An actuary by training, Douglas first joined Platinum in 2003 as an investment analyst, having spent some time at the Commonwealth Bank as a product actuary and, prior to that.. More
At Platinum our only goal is for the team to generate good outcomes for our clients. There are parallels with the All Blacks, who have an ethos around how rugby should be played, a requirement to find skilled players, a strong aligned system of rugby in New Zealand and a belief that “no one is bigger than the team".
At Platinum, we talk a lot about facts versus feelings[i].
With the All Blacks long-term success now coupled with huge commercial interests, there has, in recent years, been intense coverage of this great sporting team, particularly on their culture, an acute focus since 2005 after collective poor behaviour. The culture creates positive feelings.
The All Blacks are the most dominant team in sporting history. This results from a confluence between initial success while a national identity was being forged as a small, South Pacific outpost, and the subsequent incentive to create an aligned structure despite rugby being amateur until 1995. These are the facts.
When analysing companies we trace their antecedents to work out why a business exists, how it has evolved, and what it is today, before we assess its future, to weigh against its price. In this light, the All Blacks journey has taken 148 years since rugby was introduced to a nascent colony. They have built a system that looks set to continue to produce in the years ahead. However we cannot weigh this against market prices, unless we could consider long term betting odds.[ii]
When considering investing with a fund manager, facts and feelings are also a useful framework. Recent strong performance, or celebrity-like focus on “star” fund managers tend to create warm feelings. It is important not be blindsided by either. To focus on facts requires understanding the philosophy, the people, the process. One must determine if the manager (team, not individual) has an edge on the market, and if so, will it persist.
At Platinum our system is founded on a belief that opportunities are best found in the out-of-favour, and where there is change. We believe a deep, almost obsessive, understanding of businesses is a critical component of analysis. This requires us to hire curious people. Our system has evolved and been refined (we think for the better) as the company has grown since 1994. [iii] The one-location environment has consciously been set up to foster an intense collaborative debate. Our only goal is for the team to generate good outcomes for our clients.
There are parallels with the All Blacks, who have an ethos around how rugby should be played, a requirement to find skilled players, a strong aligned system of rugby in New Zealand, a belief that “no one is bigger than the team”[iv], and who strive to win for their nation.
Ben Darwin’s work on cohesion[v] focuses on interactions between people within a team. The All Blacks have benefited further than as a team alone. They stand at the apex of a wider system of Super Rugby, provinces, clubs and schools. The Christchurch-based Canterbury Crusaders are our inaugural winner of Australasia’s Best Sporting Team[vi], with cohesion at their heart; their feeder province Canterbury has been dominant in recent years; even Christchurch Boys High School note proudly that they provided seven members of the unbeaten 2013 All Blacks.
In the article that follows, the All Blacks’ success, driven by the development of an aligned system of NZ Rugby is considered. Its emblems - the haka, the silver fern and the black jerseys - are synonymous with New Zealand in the eyes of many and originate from the 19th century.
The key message is that more importantly than recent improvements in culture that a system, the development of which was incentivised by national identity, has arguably been by far the bigger driver.
All Blacks : The Outcome of a System
The All Blacks are widely cited as the World’s most successful sporting team. Throughout their history they have a 76% win rate[vii] against the “Foundation Eight” after 456 tests since 1903. South Africa rank second at 59%. Australia’s test cricketers dominate at 60%[viii], while soccer kings Brazil have a 57% record[ix] in matches against the other top nations.
Much has been made in recent years about the All Black culture, particularly its rebuilding around 2004-2005 following a difficult transition to professionalism post 1995. Dan Carter noted they wanted to “have [their] salaries and keep [their] amateur style socialising”[x]. Awareness of the new culture is well-told in James Kerr’s “Legacy”. This has been further fuelled by profiling via global sponsors like AIG and Adidas, and an increasing reliance on “trickle down”[xi] from broadcasting and sponsorship revenues to continue funding the system.
However, admirable mantras like “sweeping the sheds”[xii] were adopted by Japan’s soccer team, whose supporters even cleaned up the stadium at 2018’s World Cup, without on-field success[xiii].
Clearly a strong culture is commendable but the All Blacks are not above other sports’ stars in making mistakes. NZ Herald ran “match the All Black with the misdemeanour” in 2016[xiv], a long time after this embedded culture change.
The All Blacks have been revered for a long time. Top players, past and present, from all over the world often talk of them in terms of greatness; at the peak of their sport.
