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Submitted via IRC for Bytram
Why brilliant people lose their touch
It hasn't been a great couple of years for Neil Woodford — and it has been just as miserable for the people who have entrusted money to his investment funds. Mr Woodford was probably the most celebrated stockpicker in the UK, but recently his funds have been languishing. Piling on the woes, Morningstar, a rating agency, downgraded his flagship fund this week. What has happened to the darling of the investment community?
Mr Woodford isn't the only star to fade. Fund manager Anthony Bolton is an obvious parallel. He enjoyed almost three decades of superb performance, retired, then returned to blemish his record with a few miserable years investing in China.
The story of triumph followed by disappointment is not limited to investment. Think of Arsène Wenger, for a few years the most brilliant manager in football, and then an eternal runner-up. Or all the bands who have struggled with "difficult second-album syndrome".
There is even a legend that athletes who appear on the cover of Sports Illustrated are doomed to suffer the "SI jinx". The rise to the top is followed by the fall from grace.
There are three broad explanations for these tragic career arcs. Our instinct is to blame the individual. We assume that Mr Woodford lost his touch and that Mr Wenger stopped learning. That is possible. Successful people can become overconfident, or isolated from feedback, or lazy.
But an alternative possibility is that the world changed. Mr Wenger's emphasis on diet, data and the global transfer market was once unusual, but when his rivals noticed and began to follow suit, his edge disappeared. In the investment world — and indeed, the business world more broadly — good ideas don't work forever because the competition catches on.
The third explanation is the least satisfying: that luck was at play. This seems implausible at first glance. Could luck alone have brought Mr Wenger three Premier League titles? Or that Mr Bolton was simply lucky for 28 years? Do we really live in such an impossibly random universe?
(Score: 5, Insightful) by bzipitidoo on Sunday June 23 2019, @04:14PM (10 children)
Winning in the stock market is like winning in most games with an element of chance. Luck can help, but discipline, training, and skill are more important.
The way a lot of people play the stock market is to move with the herd. Do that and you end up buying high and selling low, the exact opposite of what you should be doing. Takes discipline to resist all the "advice" to buy into the latest hot thing, to be skeptical of all the urgency that this is a once in a lifetime opportunity and if you don't move, quick, you'll miss out, etc. There are a lot of scammers in the finance biz who dress in nice suits and talk softly and with seeming great authority and knowledge, aren't so raw and obvious like the typical 419 email from Nigeria, but they are nevertheless scammers.
(Score: 3, Insightful) by shortscreen on Sunday June 23 2019, @04:42PM (2 children)
The only.. winning move is.. not.. to play.
(alternatively, gamble with other people's money instead of your own, and/or get a bailout when you don't win)
(Score: 2, Insightful) by khallow on Monday June 24 2019, @03:10AM (1 child)
Because a game where most win has no winning move other than not getting on the benefits?
(Score: 2) by All Your Lawn Are Belong To Us on Monday June 24 2019, @06:01PM
No, just because chess is better.
This sig for rent.
(Score: 2, Insightful) by Anonymous Coward on Sunday June 23 2019, @05:19PM (5 children)
Perhaps the whole concept of gambling with the world economy is just a terrible idea.
(Score: 0) by Anonymous Coward on Sunday June 23 2019, @07:34PM (3 children)
You are aware that finance doesn't happen because evil people conspire against you the commoner, aren't you?
The entire house is built on the time value of money and estimations of risk, and we all participate.
(Score: 0) by Anonymous Coward on Sunday June 23 2019, @11:19PM (2 children)
That's a great platitude. Too bad it's totally false for 90% of people.
(Score: 0) by Anonymous Coward on Monday June 24 2019, @01:12AM
No we all are 'all in' at this point. Wither you like it or now.
(Score: 0) by Anonymous Coward on Monday June 24 2019, @03:46AM
I don't know if you live in a cave, but everyone else works with finance on a day to day basis. From what your insurance company thinks they need to charge you to cover your mishaps, what your credit card company wants in exchange to hand you money you might not pay back, to whether a bank is going to give you money so that you can get your masters in fine liberal arts. Perhaps even how much a bank is going to compensate you for letting them have your surplus cash.
It all works because professionals participating are intelligent and don't want to risk money for less than it's worth.
(Score: 1) by khallow on Monday June 24 2019, @03:13AM
A terrible idea that has brought increased wealth and better lives to many billions of people worldwide. Can't have that happen!
(Score: 2) by krishnoid on Monday June 24 2019, @12:30AM
"Luck favors the prepared." . So once you have the discipline, training, and skills, you're better able to take advantage of the luck when it shows up, if the saying holds.