The Parallels Between Solving the Rubik's Cube and Investing: A Lesson in Practice and Strategy
Over the past month, my 6-year-old son and I have been learning how to solve the Rubik’s Cube – and here is something that got me thinking. It is incredibly difficult to solve the Rubik’s cube, much like navigating the complexities of investing. The cube has 43 quintillion combinations, and if you stare at it long enough, you will find it mind-boggling. Similarly, even investors with several years of experience and expertise find investing challenging.
The Complexity of Investing
A Rubik’s cube has multiple interconnected parts; one wrong move can take you back to square one. Investing is similar – myriad factors, such as inflation, currency, interest rates, company profits, company management, etc., hold sway over investment success, and one wrong investment decision may lead to significant losses. No wonder those who crack the code, i.e., solve the cube or become successful investors, are raised to a pedestal, and treated as geniuses.
Not Just for Geniuses
Does this mean that if you are not a genius, all your attempts at solving the cube or investing are in vain? Fortunately, no. Here are some parallels that I figured between investing and solving the Rubik’s cube:
Building muscle memory is essential to succeed
Practice. Practice. Practice. Solving the cube on your first try would be nearly impossible. You need to keep practising, learn tricks along the way and build muscle memory that makes them better investors. Their expertise stems from having gone through similar trends multiple times over decades – and they can leverage this experience to distil noise while advising clients.
Rule-based approach
In the Rubik’s cube realm, there is a stark contrast between a structured approach—often termed 'algos'—and haphazard, erratic steps. Unsurprisingly, the structured approach is a clear winner. These 'algos' offer a streamlined path, enabling swift progression through the cube's complexities and eliminating tedious backtracking. Over time, these algorithms become ingrained, eventually becoming second nature in solving the cube.
Crafting strategic foundation
Investing success also involves a series of processes with multiple checklists, protocols, and sub-activities that can institutionalise the process of investing. Jumping between steps or being haphazard is a recipe for disaster. Steps such as creating a detailed plan or an IPS (Investment Policy Statement), focusing on asset allocation, strategy around security selection, a stringent review mechanism and being vigilant on cost, can form a foundation on which to build your investing success. For experienced advisors, these steps almost come naturally, almost like Rubik’s Algos.
Imagination, Innovation, and Honing the Cutting Edge
The record time to solve the cube has come down from one month (1974) to 23 seconds (1982) to today’s world record of 3.13 seconds. This staggering reduction in solve time is due to profound innovation in three areas:
Transformative Shifts
Pertaining to the investment landscape, we are witnessing transformative changes driven by innovation, deepening of talent pools and implementation of global best practices and supportive regulations. Innovation in products and platforms such as REITs, private equity, AIFs, large value funds (LVFs), are expanding the investment landscape. Investors can choose from a wide range of portfolio managers, advisors or distributors that are the ‘right fit’ for them. This rapid innovation is unlocking phenomenal opportunities for sophisticated investors.
Talent pool
Enabling regulations lowers entry barriers for talented managers, creates a level playing field and protects the rights of investors. This opens a large segment of the talent pool which looks at investing as a viable career – leading to greater innovation and better investment frameworks – a virtuous cycle!
Global best practices
Through supportive initiatives, we are becoming a jurisdiction of choice, both for local investors to access foreign markets or for foreigners to invest locally. Not surprisingly, we are seeing ever-increasing flows into financial investments from across the ecosystem, including mature investors such as family offices and institutions.
Consistency and Discipline
Although there is no hidden formula for mastering the game, adhering to a consistent and disciplined approach can be the key to attaining the ultimate prize in both conquering the cube and excelling in the art of investing.
Analyst comment
This news can be evaluated as neutral. As an analyst, it can be predicted that the market will require consistent practice, a rule-based approach, strategic foundation, imagination, innovation, and honing the cutting edge to excel in investing. The transformative shifts, talent pool, and global best practices in the investment landscape will continue to create opportunities for investors. However, there is no hidden formula, and consistent and disciplined approaches will be crucial for success in both solving the Rubik’s cube and investing.
