Mental Skills: Get Your Head in the Game

How to control and increase one’s mental skills was the topic that drew a capacity crowd for the latest installment of CFA Society Chicago’s Vault Series on August 20. The featured speaker was Jim Gary, a Licensed Clinical Professional Counselor with 52 years’ experience in the mental health field. In 1999, Gary started a program to help high school athletes adapt behavioral techniques to enhance their confidence and performance. One of his students was Tom Kulentes, who found the program so rewarding it led him to a career as a high school psychology teacher and, eventually principal. He also joined Gary as a partner in his counselling business. Gary’s success with student athletes received wide media attention, to the point that the Chicago Blackhawks commissioned him to work with their players and staff. He was the first mental health therapist on the staff of an NHL team, so he developed the completely new role on his own. Gary had the honor of working with the teams that won three Stanley Cup Championships (earning him a ring for each one).

Gray began his presentation with a demonstration of a simple visualization exercise. He had the audience stand up and twist their upper bodies as far to the side as they could without moving below the waist. Then he asked them to close their eyes; draw, hold and release a deep breath; and visualize repeating the exercise while trying to turn further. Then they repeated the movement with closed eyes.  Most in the room were able to turn further than they had the first time. The effectiveness of the example was evident to everyone. Gray called visualization–when the mind directs the action of the body, a simple and effective tool that everyone can use to increase their effectiveness and performance in many ways (but that few do). When we train our minds to send a positive message to the body, we will get a positive result, although Gary also demonstrated that negative messages create a correspondingly opposite effect. Visualization has even been shown to be effective in medicine. With the right coaching and a strong signal, the body can respond in a way that helps a patient recover.

Gary next introduced his partner, Tom Kulentes. Now a high school principal, Kulentes experienced such a positive impact from Gary’s counselling when he was a high school wrestler that he has applied it in his professional and personal life ever since, eventually joining him as a business partner. Kulentes approaches his role as a school administrator by assuming his students begin with an unknown, but unlimited capability–or talent–to learn and improve themselves. Such talent can’t be measured, but it can be increased with improved mental skills. These skills can be taught and enhanced with mental exercises and are one of the best predictors of performance.

Gary and Kulentes used their work with the Chicago Blackhawks hockey team to illustrate the application of mental skills counselling. Like all teams in the National Hockey League, the Blackhawks operate at the highest level of competition in their field. They employ the best athletes, selected from around the world, guided by top coaches, trainers, and counsellors focusing on attaining peak performance of both body and mind through deliberate, intense training and practice. The level of competition creates intense pressure on all participants but especially the players. They need to perform at peak levels consistently while managing the pressure of travel, risk of injury, intense media coverage, contract negotiations, and fan expectations, not to mention family obligations.

Kulentes likened the competitive, pressure-packed environment of the professional hockey player to that of investment managers. The environment creates stress which he defined as the body’s internal response to external pressure. He diagrammed stress graphically under a bell curve. A state of stress occupied the center, tallest part of the curve where the subject should feel energized and focused, where performance peaks because work seems to be easy. By contrast, in the left tail, the subject might feel bored or detached from performance which can improve as he moves to the right on the stress spectrum and up the curve. Past the sweet point in the middle of the curve, stress increases greatly and becomes distress characterized by increasing fatigue, burn-out, poor health, and culminating in a breakdown. Successful performance requires knowing oneself well enough to stay in the mid-range of the spectrum and at the peak level under the curve. Kulentes emphasized this by quoting a proverb: “Mastering others is strength, but mastering ourselves is power.”

Kulentes continued by explaining the concept of a growth mindset versus a fixed mindset, as defined by the psychologist Carol Dweck. Everyone possesses elements of both, with one usually dominant. People with a dominant fixed mindset perceive their talent, or ability, as fixed, or limited to certain areas where they feel more of an innate aptitude. Growth mindset people perceive ability as something that can be developed and increased over time with effort. They see challenges as opportunities to improve while the fixed mindset person sees them as obstacles, or risks to avoid. The growth mindset person focuses on process while the fixed mindset person focuses on outcomes. People perceived as great achievers (even over-achievers) all demonstrate a growth mindset. He presented examples such as Mozart and Einstein, along with a number of greats from the world of sports.

The attribute that most sets growth mind set people apart is “grit” which Kulentes defined as:

  • Applying sustained effort strenuously over time,
  • Enduring temporary setbacks, obstacles, and failures, and
  • Persevering until the desired goal is achieved.

People exhibiting this sort of grit will enjoy greater success than they otherwise would.  Kulentes described success as the visible part of an iceberg, lying above the surface. It’s small compared to what’s below the surface which represents the important features on which success depends such as dedication, hard work, and diligence.

