When Sachin Tendulkar and Rahul Dravid met for the first time – about 30 years ago – do you think they asked each other ‘what is your batting average’?

I doubt it. I doubt whether any batsman in the world worried about his batting average on a day to day basis. They would have instead spoken about every other topic in the world – cricket of course, music, girls,…….

I am sure they must have asked ‘what is one match you remember’ rather than why is your batting average 54.33 instead of 58.43. Sounds dumb no?

Now people making news letters (a few years ago Warren Buffett estimated newsletter buying at US $ 12 billion) keep telling you how many calls they got right and how many calls they got wrong.

Mutual funds keep talking to you about the average returns that their fund has delivered. I am not so sure how much of the average is luck, and how much is skill. That is another problem.

Most of us have to focus on ‘how much do I make when I get it right’ and ‘how much do I lose when I get it wrong’. Now when you see mutual fund performance you really do not get it right or get it wrong. You ONLY HAVE shades of grey. So you choose a fund that gave 23% return and I chose a fund that gave 14% return. I surely made lesser money than you did – relatively – for that year, however there might be a role reversal the next year. So I could earn more. I need to be assured that YOU choose that fund by a deliberate process. Or did you not?

I am sure most of the biggest investors in the world – Buffett, Soros, Munger, Vallabh Bhansali, Damani, Rakesh Jhunjhunwala,…all of them have an average (CAGR) but none of them concentrate on that.

When I take a taxi from Nerul to Pashan, I do not ask the taxi driver – what will be the average speed at which he will travel! I just ask him ‘on an average how much time will you take to cover the 140 km distance, assuming we do not stop inbetween for a break’.

The investment success comes from MAKING more from right calls and LOSING less from wrong calls. So if you got 8 calls wrong and 5 calls right, but made 3 crores in the right calls and lost 1.2 crores in the wrong calls, you still got it right, did you not? The results will obviously favoring the correct ones – or you are getting it wrong. Honestly you will be better off indexing.

Only newsletter producers and asset gatherers are talking ‘average returns’. No clue who is listening. I am not.