Russia’s Wrestling Dominance
When Khabib Nurmagomedov first started in the Ultimate Fighting Championship (UFC) he spoke almost no English. He had already been successful within the Russian-speaking world in the sport of Sambo. But over the next decade, he held an undefeated run in which he dominated every one of his opponents in the leading mixed martial arts promotion in the world. He retired undefeated in 2020.
Nurmagomedov’s dominance was most obvious in his wrestling. Although he could strike, his ability to close distance and dominate opponents on the ground was particularly marked. Nurmagomedov hails from Dagestan, a Muslim majority province of Russia. He is now one of the most famous sports stars in the Muslim world, as well as being a Russian citizen. Add in that the UFC fight promoters in Las Vegas are close with Donald Trump, and you have a man who sits at the intersection of some fascinating geopolitical fault lines.
Fighting sports are old. There were famous boxers and wrestlers in Ancient Greece. The pankration, a sport similar to modern mixed martial arts, dates from Iron Age Greece. There is a sculpture from modern day Turkmenistan that dates to around 2400 BCE of someone performing a ‘kimura’; a form of arm lock often used in combat sports today.
Although fighting sports have existed for a very long time, there are still innovations happening. Practitioners talk about the current ‘meta;’ the trend of techniques currently in vogue. There is also an interchange between connected sports. Techniques from wrestling, ju-jitsu, judo and boxing often start creeping into the wider mixed martial arts rule set.
What on earth does this have to do with investing? I find the comparison between financial markets and fight sports useful. They are similar practices. Both have unforgiving, clear and tangible outcomes. Both are fundamentally dynamic systems. Applying a new set of techniques, whether it be Russian-style wrestling or selling S&P puts, has a complicated and difficult-to-predict impact. In both worlds, other people’s behaviour changes because of your own tactics.
There are, however, important differences which I think make the comparison particularly worthwhile. Financial markets have a short history. The complexity and dynamism of financial systems are such that drawing firm conclusions about very long-term trends can be difficult. Fighting sports have changed less and therefore have existed for longer.
One key conclusion I draw is that it is possible, in some circumstances, to have an investment edge. There are those who will argue that no individual can have a reliable and consistent edge in financial markets. That may be true. But if we take a lesson from Mr Nurmagomedov’s dominant career, it seems clear that there are periods of time when new or little-used investment techniques will work well against the current behaviour of the market.
This isn’t a full-throated endorsement of active management, nor a total rejection of the efficient market hypothesis. But in an environment in which sales pitches are dressed up with scientific and academic credentials, where the data is spotty and where the whole venture often seems unsuited to scientific or empirical conclusions, I think drawing comparisons can be fruitful.
The edge that Dagestani-style wrestling delivered to fighters has not yet been arbitraged away. Nurmagomedov may be retired, but many of his teammates are still active fighters. Two of them currently hold titles within the UFC. Predicting how long this dominance will last is impossible to do scientifically; even the attempt seems nonsensical. That is, perhaps, another lesson for those tasked with picking investments.
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