Gary returned to the lectern to complete the presentation by introducing one more concept: that of the Self Talk.  This he described as a brief statement affirming one’s commitment to taking control of how the mind controls the body. As examples he provided:

  • “I will take control of the messages I give myself.”
  • “Today I will recognize negative thoughts and replace them with positive thoughts.”
  • “Don’t let the pressure exceed the pleasure.” (From Cubs manager Joe Maddon.)

Curling at Kaiser Tiger

On a frosty evening where temperatures hovered just above ten degrees, CFA Society Chicago hosted an evening of curling and drinks at Kaiser Tiger, a bar with a large beer garden on Randolph Street. Curling, with origins dating back to 16th century Scotland, involves sliding a smooth stone across a sheet of ice, with the goal of centering the stone in the middle of a target (typically 146-150 feet away, the rink at Kaiser was a bit smaller though). It was added to the Olympics in 1924 as a “demonstration sport”, and was officially added in 1998. Curling is most popular in Canada, but many countries across the globe field teams in the world championships and Olympics, including Finland and Scandinavian nations, the UK and Japan.

This was our first curling occasion as a Society, and it was a packed event, with networking taking place in Kaiser Tiger’s large West Room and participants bearing the cold and taking turns hurling stones outdoors in the ice curling rinks in the beer garden. If you missed the event, you can get a group of friends together rent a lane for $40 per half hour here – Kaiser Tiger Curling. Aside from the networking, attendees were treated to a fantastic menu of craft beers, wine and appetizers. Despite the chilly temperatures, fun was had by all, and curling very well may turn into an annual CFA Society Chicago winter tradition!

Distinguished Speaker Series: Tom Ricketts, CFA

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Chairman of the Chicago Cubs and Incapital LLC, Tom Ricketts, CFA, speaks to local financial and investment professionals at the Standard Club on April 12, 2016.

After his family acquired the Cubs in 2009, Tom Ricketts, CFA, found the storied franchise in disarray. Despite not winning a World Series championship in over a hundred years, the team continued to pack fans into historic Wrigley Field. But with the 3rd highest payroll and the 2nd worst record in the National League in 2011, success didn’t seem to be just around the corner. In a presentation to CFA Society Chicago, Ricketts offered his playbook for turning the perennial “Lovable Loser” Cubs into a championship-caliber squad in just five years.

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“Every single day I wake up and think about winning the World Series” – Tom Ricketts, CFA

As the team’s new owner, Ricketts put forth three goals for the organization:

  1. Win the World Series
  2. Preserve historic Wrigley Field
  3. Act as a contributor to the community

“Every single day I wake up and think about winning the World Series,” said Ricketts. He shared an interaction he often has with older Cubs aficionados: a fan approaches and tells him “Mr. Ricketts, I’m 70 years old and a huge Cubs fan, can you please win the World Series before I die?” To which, Mr. Ricketts typically responds, “Well, how’s your health? Are you exercising and eating healthy?”

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Tom Ricketts, CFA, and Distinguished Speaker Series Advisory Group member, Jim Stirling, CFA, meet with attendees before the presentation.

When Theo Epstein was hired as General Manager, the Cubs had a poorly ranked farm system and a very old, overpaid team. The Tribune organization, which Ricketts reckoned wanted to win as much as any owner, seemed to focus on short term success and viewed each season as a “discrete event”, hardly the way to build a championship team in his opinion. The Cubs executives began their quest for a championship by looking extensively at data. One thing they found was that the correlation between regular season winning percentage and playoff winning percentage is often somewhat low. In fact, many Wild Card teams haveended up winning the World Series in the past decade. Ricketts interpreted this as regular season records not mattering as much as simply reaching the playoffs for a chance to win.

Another insight that came out of their research involved the relationship between payroll and winning. A commonly held view by the media is that if you spend a lot of money on talented players, you will win a lot of games. Sports writers often consider payroll expenditure a good proxy for a franchise’s commitment to winning. After analyzing the data, the Cubs management realized that this simply wasn’t true.

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Tom Ricketts, CFA, with CFA Society Chicago’s Executive Committee. (L to R: Doug Jackman, CFA; Marie Winters, CFA, CAIA; Tom Ricketts, CFA; Kerry Jordan, CFA; Shannon, Curley, CFA

“Correlation between payroll size and winning percentage is much lower than you’d expect. You can’t just go out and buy wins,” Ricketts said, proving his point with a graph of the two variables’ low R-squared (a measure of goodness of fit of a model). The correlation between high payroll and winning percentage has subsequently declined even further in the past few years. Ricketts sought to understand why that might be. He found his answer in Major League Baseball’s contract system, which divides a player’s lifecycle into three phases:

  1. MLB debut
  2. Arbitration
  3. Free Agency

During the MLB debut phase, players often earn far less than their fair value. For instance, last year’s NL Rookie of the Year Kris Bryant will earn just $652,000 in 2016, despite batting more home runs than all but 13 players in the National League in 2015. Meanwhile, 35 year-old Curtis Granderson was less productive than Bryant, finishing with 29 fewer RBIs in 2015, yet is paid over 20 times the amount Bryant receives. This shows the asymmetry between production and cost that Ricketts says can hamper teams’ efforts to win.

