According to this survey from last year, 70% of all "actively managed" stocks perform worse than the market. I need you to understand this: they aren't just not doing better than the natural evolution of the market, they do considerably worse. In fact, you could probably match or improve your own stock performance by randomly picking them. But at the same time, these guys are hauling in serious salaries and bonuses.

Yup. It's another scam profession that wants you to believe that there is (much) skill involved...like top managers, high-level poker players, business consulting, wine tasting, modern art criticism and so forth.

http://www.marketwatch.com/story/indexe ... ly-managed

Let me just get this straight, these guys get paid big bucks for being fuck ups? Man, I want their job!

Age x Knowledge = Disbelieve and loss of faith in the world

The secret is in accepting this knowledge for what it is and not become unhappy because of it. Up until a certain bottom, happiness is very relative: you may feel unhappy for having less than these guys, but those guys may feel unhappy because their neighbours all live in 15-million mansions while he can 'only' afford a 7-million one.

It has been proved that wealth doesn't bring happiness, but relative wealth (ie being wealthier or have more means than those you relate to) does. So just apply the reverse to our poor asses and life suddenly looks a little brighter.

The only thing I DO still get irritated by is people who maintain that most of those professions require a lot more beyond luck and/or the ability to bullshit. I have these recurring discussions about poker with a friend...I say it's mostly luck, he says it's mostly skill. Clearly, he's insane. You will never win a poker tournament purely on skill - but you can win it purely on luck. Those guys who're "at the top" playing the big leagues for big cash aren't there because they're better than most of the other players in the world - they got lucky breaks.

No they are there because they administrate the "luck" of others. A manager is a person who uses your skills to bring himself wealth. Its not that difficult to put together.

I disagree on the poker thing. Yes it involves some luck, but it does involve skill as well. If you let a monkey play poker, he won't make as much money as a poker pro (given a good sample size). It's true that the monkey might even win a tournament if lucky enough though. Cashgames is another thing, i think pro's will have a much bigger edge there (since tournaments is very high variance).

The stock thing reminds me of something they did in P-magazine or at least some journal: monkeys could randomly pick a stock, and a 'pro' or a couple of them as well. I don't remember the exact setup, but it turned out the monkeys did better there as well.

Actually, manager success distributions show that they are almost exactly the same as any random distribution over a sufficient amount of years.

A highly simplified version would be to say that you start with a 1000 managers in year 1. In year 2, only 50 of them are still considered to be 'succesful', so 500. Then 250, then 125, then 62, then 31, etc. Up until (around) 1. The result is that, after enough years, you get one guy who's got consistently amazing results. We'll see that guy and wonder over his achievements, and pay him loads of cash - but nobody will ever have noticed the vast throves of managers that didn't succeed.

There is SOME skill involved, but as with almost everything in life, it's catching lucky breaks. It's almost exactly the same with famous artists who sell their work for millions of dollars. Are they talented? Perhaps. Are they more talented than those millions of artists who never succeeded? Probably not. Why do they sell for insane figures and the others who didn't succeed don't? They just do. It's a series of lucky breaks.

(not every discipline in life is subject to this rule - for example an elite sportsman. There is still luck involved in that, but you can't become a sports legend by just being lucky.)

Wine tasting is a scam? I can tell the difference between a good wine and a bad wine. In fact, I'd say I have a pretty decent wine palate (at least as compared to pretty much everyone I know).

However, the stock thing doesn't surprise me. I really should play the stocks...someone with my brain and constant internet access should be able to make better than the 2% interest I'm currently pulling in.

@ Satis: yes, there are differences between absolutely horrid wines and delightful wines and they can be tasted by most people with some experience. But (paid) 'high-level' wine-tasting, the stuff done at competitions and to select the best wine from a selection of great wines, is a scam. There's even evidence that most of the 'experts' are just faffing about. Check this:

http://www.seattleweekly.com/2002-02-20 ... candal.php






@ J: oh I didn't mean to say that there wasn't any skill involved in poker, just that it's a much smaller part of the equation than luck. I don't really accept cash games or any tournament game with a significant buy-in (or an automatic ticket as a former winner/pro player) as evidence for any sort of major performance gap with amateur players, as the treshold for your average amateur player is too high - they don't have enough starting money to run with the big guys.

