They don’t receive “nearly all of the benefit”, they are just doing a bit better than the market consistently. This feels like a motte-and-bailey argument, with the motte being the examples of Buffett etc. who in a certain sense seem to be beating the market, but not dramatically, and the bailey being the claim that one can win much more than the market by noticing opportunities early.
(I mentioned lottery as an illustration for the importance of being able to affect the outcome, that mere existence of people beating the market is insufficient. Whether it’s possible to affect the outcome is a separate question that you are now addressing.)
It does follow from repeatability—Warren Buffet and Goldman Sachs are not explained by the lottery analogy.
It doesn’t follow from repeatability. Or rather it doesn’t follow from the existence of examples of repeated success. A normal distribution of returns with repeated play will still lead us to expect at least one investor with Buffet’s track record (if my econ. prof’s math is to believed----I haven’t have cause to look closely).
It would follow from “significantly more repeated success than a normal distribution would predict”.
I do believe that Buffet’s success is more than luck, just not that this particular argument follows.
A normal distribution of returns with repeated play will still lead us to expect at least one investor with Buffet’s track record (if my econ. prof’s math is to believed----I haven’t have cause to look closely).
Buffett claimed at some point that they calculated he was a 3 sigma event, then a 4 sigma, then a 5 sigma, then stopped calculating because it was getting embarrassing.
Berkshire and Goldman don’t just buy-and-hold though; they are a large holding company that actively manages its largest investments and a premier financial services provider respectively.
Genius stock picks are only a part of the story. The more imitable part is finding a genuine business angle that earns the premium.
I never said they buy-and-hold (although sometimes they do—see Coca Cola and See’s candy, for example). The fact that they actively manage their portfolio shows that they are able to pick winners. What they are doing is working.
It does follow from repeatability—Warren Buffet and Goldman Sachs are not explained by the lottery analogy.
They don’t receive “nearly all of the benefit”, they are just doing a bit better than the market consistently. This feels like a motte-and-bailey argument, with the motte being the examples of Buffett etc. who in a certain sense seem to be beating the market, but not dramatically, and the bailey being the claim that one can win much more than the market by noticing opportunities early.
(I mentioned lottery as an illustration for the importance of being able to affect the outcome, that mere existence of people beating the market is insufficient. Whether it’s possible to affect the outcome is a separate question that you are now addressing.)
It doesn’t follow from repeatability. Or rather it doesn’t follow from the existence of examples of repeated success. A normal distribution of returns with repeated play will still lead us to expect at least one investor with Buffet’s track record (if my econ. prof’s math is to believed----I haven’t have cause to look closely).
It would follow from “significantly more repeated success than a normal distribution would predict”.
I do believe that Buffet’s success is more than luck, just not that this particular argument follows.
Buffett claimed at some point that they calculated he was a 3 sigma event, then a 4 sigma, then a 5 sigma, then stopped calculating because it was getting embarrassing.
Here is his contemporary, fuller argument.
Buffet’s track record is well beyond what chance would allow.
Berkshire and Goldman don’t just buy-and-hold though; they are a large holding company that actively manages its largest investments and a premier financial services provider respectively.
Genius stock picks are only a part of the story. The more imitable part is finding a genuine business angle that earns the premium.
I never said they buy-and-hold (although sometimes they do—see Coca Cola and See’s candy, for example). The fact that they actively manage their portfolio shows that they are able to pick winners. What they are doing is working.