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The Distinguished Speaker Series luncheon featuring Tom Ricketts, CFA, was one of the largest with more than 350 attendees.

The arbitration phase was characterized by Ricketts as a presentation by a player’s agent saying effectively that the represented player “was probably the best player on the team, and should receive an appropriately massive salary”, while the team’s presentation would sound more like “This individual shouldn’t even be in baseball and is fortunate to receive anything at all.” Following both presentations to a neutral arbitration panel, teams and agents will often meet somewhere in the middle on salary.

After six years following the debut and arbitration phase, salaries finally become lucrative as Major League Baseball players enter free agency. The problem for a team is that by the time a player reaches this stage, their Wins Above Replacement value (Wins Above Replacement, or WAR, is an overall measure of a player’s production and value) has typically peaked, and teams end up overpaying heavily for aging, declining talent. This was the case with the Cubs team that the Ricketts family inherited from the Tribune Corporation.

A slide charting the average players pay alongside WAR was shown, depicting a huge mismatch between value and pay early and late in a player’s career. The left portion of the chart (early on in a player’s career when their value to their team exceeds their pay) indicated an economic surplus for the organization, while the right portion of the chart (when a player’s pay exceeds value-added) showed an economic surplus for aging players. Puzzlingly, free agents sign the most lucrative contracts of their careers almost exactly when their production begins to slow down.

Another factor exacerbating the effect of low WAR relative to salary in players’ later years (i.e. free agency) is the growing practice of teams giving young, highly talented players longer contract extensions. Buster Posey’s 8 year, $167 million deal at age 26 was used as a good example of this. The net effect of longer contracts for star players is that quality players are entering free agency at an older age, when their WAR has typically peaked and their talents are in decline. Given these developments, it has become harder and harder to “buy a winner” and simply acquire high-priced free agent talent in order to win the World Series.

In light of that information, what were the Cubs to do in order to build a winner?

Their solution: focus on building a core of young, homegrown talent.

A number of other problems plagued the Cubs in 2011. According to Ricketts, the team had perhaps the worst facilities in Major League Baseball and didn’t have a clear philosophy on how to play the game. The Cubs developed the following plan:

  1. Upgrade all facilities
  2. Improve and expand scouting capabilities
  3. Focus on player development – create a “Cubs way” including a how-to manual for players detailing how to play the game
  4. Talent Acquisition
  5. Contract Extensions

The Cubs made a series of trades focused on length of control and getting younger, often moving older, more established players for prospects. The average age of their traded players was 31, compared to an average age of 23 for players received in trades. Ricketts reviewed several recent Cubs moves. According to the Cubs Chairman, the trade for Jake Arrieta was “the best trade in the history of mankind”, which was met with laughter and smiles by the audience.

After shedding older players and their costly contracts, developing prospects was the next key part of the Cubs strategy for sustained success. Ricketts noted that 24 out of 50 players playing in the 2015 World Series between the Mets and Royals were homegrown talent – players who had come up through each team’s farm system. The Cubs aggressive moves to cut older players and focus on improving their pipeline paid off in a big way. By 2015, ESPN reported that the Cubs had the #1 farm system in the MLB. In just five years after beginning a rebuilding effort in 2011, the Cubs entered the 2016 season with the most talented squad in the Major Leagues.

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CFA Society Chicago Vice Chair, Doug Jackman, CFA, welcomes Tom Ricketts, CFA.

On rooftops, Ricketts opined that it’s a difficult business situation when people across the street have access to your product for free. The practice of watching games at Wrigley on Waveland and Sheffield avenue rooftops began organically, with residents bringing up a cooler of beer and occasionally inviting a friend over to watch the game. Then some enterprising individuals began charging fans to go up on their rooftops and take in the Cubs, forever changing the rooftops into a commercial endeavor. The Tribune Corporation viewed rooftops as a threat and moved to block their view of the field. Rooftop owners responded by petitioning the City of Chicago to assign landmark status to three distinct elements: the marquee, the scoreboard, and most critically for them, the “natural slope of the bleachers”. The last item effectively prohibited the Cubs organization from blocking the rooftops’ view. Now, Ricketts said, the Cubs have made peace with the rooftop owners, their presence being one of the most distinct aspects of watching a baseball game at Wrigley Field.