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  1. Sunday, November 18th, 2018
    the dangers of maximization

    In a recent posting,Epsilon Theory | The title is “Getting Out: A Godfather Story.” Ben Hunt wrote, “My goal as an investor is NOT to maximize my investment returns or to maximize my personal wealth.”  Instead, his goal is to “minimize my maximum regret.”

    As Hunt explains, that’s not the way of the investment world, with its benchmarks and optimizers and breathless searches for the best stock, the best strategy, the best manager, etc.  He says that the business is based upon the assumptions that we are maximizers and “that we SHOULD BE maximizers” — and sees that at the root of many problems.

    I discussed the differences between maximizers and satisficers in three postingsthe research puzzle | This is the first one of the three; click the “next post” link at the bottom to get to the other two. written 2013, based upon ideas in The Paradox of Choice by Barry Schwartz.  Basically, a maximizer is that person who ... continues

  2. Monday, October 22nd, 2018
    best and brightest

    Last fall, I watched the Ken Burns film, The Vietnam War.Ken Burns | This documentary is well worth its eighteen-hour length.  In a discussion around the same time, David SalemEpsilon Theory | Salem has a distinguished background in the investment business and recently started writing an interesting series for Epsilon Theory. encouraged me to read The Best and the Brightest,Kirkus | This short review gets at the assumed brilliance of the players involved. David Halberstam’s account of the origins and early years of that war.  I did so, and went a step further by reading another book in tandem with it, Neil Sheehan’s A Bright Shining Lie.Wikipedia | This provides a good summary.  Halberstam won a Pulitzer for his reporting from Vietnam; Sheehan was awarded one (plus a National Book Award) for his book.

    Halberstam looks primarily at the people and policy making in Washington, while Sheehan tells the story of the Vietnam conflict itself and of John Paul Vann’s ... continues

  3. Wednesday, August 29th, 2018
    quant questions

    Quantitative investment management has been around for quite a long time.  Three decades ago, changes were often made at a monthly frequency, based upon attributes identified by leading academics and developed into strategies by new units set up at Wall Street firms.

    Today, according to Bank of America Merrill Lynch, “A seismic shift in assets and resources toward data-driven, systematic strategies and shorter-term investment strategies, which tend to rely on access to better, faster and larger stores of data is underway.”  The quant rush is definitely on.

    There are a host of questions for investors to consider, some of which are outlined below.  Most of them have been covered in extensive depth elsewhere; this, then, is not meant to be a comprehensive list of questions or a detailed analysis of any of them.  Instead, it represents what seem to be some open questions of importance, based upon where we are right now and how quantitative investing has been embraced in ... continues

  4. Tuesday, July 24th, 2018
    through the glass door

    When investigating and analyzing investment organizations, one of the hardest things to assess is “culture.”  In the workshops that I lead on due diligence and manager selection (here’s the next one:tjb research | Make sure to look at the rest of the site for related resources and services for allocators and asset managers.), we spend a fair amount of time on culture, how to analyze it, what makes for a “good” culture, etc.

    I start not with definitions from the investment world, but with general principles about culture from those who study it.  As I like to say, “Investment people are people and investment organizations are organizations.”  Certainly there are aspects of those organizations that are different from ones in other fields, but when you bring people together in groups, the same kinds of issues and behaviors appear over and over.  A grounding in the basic concepts helps in the assessment of the sustainability of an ... continues

  5. Thursday, June 14th, 2018
    slings and arrows

    I think it’s fair to assert, as a New York Times article did, that “the American business world now fetishizes failure.”New York Times | The article is about colleges helping students experience failure.  Books, articles, podcasts, etc. extol the virtues of failure, citing the personal and business stumbles of those who went on to attain wild success — and encourage us to be willing to fail and fail again in pursuit of our dreams.

    “If you think that’s a big failure,” Jeff Bezos said of one of Amazon’s stumbles, “We’re working on much bigger failures right now.”Money | The article includes failure episodes from nine other “highly successful people” too.  That philosophy is in ascendance at organizations large and small, although there’s no doubt that having a motivational poster on the wall is a lot easier than living a mantra day to day.  There are exceptions,New York Times | The team members of Project Foghorn got a bonus despite their flop. ... continues