Investing Insights: Skills vs. Luck

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This chapter explores the philosophies of successful investors, drawing parallels to the hot hand phenomenon in sports to emphasize the role of skill in long-term market success. It also discusses psychological stressors that can impact investor decision-making, particularly highlighting commitment bias and its effects on strategy adaptability.

In today’s episode, Shawn O’Malley (@Shawn_OMalley_) shares his favorite insights from Michael Mauboussin’s excellent book, More Than You Know.

You’ll learn how the stock market is like a complex adaptive system, the importance of having a clear investment philosophy, the psychology of investing, how innovation and competition affect stock returns, how Mauboussin uses complexity theory as an investor, plus so much more!

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

02:00 - Why multi-disciplinary thinking matters so much to investors

03:55 - What a good investment process looks like and how to build one

05:39 - Why results can be so blinding to investors

08:39 - Why the magnitude of returns can matter more than frequency

10:13 - What are the commonalities between top investors

19:04 - How stress and other biases distort our thinking

25:57 - What the original Dow Jones index looked like

29:07 - How the boom and bust cycle for new industries unfolds

30:57 - Why companies’ assets don’t last as long as they used to

36:29 - Why using historic P/E ratios can be fraught

44:28 - How the wisdom of the crowds works

45:04 - How extreme events shape markets and the St. Petersburg paradox

And much, much more!

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

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Michael Mauboussin's book, More Than You Know.
Nassim Taleb's book, The Black Swan.
Richard Foster and Sarah Kaplan's book, Creative Destruction.
Chris Zook and James Allen's book, Profit to the Core.
Pulak Prasad's book, What Darwin Taught Me About Investing.
Check out the books mentioned in the podcast here.
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