My guest today is Michael Mauboussin, an author (“More Than You Know”, “Think Twice: Harnessing the Power of Counterintuition”), investment strategist in the financial services industry, professor at the Columbia Graduate School of Business, and board of trustees at the Santa Fe Institute (an independent, nonprofit theoretical research institute).
The topic is his book The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing.
In this episode of Trend Following Radio we discuss:
Luck and skill, how they cross over and play off each other, and how both of those factors have played a part in both Covel and Mauboussin’s careers
How Mauboussin came to start working on “The Success Equation”
How losing on purpose can define skill
How sports can provide great examples of what Mauboussin contends regarding skill and luck
The human desire and emotional need to tell stories, and how that plays into peoples’ difficulty untangling skill and luck
Stephen Jay Gould’s notion of the .400 hitter in baseball and the paradox of skill
Physical limits and improvement in skill over time
Sample size issues
Process vs. outcome
What to do when you’re the underdog and how complicating the situation can help when you’re in that position
Improving your guesswork on where you are in the luck-skill continuum
Persistence and predictive value
Building skill
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Michael Mauboussin appeared in my film Broke a few years back and I have always enjoyed his efforts. While not a trend follower much of his work dovetails nicely with the heart and soul of trend following success: human behavior and inefficient markets. Two recent Mauboussin works worth reading (PDF):
