Saturday, November 27, 2010

On Risk, Return and Batsmanship

In Finance, one of the cardinal sins is to undertake an investment decision without assessing the forecasted return in the context of the risk exposure. Risk and Return are inextricably linked. I'd rather have my money earn 3.5% in the Savings account if an alternative market investment promises a 10% return with a standard deviation of 50%!

A common metric often employed to evaluate portfolio performance is the Sharpe Ratio, which is basically the premium return that is offered by an investment for each unit of risk undertaken. No wonder "risk-adjusted return" is a hackneyed phrase one hears from portfolio managers.

How is all this related to Test Match Batsmanship? Very closely related as we shall see.

Batsmen in Test Matches are often judged on the basis of their "batting average". An average of 50+ is usually regarded as outstanding and is often the figure that most Test batsmen aspire for. Ofcourse, one needs considerable skill to maintain an average of over 50. But more than skill, I think the key is to understand risk-return dynamics well.

There are two components to the batting average that ought to be understood if one wishes to optimize it:

Component A : Time Spent in the Middle i.e the No of balls that one lasts on an average per innings

Component B : The ability to force the pace while in the Middle. This component is better known as "Strike rate" i.e the No of runs that one scores per 100 balls faced.

Batting Average = F(Component A, Component B)

Sounds too obvious, yes. But this is not exactly a simple plain-vanilla two-variable function. What's often overlooked by batsmen and cricket pundits is that A and B are not independent variables. A is a function of B and vice-versa.

In fact, the two components influence each other negatively. Typically, a batsman with a high strike rate spends less time in the middle, because of the risks involved in trying to force the pace. Similarly, a batsman who bats for long periods of time tends to have a lower strike rate, for reasons that are obvious.

So what should one do to optimize the Batting Average? Should the batsman adopt a risk-averse style by concentrating only on putting away the rank bad ball and defending the rest? The likes of Hutton, Gavaskar and Dravid have achieved great Test records by optimising Component A, without overly worrying about Component B. Nevertheless, for every Gavaskar, there are a dozen other fine technicians who couldn't reach the magic figure of 50 despite their excellence at Component A. Geoff Boycott is a name that readily springs to mind.

There are others who have Test records just as enviable as those of a Gavaskar or a Dravid thanks to their extraordinary strike rates. Viru Sehwag is an obvious example. Here's a guy who is a very limited batsman in many ways, with serious technical deficiencies against the short rising ball. A guy who lasts only 64 balls each time he comes in to bat (that's probably about half the number of balls per innings faced by someone like Gavaskar). And yet, he has a brilliant batting average of 54, significantly better than Gavaskar's 51!! The secret of his success is that he manages to maintain a strike-rate of 80 and yet lasts 64 balls per innings!

There have been several daredevil strokeplayers in the past who have graced the game of cricket. Think Gilbert Jessop, Kris Srikkanth and more recently Shahid Afridi. All of them had batting averages significantly below 40. This is because their high-risk approach to the game significantly reduced their average duration at the crease.

The reason why Sehwag is such a great treasure is not because he is a great strokemaker (there have been several such players in the past) or a great technician (which is hardly the case). Sehwag's greatness lies in his ability to understand the dynamics of risk and return. He is able to play his normal game without taking undue risks that were the bane of players like Afridi or Yuvraj Singh.

It is vital for batsmen around the world to grasp the importance of maximising risk-adjusted returns. The tradeoff between risk and return may vary among batsmen depending on their skill level. Yet, the magnitude of the tradeoff can be minimised only if you are aware of the tradeoff in the first place!

Take Dravid for instance. The man averages a fantastic 53 with a strike rate of about 42 per 100 balls faced. He roughly faces 110 balls each time he visits the crease in a Test match. I'd like to argue that he has not consciously thought about the tradeoff during his career. For a batsman of his ability, the tradeoff between strike-rate and duration at the crease shouldn't be too large.

Mathematically, the tradeoff can be stated as shown below :

d(No of Balls per innings)/d(Strike Rate) <= 0

The objective should be to minimise the absolute value of the above differential!
Cutting down the aerial strokes to the extent possible and running well between the wickets are some of the ways of achieving this objective.

Let us suppose Dravid had been a little more aggressive during his Test career and maintained a strike-rate of 50 instead of 42. This might have reduced his "No of balls per innings" figure from 110 to perhaps 100. Nevertheless, it is a great trade-off. His hypothetical batting average in this case is 56.5, a good three runs higher than his current average! (Note: I'm assuming the same no of "Not out" innings as before)

The man widely regarded as the greatest batsman in Test history is ofcourse Sir Donald Bradman. People often have endless debates on what made him so special. The Don was a somewhat frail man with poor eyesight. In fact, he came perilously close to losing his life on account of poor health during his career. By most accounts, he wasn't a particularly "correct" batsman, with a very unusual grip and a notorious tendency to play across the line. Yet, he averaged 99.94 in Tests and more astonishingly 95.14 in all first-class cricket!

The secret to his success is that like Sehwag, he understood the risk-return tradeoff probably better than most people. No wonder he was a professional stock-broker off the field. The Don managed to maintain a strike-rate of 60 in Test matches (astonishingly high back in the thirties) and lasted about 145 balls per innings.

The figure of 145 is not as exceptional as his batting average. It's still probably better than the Component A of most other batsmen in Test history. But I'm sure there are several bastsmen who are running him close. What made him special was his ability to score at a strike rate as high as 60 without compromising on the time spent in the middle.

I know this post may sound a tad too obvious to a lot of people. But I think it bears repeating. The Risk-return tradeoff is something we're all aware of, yet we don't always consciously think of optimising it in the daily business of life!

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