In late 2014 Griffith University on the Gold Coast hosted the World Scientific Conference on Golf (WSCG). Julie Knutsen, a lecturer at the university, seized on the opportunity to tee-off some research to answer a question that she’d been considering for a long time: what can elite golfers teach us about making better financial decisions?
At the Personal Finance and Investment Symposium (PFIS) held at Western Sydney University last week, Knutsen presented the preliminary findings of her research into whether decision-making processes that lead to the best results on the golf course can also improve results when it comes to financial behaviour and financial planning.
“Are they linked – that’s the question,” Knutsen said. “Could strategic and behavioural decisions that are employed by good golf players be used to apply effective financial behaviour; and also, could those lessons also provide analogies and visual clues to be used in financial education and financial planning?”
Griffith’s hosting of the conference was “quite major, because it had never been done outside of St Andrews and/or Pebble Beach before”, Knutsen says.
“I’m a golfer, and when I saw it come across my desk I thought, how do I do research and get involved in this conference at the same time?” she said.
“I’d been thinking there were analogies between golf and life, and golf and business, for many, many years, so I saw this as an opportunity to pull this together.”
Commendable zeal, gross errors
Knutsen said the British author CB Daish wrote in his book, the The Physics of Ball Games: “Hard-headed, quick-thinking men of affairs are to be seen daily on any golf course, bringing to this pursuit a highly commendable zeal but, all too often, a singular lack of skill; and displaying, from time to time, such gross errors in decision making which, if they were carried over into everyday business affairs, would be guaranteed to ruin them overnight.”
“So I started to think: What if the inverse were true?” she said.
“Can the learning from good golf decisions carry over into everyday financial decision making, and perhaps help to avoid financial ruin?”
Knutsen said that a review of the literature on the science of golf and financial behaviour revealed some common themes.
“There are three … psychological errors that are common to both areas: over-optimism, over-confidence, and emotional judgements,” she said.
“You’ll see that the only difference is that good golfers manage this really well. We haven’t learned to manage it very well over in financial behaviour.”
Knutsen put together a focus group made up of three professional golfers, six academics “who also had some affinity with golf”, and then three regular golf players.
“I did very standard focus group-type research. We had qualitative methods; we had three hours to discuss; we had semi-structured questions, just to get everyone’s golfing experiences; and then we also made some links to financial behaviour.
“In the afternoon we tested the theory and went off to the golf course and played nine holes.”
Good golf, good financial decisions
Knutsen says the group “did find definite correlations between what could be learned from good golf, into financial behaviour”.
“There were a couple of themes that fell out from the discussions, insofar as good golfers we found tend to set plans, plan and evaluate; they focus on a target; they are very consistent with their emotional control; and they will tend to play safe – putt for par.
“Just those things alone had some good lessons for effective financial behaviour as well.”
She said that an insight that came out of the focus group discussion was the importance of a good coach.
“That is so much also relevant to financial planning,” she said.
“If you’ve got a good coach who is guiding you and telling you perhaps which club to play to reach that strategy, it can be a great thing.”
Knutsen said other comments by the focus group provided strong parallels to the literature on good financial decision-making. She said elite golfers have a strong focus on a goal, have a strategy and do not avoid taking action.
“Probably one of the mot profound things that came out of the discussion was about putting – play safe, putt for par,” she said.
“Good golfers hit birdie putts less hard.
“If you’re trying to win the game, a good golfer will actually play it a little bit safer … and leave themselves short of the hole to avoid difficult problems. In that analogy, I can see it so clearly for effective financial behaviour. Many over-optimistic investment decisions are made by believing they can control events – hit the target hard, for example, and then pay the consequences.”
Still in the rough
Knutsen says there is considerably more research to be done on the parallels between good golf and good financial behaviour.
“Even though the global financial crisis gave us a whole heap of data [to show] we don’t get it right, we’re still in the rough on how to do it better,” she says.
“We’ve got advisers, and all sorts of things, but we still make ineffective decisions.
“There is a possible link between strategies used on the golf course and effective financial behaviour, and I also think the analogies can be used in financial education and financial planning – and I’d like to do a lot more on that.
“I’m hoping to continue on – do more discussion, more interviews with good golfers, leverage the worldwide interest in golf – and then work on some vidual clues. It could be some articles, using both golf and financial behaviour to be used in financial education and financial planning.”
