The Importance of Process

At the beginning of 2014, the Astros began selling a new T-shirt in the gift shops of Minute Maid Park, one that succinctly defined the primary thing their fans could genuinely root for, though it remained more abstract than a winning team. PROCESS, the T-shirt read, in bold capital letters. The diehards bought them.

- ­Ben Reiter, Astroball: The New Way to Win It All

Great minds love a Venn.

- Clay Hilbert

By the end of 2013, the Houston Astros had achieved the status as one of the worst franchises in major league history having finished its fifth straight losing season and third straight with more than 100 losses. An eyesore on paper and on the field, winning baseball games didn’t seem to be a priority for the organization. With the Astros consistently producing disappointing results season after season, Houstonians began to worry that their home team would forever be labeled the “Lastros”, but diehard fans kept the faith that management knew what it was doing.

At the depths of the Astros’ futility in 2013, sportswriter, Ben Reiter, boldly predicted in a Sports Illustrated article that Houston would win the World Series in 2017, and his recently released book, Astroball, details the Astros’ extraordinary resurrection from the doldrums of last place that indeed unfolded over the subsequent four years. The seeds of the revival were planted with the arrival of Jeff Luhnow in 2011 as the team’s new general manager along with his top analyst and former NASA engineer, Sig Mejdal. The new leadership put in place a unique process that melded quantitative and qualitative metrics to rebuild the team into the fabled 2017 World Champs that Reiter had foretold. However, in the summer of 2013, belief in the process seemed dubious to all but the truly faithful.

For value investors these days, it can seem like those painful dog days of summer endured by the Astros. With growth stocks having outperformed value stocks on a rolling 10-year basis over the past four years, many have begun to question the theory and practice of investing in value stocks much like they did at the end of the 1990s. However, history still suggests, and we continue to believe, that an investment process geared towards building a portfolio of quality value stocks will generate good long-run returns. While unpleasant, periods of underperformance actually serve to help make value investing a durable long-run investment strategy by convincing others to abandon it and in turn create opportunities for the rest of us.

The story of the Astros’ resurgence and value investing highlight the importance of sticking with your process at the moments of maximum doubt. Whether building a baseball team or an investment portfolio, any solid process contains some essential, common elements. First, a process should be Theoretical – based in logical reason for why it should work. It should also be Empirical – founded on past evidence of success. It should be Sustainable – built to capitalize on and endure human nature. And, perhaps most importantly, it needs to be Refinable – continuously improved. Much wisdom can be conveyed in a Venn diagram, and, as shown below, it is at the intersection of these four parts that a complete process is found. It is possible to construct a process with any one of these elements or two or three, but it takes all four to build a reliable, repeatable and successful process. Staying true to a process and each of its interlinked parts when things don’t seem to be working is difficult and the key to ultimate success.

Clement is a Financial Advisor for Alpha Omega. Clement has more than 10 years of experience in the financial services industry. For feedback or questions regarding this blog post, please contact Clement at

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