Is 1/404 a good ratio?

The unexpected self-reflections that came up from my Wordle strategy

When I started playing Wordle, I made the active decision to play the same first word, every single day. My rationale at the time was simple, I wanted a word that included the three vowels, as well as two common consonants, and hoped it worked.

The word I chose was RATIO.

Although purposed for a simple game, I now see that the strategy was in actuality founded on something more intrinsic within my personality and investment style. My 'Wordle process' reflects aspects of consistency, persistency and yes, the undeniable hope for a little bit of luck.

When I look back at the biggest learnings I have experienced as an investor, the discipline required to stick to a pre-defined, proven process, particularly in times of increased uncertainty, trumps almost all other lessons.

As an intrinsic value focused investor, I look for mis-pricings in the market. What am I missing? What is the under appreciated value? I try to repeat these question over and over again, looking for consistency in the discounts between business potential and pricing. If I am unable to define this basic process requirement simply and clearly, then it is not something I will (or should) invest in.

Choosing and designing a process is personal and allows for a wide degree of flexibility. Everyone has different skills, risk tolerance and preferences. One size does not fit all.

There are many ways to make money from investing but very few that I know I can do consistently over time.

Crucially, sticking to a pre-defined process, persistently, reduces the risk of falling into costly behavioural biases. Trying to change strategies in times of stress or volatility is usually unsuccessful and expensive. Similar to trying to find direction in the midst of a dust storm, you need to trust your map and compass and follow it to safety. If the map was off make the changes necessary after the dust settles but not while the sand is blowing into your eyes.

Coming back to my Wordle triumph, this week after 404 tries, RATIO was the winning word, resulting in my first word hit rate result of 0.25%. Taking into account that there are between 9,000 - 158,000 (depending on your preferred dictionary) five letter words in the English language, the probability of guessing the correct answer in the first try is around 0.0012%. Though mostly attributed to luck, this allows me very minor bragging rights in my family.

So today, I celebrate my win, but tomorrow, the hard work of choosing a new strategy word begins. Any suggestions?