Capital Allocators – Inside the Institutional Investment Industry REPLAY - Michael Mauboussin – Active Challenges, Rational Decisions and Team Dynamics (Capital Allocators, EP.36)
May 13, 2019
Michael Mauboussin, Director of Research at BlueMountain Capital and adjunct professor at Columbia Business School, shares his expertise in decision-making and team dynamics. He discusses the paradox of skill in investing and how cognitive biases affect market decisions. The conversation touches on the interplay of data analysis in sports and finance, and the role of cognitive diversity in teams. Michael also explores the implications of market volatility and the exciting future of research at the Santa Fe Institute, emphasizing the importance of continuous learning.
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Redskins Trash Can
- Michael Mauboussin landed his first Wall Street job at Drexel Burnham Lambert due to a shared interest in the Washington Redskins with a senior executive.
- He had limited business knowledge, highlighting the role of chance in career paths.
Paradox of Skill
- The paradox of skill explains why there are no 400 hitters in baseball anymore.
- As absolute skill improves in a field, relative skill decreases, making outstanding achievements rarer despite overall improvement.
Rethinking Active Management
- Burke and Green suggest evaluating active management by 'gross profit' (excess return * AUM).
- This accounts for the impact of asset size on overall value creation, showing active management may be more successful than previously thought.
