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posted by Fnord666 on Sunday June 23 2019, @01:50PM   Printer-friendly
from the getting-lucky dept.

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?


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  • (Score: -1, Troll) by Anonymous Coward on Sunday June 23 2019, @04:51PM (4 children)

    by Anonymous Coward on Sunday June 23 2019, @04:51PM (#859098)

    You can do far better than index funds... You should be able to at least double your money every year if you know what you're doing.

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  • (Score: 0) by Anonymous Coward on Sunday June 23 2019, @06:49PM (3 children)

    by Anonymous Coward on Sunday June 23 2019, @06:49PM (#859120)

    It really isn't hard, all you have to do is pay attention and understand how the economy works (hint: we don't have capitalism).

    • (Score: 1) by Ethanol-fueled on Sunday June 23 2019, @08:12PM (2 children)

      by Ethanol-fueled (2792) on Sunday June 23 2019, @08:12PM (#859135) Homepage

      I knew a motherfucker who made and lost $100,000 day-trading because he didn't know when to quit.

      A couple weeks ago, I came up 25 cents playing video poker at a casino, and the second I was ahead, I cashed out. When you suck at gambling, you should take what you can get.

      • (Score: 0) by Anonymous Coward on Sunday June 23 2019, @08:14PM

        by Anonymous Coward on Sunday June 23 2019, @08:14PM (#859136)

        I wouldn't day trade, swing trading at least and stick to stuff you know. And that's how I treat those video poker machines too.

      • (Score: 0) by Anonymous Coward on Monday June 24 2019, @03:03PM

        by Anonymous Coward on Monday June 24 2019, @03:03PM (#859364)

        If you are truly gambling then you have an idea of the risk you are taking and the odds of being successful. Casino games (with the exception of the way some/many house blackjack games are run if one uses a card counting system) all have published odds which means you will lose and the house will win over time. Although whether you win or lose in a particular session due to luck. I have twice managed to take $5 and turn it into $50 when I cashed out, but I make no illusions that this was skill.

        In day trading and other things listed above, there are elements of skill which can change the odds. It still doesn't mean that luck is not a factor. Day traders use strategies also. The question is if the marketplace they operate in is like Blackjack (where one might win consistently with an applied strategy) or Craps/Roulette (where the player will eventually lose regardless of strategy employed).

        As if you didn't know those things.