Shiny new thing no guarantee of success

David MoonBlog

When the University of Tennessee hired Tony Vitello in 2017, he was not the Vols’ first choice. Only after University of South Alabama head coach Mark Calvi declined UT’s offer did (then) UT Athletics Director John Currie turn to Arkansas assistant Tony Vitello, one of his fallback candidates.

Vitello, a 14-year assistant coach at Missouri, TCU and Arkansas, had never been on a team that had won a conference championship. As a player, Vitello’s only personal awards were related to his grades, as he was named to the Big 12 Commissioner’s Honor Roll twice in his three years as a starter at Missouri.

There was nothing about Vitello that screamed “home run hire.” He was certainly not the shiny new thing in 2017. But then neither were Karen Weekly, Rick Barnes or Josh Heupel when UT hired them. Or 22-year-old Pat Summitt, who in 1974 was named Lady Vols’ head coach, only five months following her graduation from UT-Martin. Despite a lack of initial flash, those hires seem to have turned out to be enviably reasonable.

The shiny new thing phenomenon extends well beyond athletics. It’s common in the investment world. People will buy a stock simply because its price has already increased, without any understanding of the business or cause of the stock price change. GameStop stock doubled over a couple of days in early June. “It went up, so it must be a good investment! So what if the company lost nearly $2 billion in the past six years? It’s going up!” Of course, this ignores that GameStop would be bankrupt if it hadn’t suckered shareholders into putting an additional $1.6 billion into the company on the heels of a chat board fueled mania in 2022.

Imagine that 1,000 people enter a coin-flipping contest. Eventually, someone emerges undefeated from the competition, after guessing correctly or benefiting from his opponent’s incorrect guess 10 consecutive times. When someone is successful, it is useful to try and understand if it is because of some underlying fundamental advantage – or if that person simply won the coin flipping contest.

And to do that requires some analysis beyond simply observing who won and lost.

People are susceptible to the allure of the shiny new thing phenomenon when they don’t understand the fundamentals of a situation. If you don’t understand why something happens, it is tempting to ascribe some random causality to the event, no matter how goofy or illogical. The price of Bitcoin may double next week, but it won’t be because of any fundamental economic reason – no more so than a batter on your favorite team hit a game winning single because you chose to watch the ninth inning from a different room.

David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.