer, Financial Planning; Department of Accounting, Economics and Finance
Griffith Business School, Griffith University,