Capital Allocators – Inside the Institutional Investment Industry [REPLAY] Michael Mauboussin – Active Challenges, Rational Decisions and Team Dynamics (Capital Allocators, EP.36)
Mar 23, 2020
Michael Mauboussin, Director of Research at BlueMountain Capital and an expert in decision-making, shares insights from his rich career in finance and academia. He delves into the paradox of skill in investing, discussing the balance between luck and skill that shapes outcomes. Mauboussin highlights the importance of diverse teams for optimizing investment decisions while cautioning against consensus-driven choices. He also explores the impact of data analytics in sports and cross-disciplinary approaches at the Santa Fe Institute, emphasizing the need for collaboration in understanding complex systems.
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Redskins Trash Can
- Michael Mauboussin landed a job at Drexel Burnham Lambert due to a shared interest in the Washington Redskins with an executive.
- This chance encounter highlighted the role of luck and happenstance in career paths.
Paradox of Skill
- The paradox of skill explains why there are no 400 hitters anymore: as skill improves, luck becomes more important.
- Relative skill, the difference between the best and average, has decreased, leading to more uniform excellence.
Burke and Green Paper
- The Burke and Green paper suggests a different way to evaluate active managers by focusing on "gross profit."
- This metric, calculated as pre-fee risk-adjusted return minus the benchmark times AUM, reflects value extraction.
