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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: 3, Interesting) by AthanasiusKircher on Monday June 24 2019, @03:36AM

    by AthanasiusKircher (5291) on Monday June 24 2019, @03:36AM (#859240) Journal

    Great book and recommendation. Even more on-point, try The Drunkard's Walk: How Randomness Rules Our Lives by Leonard Mlodinow.

    It's specifically about how the mathematics of randomness leads to all sorts of apparent "patterns," including supposed "success" of stock managers, CEOs (who so often seem to take a golden parachute a few years after being hired for some amazing success at a previous company, which might have been luck), picking which blockbuster movies are worth their advertising budget (also a lot of luck), many sports achievements, etc.

    Randomness has a lot more "streaks" (both good and bad) than most people realize. So many apparent successes are probably just misinterpreted patterns of randomness and chance. As for the likelihood of "improbable" events, keep in mind that every time you shuffle a deck of cards, you are creating an incredibly improbable event that wouldn't have happened before in the history of the universe even if it has been populated by oodles of civilizations who love to shuffle cards.

    But mostly we don't ascribe significance to the unique outcome of the order of a deck of cards. If it were a lucky lottery pick, we might view it differently (even though picking the right megajackpot numbers are a lot more probable than that ordering of the cards you shuffled). We ascribe significance to many other things that are just as much a function of luck and randomness.

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