Capital Allocators – Inside the Institutional Investment Industry [REPLAY] Michael Mauboussin – Active Challenges, Rational Decisions and Team Dynamics (Capital Allocators, EP.36)
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Feb 19, 2024 
Michael Mauboussin, Director of Research at BlueMountain Capital and a decision-making expert, dives into the paradox of skill in active management versus passive strategies. He discusses the impact of team dynamics and market volatility on investment decisions. Enriching the conversation, Mauboussin shares insights from data analysis in sports, revealing psychological biases that affect outcomes. He also touches on innovative research at the Santa Fe Institute and the complexities of navigating low volatility in the market, providing listeners with a multifaceted view of capital allocation.
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Path to Wall Street
- Michael Mauboussin's career began unexpectedly at Drexel Burnham Lambert in 1986.
- His interest in the Washington Redskins trash can in an executive's office landed him the job.
Paradox of Skill
- The paradox of skill explains why there are fewer "400 hitters" in active management.
- As skill improves, luck becomes more important due to the shrinking difference between top and average performers.
Rethinking Active Management
- The Burke and Green paper suggests active management may not be as bleak as it seems.
- It proposes evaluating managers based on "gross profit" (excess return * AUM), considering how much value they extract in dollars.