Spiro Zavos highlighted in his 1998 book “Ka Mate! Ka Mate!” that while the British often tend to think NZ has advantages of space, climate, or physical superiority, he emphasised that the key was the development of “a superior system of rugby” and a “coherent understanding of how to play”.
As rugby has been inextricably linked with the national identity[xv], emblematically and psychologically, and even variously associated with the economy[xvi], election outcomes[xvii], and national grief after losing important games, it certainly appears that there was enough incentive for NZ to build an aligned, coherent system while the game remained amateur globally until 1995.
Four other teams have reached a World Cup Final. In Australia, England and France rugby clubs did, and continue to, hold a large amount of power, often in the Northern Hemisphere due to generous benefactors[xviii]. Perennial rival South Africa had its own well-documented socio-political problems.
Notably, Ireland have made big strides in recent years and now sit second in the world rankings[xix] with a provincial and club system modelled very closely on NZ’s Super Rugby and provincial system.
“Why England Lose?”[xx] demonstrates soccer is dominated by large, wealthy countries with the most experience playing the game. Rugby has smaller reach, but the game remains dominated by the developed nations that introduced the game in the 19th century.
Rugby came to NZ in 1870[xxi], introduced by Charles Munro, with the first game held in Nelson. Canterbury was the first provincial union formed in 1879, and have won nine of the last 11 provincial championships. Auckland, founded in 1883, has been most successful over time, and won this year.
While the first National tour took place in 1884 to Australia, the Natives tour of 1888-9 was perhaps the defining beginning of the creation of the link between rugby and national identity, which one could argue spawns the current system of success. On this mammoth tour of 107 matches in the British Isles, Australia and NZ, this team, dominated by Maori, lost only six games, and introduced the symbolic black jerseys and silver fern, while introducing the haka. These define the All Blacks today.
The NZ Rugby Union was formed in 1892 and by 1900 Auckland were declared the first Champions of the Colony. The Ranfurley Shield, a challenge trophy, was first awarded to Auckland in 1902, and is held today by Otago. By 1903, The All Blacks had played, and won, their first test in Sydney, versus Australia, before the seminal moment in NZ Rugby history, when the 1905-6 “Originals” led by Dave Gallaher, who later died in World War I, toured Britain, France and North America, winning 34 of 35 games. With NZ being upgraded from a colony to a dominion in 1907, this was a significant period in the formation of a national identity. At the time, around one million people lived in the country.
When the 1924/5 “Invincibles” toured UK, France and Canada winning all 32 matches, the legend of the All Blacks grew larger, and their reputation blossomed. During the 1920’s, player numbers swelled by over 50%.
In my father’s attic, he found several 1963 Rugby World magazines, ahead of an All Blacks tour to Britain. They cited “the toughness and hard play of these dedicated men”, noting that home-country players would just want to say “I played against the All Blacks” given “the prestige of the wearers of the silver fern” before asking “are the All Blacks invincible?”. The 1967 book “Rugby in Black and Red” by JGB Thomas determined their success was based on simplicity, a blend of possession, power and pace, not far from Zavos’ 1998 conclusions.
The basis of today’s system was the formation of the National Provincial Championship in 1976, a full 12 years before England introduced its first league system. With 26 provinces (19 of which were formed before WW1) fed by over 500 clubs this is an annual tiered competition and which in recent years is known as the Mitre10 Cup at the elite level.
The clubs are in turn fed by a deep youth and schools rugby system[xxii]. Weight-based, rather than age-based games, help to keep smaller kids in the game longer. An intense focus on core skills like “catch-pass” from a young age is important in their development. Top schools vie for talent, and the big high school matches are televised. Dan Carter remembers Canterbury Boys High School “never letting you forget its proud history”, and with 16 of its 47 All Blacks being produced since 1996 it is catching up on Auckland Grammar School which boasts 52 All Blacks.
Superstar of the 1995 World Cup, Jonah Lomu went from being “known to the police” to Wesley College on a scholarship and into the 1st XV at 14 years old based on what became his famous “size, skill and speed”, and went on to become Head Boy and Captain of a successful school team after excellent guidance there[xxiii]. Richie McCaw was another to break into his school 1st XV at 15[xxiv] and is today the world’s most capped player. As Carter put it “NZ Rugby is good at identifying talent and giving it a chance”, so we end up seeing many familiar names in NZ age group and schoolboy teams if we look back in the archives.
