Narratives, Luck, and Skill in Investing and Poker

Michael Mauboussin talks with Jim about his latest book, SFI, investment, using variance & complexity, luck & skill, bias, IQ vs RQ, forecasting, and more... Michael Mauboussin, Director of Research at BlueMountain Capital Management, Author, and Adjunct Professor at Columbia University talks with Jim about how he came to be the Chairman of the Board at the Santa Fe Institute, his perspective on investing & its challenges, the Colonel Blotto game, using variance & complexity in game theory, defining luck & skill and their relative importance in several domains, outcome bias, the importance of understanding sample size, intelligence quotient (IQ) vs. rationality quotient (RQ), bad and good forecasting by experts, increasing the variance when you are behind, looking for weak games, how age impacts skill in people & organizations, deliberate practice, time management, and more. Episode Transcript Mentions & Recommendations Michael’s new book, The Success Equation Michael’s paper, Who Is On The Other Side Is There Anything Good about Men? By Roy F. Baumeister Success Equation Simulation: Polya Urn Model Thinking in Bets by Annie Duke Narrative Economics by Robert J. Shiller Superforecasting by Philip E. Tetlock Expert Political Judgment by Philip E. Tetlock Full House by Stephen Jay Gould The Sports Gene by David Epstein Range by David Epstein Michael’s Website Michael J. Mauboussin is Director of Research at BlueMountain Capital Management. Prior to joining BlueMountain, he was Head of Global Financial Strategies at Credit Suisse and Chief Investment Strategist at Legg Mason Capital Management. He is also the author of three books, including More Than You Know: Finding Financial Wisdom in Unconventional Places, named in the The 100 Best Business Books of All Time by 800-CEO-Read. Michael has been an adjunct professor of finance at Columbia Business School since 1993, and received the Dean's Award for Teaching Excellence in 2009 and 2016. He is also chairman of the board of trustees of the Santa Fe Institute, a leading center for multi-disciplinary research in complex systems theory.