A more interesting phenomenon is the recent rise of internet poker. There are several high-level poker events that have internet qualifiers at their main events these days, guys that usually have some experience in poker but aren't anywhere near pros when it comes to money and concern. And guess what? I just looked at the 'main event' for the World Series of Poker, the biggest tournament in the world (which allows celebs, pro players, amateurs who buy in for a big amount of cash and qualifiers and internet qualifiers), and in the last 5 years a pro won only once. All the others were amateur qualifiers.

In fact, most of the former winners don't even do all that well. There were 20 former winners of the main event (master poker players, if you will) at the start of the event. Of those, 55 % (!!) was eliminated on the first day. Another 30% was eliminated on the second day. 3 of the 20 starters, or 18%, survived the first two days and only 2 of them finished in the money (in 329th and 45th place respectively). Now...that looks like an almost random performance to me, given these guys' experience with pressure, the game and the skill they have - which, again, I do believe exists.

On another note, I once saw a reporter ask a poker champ what his odds of winning the final table were, given that he was "the best player in the world". His answer was: "I've got about 13% of the chips, and you say I'm the best player in the world, so I'd say about 20%". 7%...that was his estimation of the skill factor as the best player in the world.

Put it this way: if you let the past 10 winners of Roland Garros, Wimbledon, the American Open and the Australian Open all autmatically participate in the tournament, there is no chance that 82% of them will be elminated by the second day. In fact, I'm pretty sure a majority will make it to the top half of the tournament. The randomness factor is mitigated by the skill they posses. But poker? It's a game of luck, and a small amount of factors like experience, counting cards and psychological understanding of your opponents. But those things aren't too hard too master, only the latter could be considered hard for the above-averagely intelligent person.

True, the factor of luck in tournaments is very high. If you're a very good pokerplayer, you probably won't even finish 1 in 5 tourneys in the money (ITM<20%). However, if you're a good pokerplayer (and have a good bankrolmanagement), you'll still be a winning player.

That's why i mentioned cashgames: it's a different ballgame. If you make 1 mistake in a tourney (or get unlucky), you're out and possibly have won absolutely nothing. In cashgames you'll just rebuy and play the next hand. So if you're taking good decisions (which a good pokerplayer would do) you'll end up as a winning player and pretty easily beat the cashgames. Ofcourse you'll have your share of bad luck as well, but skilled player will always be winning players, since they're making good decisions in the long run. So you'll need good bankroll management as well.

As to why those internet players are doing so well against pros that are playing for 20+ years: volume.
The 'oldschool' pokerplayers are live pokerplayers. Which means kinda slow play (even with good dealers), so less situations where you improve your game. With the internet generation, you've got tons of people playing 20 tables and more, so they're playing like 2000 hands in 1 hour! Which would take a live player perhaps 100 hours (rough estimate ).

So pokerpros that are playing their whole life (take Doyle Brunson) have played much fewer hands than 20 year old internetkids.
There are probably other factors (like internetgeneration being much more agressive), but this is a very important reason.

Btw i think you underestimate the edge you can have on inexperienced opponents, or overestimate the amount of luck that comes into play. Example: say they allow you (or me, or anyone else) to play a series of heads-up matches against a good poker pro. It would be interesting to see, but i think you won't win often. Say 1 in 10?
Since there is still luck involved, you do have a chance to win ofcourse. If you were to play Federer heads-up in tennis .. well good luck.

Good point on the online players having seen many many hands thanks to modern technology. Didn't really consider that.

But still I think my chances on winning a game are higher than 1/10 for every game head-to-head against a poker pro, given some minor training and mental techniques to remember cards. I've seen some guys who made good money from playing poker(irl) and what they do isn't anything like rocket science. As long as they can meet the blinds, they just fold the moment they get anything other than king+ace, king+king or queen+queen. Basically. They never bluff or take risks. That strategy alone is enough to make a profit most of the time, since other people do bluff. It's pretty simple.

And yeah, cash tables, but they favour rich players. Professionals (who are given an X amount of cash to play with by the organizers at each event) and millionaires can basically just keep putting in cash and in the end they WILL beat the 'normal' players, unless they become really lucky and eventually join the "professional" pantheon themselves. Tournaments are a more realistic image of the luck/skill factor in that everyone starts with the same stack, and there's no buying in again.

Like you pointed out, if we play federer, tiger woods, Gary Kasparov, Kobe Bryant or anyone of a similar skill level, we'd lose. Every time. In poker, if we get REALLY REALLY lucky we could hypothetically win 10 hands in a row against Phil Hellmuth, Tony G and the Devilfish.