In the 1980s the pace of change accelerated, with Australia and NZ initiating, convincing other International countries, and then co-hosting the first Rugby World Cup . In 1987 in Auckland, David Kirk hoisted the Webb Ellis Trophy as All Black captain after a 29-9 win over France. Ahead of the World Cup however, in 1981 there was a controversial inbound tour by the South Africans, with political protests and violence against their apartheid regime. The All Blacks were banned by the NZ High Court from making the return trip in 1985.
But around this time some felt “rugby lost its status as a religion”[xxv] and the controversial rebel Cavaliers tour to South Africa by many leading All Blacks of the time, “prepared to sacrifice All Blackdom for other incentives” perhaps also reflected the amateur players were generating wealth for others. The rebels were certainly let off lightly, being banned for only two games and going on to form the core of the winning World Cup Team. But, this was ultimately part of an inevitable move towards professionalism which occurred after the 1995 World Cup, which had been dominated by Jonah Lomu’s incredible physical power and speed, but won by hosts South Africa.
This caught the imagination of Rupert Murdoch, and News Limited were quick to drive the set-up of Super 12 Rugby[xxvi] and the Tri-Nations for NZ, Australia and South Africa. Certainly in Australia and NZ the revenue provided a much-needed fillip in a battle against losing players to rugby league, lured by the dollars. NZ adopted a franchise model with five Super Rugby teams based in the heartlands of Auckland, Canterbury, Otago (Dunedin) and Wellington, with Waikato Chiefs based in Hamilton the only debatable choice. They ensured a reasonably equitable distribution of 125 contracted players.
Super Rugby became “almost a part of the fabric of society” via Sky TV coverage[xxvii] but it took a little while to win some fans over, particularly the Crusaders who “took a while to identify with the brand, as opposed to the [traditional, provincial] Canterbury rugby brand, but the horses and the music [of the pre-game show] definitely helped”.
NZ teams have dominated the competition winning 16 of 23 tournaments; all five franchises having won it; Crusaders a record nine times. Over time, the competition has grown (to 18 in stages, but is now 15). Argentina and Japan have entered teams but NZ has kept the same five teams throughout, while Australia and South Africa have not.
The move to Adidas as jersey sponsor in 1999 was the beginning of the true globalisation of All Blacks brand, and the short movie “Made in Black”[xxviii] is an insightful illustration of how far this relationship and sportswear technology had come by 2015.
Meanwhile the All Blacks failed to win the 1991, 1995, 1999, 2003 or 2007 editions of the game’s top prize, the World Cup. They began to be called chokers on the big stage. Through the period 1987-2007 they still had the best record among leading rugby nations[xxix] but Australia twice, France twice and South Africa got the better of them on the big stage. McCaw talked of “national grief” and of knowing what “loss will mean in our rugby nation” while former English player Paul Ackford noted in 2009 they had “lost their aura of invincibility”[xxx].
During this phase were the events that culminated in a revisiting culture, spawning the book Legacy. Without dwelling on what are noble goals and objectives around the culture, many of the problems likely resulted from a transition to professionalism and despite codifying what they stand for, and excellent results on the field, improvements could still be made.
A home World Cup in 2011 became a must-win, and incredible pressure on the team almost saw a shock French win in the final, but the team, coached by Sir Graham Henry and captained by Richie McCaw held on to win 8-7. McCaw reflected on victory: “We’ve won. I should be happy, all I feel is relief”, but with the monkey off their backs, the All Blacks won the 2015 World Cup, and like Brazil in soccer, became the first team to win three times. The silver fern even made the “final” of the referendum for a new flag for the country in 2016, losing narrowly to the status quo.[xxxi] Next year in Japan, they are favourites to complete a hat-trick of wins.
The commercialisation continued in 2012 with AIG becoming the first shirt-front sponsor, adding to NZ Rugby’s top line. This funds the sport, for example, funnelling NZ$31m of its NZ$257m total revenues back down to the provinces in 2017[xxxii]. As one reads the NZ Rugby’s Strategy vision for 2020[xxxiii], the goals are high, but the structure is certainly in place, with Ireland the other nation that seems to have formulated a coherent, aligned strategy. However, Plan Ireland[xxxiv] looks like the sincerest form of flattery.
Since this article was completed, on 17 November Ireland beat the All Blacks 16-9 in Dublin. This was Ireland’s first home win, and second overall, in 31 matches against the All Blacks since 1905.
[ii] The most distant odds I can find on the internet today relate to the 2019 World Cup. Our investment horizon is 3-5 years, and we do not speculate in any case!
