What Wilt Chamberlain Can Teach Us About Investing (The Irrational Investor Part 2)

On March 2, 1962 Wilt Chamberlain set an NBA record by scoring 100 points in a game. He scored 28 points in free throws alone, another NBA record, going 28 for 32 (87.5%) from the line. While 100 points in a game is no small task, Wilt averaged 50.4 points per game and had already scored 78 points in a game that season.

What was more impressive in that game was his free throw percentage. Why? Wilt Chamberlain’s career average from the free throw line was 50.4%. So how did he shoot 87.5% that night? By shooting his free throws underhanded. So why didn’t he permanently adopt the underhanded free throw permanently? Because, in his words, it made him “feel silly, like a sissy.” 

Malcolm Gladwell explored this and Wilt’s inexplicable aversion to shooting underhanded in a recent podcast. (A Q&A with Gladwell that touches on the same issue with other NBA players is here). Ira Glass explores this topic, including other examples of people “choosing wrong”, despite evidence suggesting a better outcome if they choose otherwise, in a recent episode of This American Life.

Gladwell ties Wilt’s choice to rebuff the underhanded free throw to Mark Granovetter’s threshold theory. In short, people with low thresholds are much more likely to follow the crowd, despite the advantages of not doing so. People with high thresholds are much more likely to ignore the social context of a behavior.

So how can this help you be a better investor? By being aware of our innate irrationality, we can avoid the herd mentality that led to the dotcom bubble. Awareness of this phenomenon can help you resist the latest trendy stock or strategy and to not lose sight of the underlying fundamentals of an asset. 

Knowing that your brain is working against you will hopefully prevent you from selling low and buying high, like so many millions of investors still seem to do.

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