Capital Allocators – Inside the Institutional Investment Industry Michael Mauboussin – Active Challenges, Rational Decisions and Team Dynamics (Capital Allocators, EP.36)
Michael Mauboussin currently is the Director of Research at BlueMountain Capital, a multi-billion dollar hedge fund and asset manager. He spent the majority of his professional career thinking and writing about decision making, behavior and complex systems, with long stints at Credit Suisse and nearly a decade alongside Bill Miller at Legg Mason. Michael has been an Adjust Professor at Columbia Business School for 24 years.
Our conversation covers Michael's early career, the paradox of skill, academic research more favorable to active management, decision-making, optimal size and composition of teams, unsettling features in the market, data analysis in sports, career risk, the Santa Fe Institute, and Michael's new research on the horizon.
Every time I speak to Michael I come away thinking better and feeling smarter, and this time was no exception.
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Show Notes
1:48 - What was Michael like as a kid
2:26 – How Michael found his way to Wall Street
6:18 – His start as an analyst in consumer and packaged goods
7:52 – Why there are no .400 hitters in active management and the paradox of skill
8:15 – Full House: The Spread of Excellence from Plato to Darwin
14:26 – Why have there been massive flows into index funds over the last 3-4 years
15:44 – Academic research supporting active management
16:09 – Mutual Fund Flows and Performance in Rational Markets
16:25 - On the Impossibility of Informationally Efficient Markets
22:52 - Indexing and Active Fund Management: International Evidence
23:12 – Do these trends also apply in global markets
24:01 - The Mutual Fund Industry Worldwide: Explicit and Closet Indexing, Fees, and Performance
25:22 – What has Michael discovered in his new role at Blue Mountain through his new credit lens
27:49 – Amazon, the world's most remarkable firm, is just getting started
30:02 – What are some of the lenses that Michael uses when dealing with allocators
35:02 – How does Michael go about interviewing for a team while taking into account their biases
36:19 – The Rationality Quotient: Toward a Test of Rational Thinking
36:37 – Biggest risks in the markets today
37:31 – Banks to Funds: Have Some Leverage With That Deal
39:45 – Liquidity in the markets
41:26 – What's most interesting to Michael about the merging of data and sports
41:34 – The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing
43:42 – Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak
44:32 – Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are Won
45:57 – Psychological bias in sports
46:16 - Malcom Gladwell Podcast: The Big Man Can't Shoot
47:23 – Psychological bias in investment management
47:40 – Scott Malpass on Capital Allocators
48:44 – Michael's work with the Santa Fe institute
54:40 – Next big piece of research Michael is working on
57:53 – The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction
57:59 – Should Michael be using his skills elsewhere in the context of a world where so many advocate for just indexing
1:01:36 – Charley Ellis on Capital Allocators
1:02:31 – CLOSING QUESTIONS