[iv] Source : Legacy by James Kerr
[vii] Data sourced from espnscrum.com extracted 31 October 2018. The “Foundation Eight” (Australia, England, France, Ireland, NZ, Scotland, South Africa, Wales) have dominated rugby and each others’ fixture lists, since Scotland beat England in the first international in 1871. The record against only these teams shows NZ’s dominance. The win rate is higher if all nations were included.
[viii] Data sourced from espncricinfo.com on 31 October 2018. Test cricket is only played by a small number of countries, so the entire test record is a reasonable measure.
[ix] Data sourced from fifa.com on 31 October 2018. Top nations a 7 teams who have won the World Cup (Argentina, England, France, Germany, Italy, Spain, Uruguay) and perennial runner-up, Holland.
[x] Source: “My Story” by Dan Carter, as are all subsequent quotes attributed to him.
[xi] Source: Geoff Parkes attributes the phrase “trickle-down” to Dylan Cleaver in his 2017 article published on theroar.com.au titled “Will Grassroots and Professional Rugby Ever Embrace each other?”
[xii] Source: Legacy by James Kerr
[xiii] To read more on this : https://www.independent.co.uk/sport/football/world-cup/world-cup-2018-japan-fans-vs-belgium-clean-up-stadium-team-changing-room-thank-you-note-a8428666.html
[xiv] Source: https://www.nzherald.co.nz/sport/news/article.cfm?c_id=4&objectid=11725218
[xv] Refer to three papers: “Rugby and the Forging of National Identity” by Scott Crawford of Eastern Illinois University, published in ASSH Studies in Sports History No.11 in 1999 and “Sports, Tribes and Technology : The New Zealand All Blacks Haka and the Politics of Identity” by Steve Jackson, Univ of Otago and Brendan Horowitu, Univ of Waikato published in the Journal of Sports and Social Issues, May 2002 and ‘Rugby and National Identity in NZ” by John Nauright, Professor of Sports Management at George Mason Univ. in 2007
[xvi] Eg. “What is an All Blacks Win Worth”, Tom Fitzsimons in the Dominion Post, 31.10.15
[xvii] Eg. “Will the All Blacks affect the upcoming NZ election?” Jamie Wall in Rugby Pass, 21.09.17
[xviii] Geoff Parkes attributes word “benefactors” to Nick Bishop in his theroar.com.au article mentioned above
[xix] Source: World Rugby Rankings as at 31 October 2018
[xx] “Why England lose & other curious football phenomena explained” by Simon Kuper and Stefan Szymanski
[xxi] For the timelines, unless stated, sourced from nzrugbyhistory.co.nz and nzhistory.govt.nz/keyword/rugby
[xxii] References here include “The Making of an All Black : How NZ Sustains its Rugby Dynasty” by Andy Bull published in the Guardian, 11.9.15; “The Kiwi Kings: The current All Blacks are the most dominant rugby side ever. Why?” from The Economist, 19.11.16 and “The reason why rugby is so important in NZ” from NZ Herald, 22.10.17
[xxiii] Info and quotes from “Jonah Lomu, The Autobiography”
[xxiv] Source: “The Real McCaw” Richie McCaw, The Autobiography, and all quotes attributed to him.
[xxv] “The Road to Cardiff, The story of New Zealand and the Rugby World Cup” by Graham Hutchins and David Kirk for both quotes and reference.
[xxvi] References for Super 12 launch are “Sanzar Saga, 10 years of Super 12 and Tri-Nations Rugby” by Bob Howitt, and “Ten Years of Super Rugby” by Matt McIlraith
[xxvii] “Ten Years of Super Rugby” by Matt McIlraith, as is immediately following quote regarding the Crusaders.
[xxviii] “The Making of Black” is a documentary that I saw on an aeroplane inflight entertainment system combining the meaning of Black, and development of the hi-technology jersey for the 2015 World Cup; it can currently be found at https://www.youtube.com/watch?v=VXUHxHtgb6k
[xxix] Data sourced from espnscrum.com
[xxx] “Southern Hemisphere dominance is fading ahead of the Rugby World Cup” by Paul Ackford in the Telegraph, 12.9.09 - Needless to say, NZ won the next two World cups!
[xxxi] See : https://www.electionresults.govt.nz/2016_flag_referendum2/
[xxxii] New Zealand Rugby Annual Report 2017
[xxxiii] New Zealand Rugby 2020 : A Bright Future for Rugby
[xxxiv] Source : IRFU Strategic Plan 2013-2017 : From grassroots to international success; one island, one passion, one goal
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