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Comment by 2irons on Don't You Care If It Works? - Part 1 · 2015-07-29T15:41:35.266Z · LW · GW

"Does this change your confidence in Bob managing your retirement investments?"

  • if he never held himself out as a quant based investor or using a method reliant on much analytical or quantitative research I wouldn't worry about it.

Maybe he's been good at choosing ETF's because he's great at listening to investors and trader chat - can feel which arguments are about to dominate the market and allocates capital accordingly. Maybe he sits by a high performing proprietory trading team in his bank and you're piggy backing off of all their trades at a fraction of the fee. As a fund manager I know several other managers who would have no hope of following most of the articles on this website, misunderstand probability at basic levels (this has been teased out by in depth conversations on things like card counting - where they are high conviction yet wrong) but yet who I'd still have to concede are likely to continue outperforming me in the market because they are great at the parts that count.

I think this is put best by Nassim Taleb in Anti-Fragile:

“In one of the rare noncharlatanic books in finance, descriptively called What I Learned Losing A Million Dollars, the protagonist makes a big discovery. He remarks that a fellow called Joe Siegel, the most active trader in a commodity called “green lumber” actually thought that it was lumber painted green (rather than freshly cut lumber, called green because it had not been dried). And he made a living, even a fortune trading the stuff! Meanwhile the narrator was into theories of what caused the price of commodities to move and went bust.

The fact is that predicting the orderflow in lumber and the price dynamics narrative had little to do with these details —not the same ting. Floor traders are selected in the most nonnarrative manner, just by evolution in the sense that nice arguments don’t make much difference.”

Perhaps I'm being a bit harsh focusing on an analogy but I think there might be a wider point. Producing the right or wrong answers in one domain isn't necessarily a useful predictor of someone's ability to produce the right or wrong answer in another - even when they are highly connected.

Comment by 2irons on Twenty basic rules for intelligent money management · 2015-03-27T16:05:00.523Z · LW · GW

I think you can win using this strategy - but it requires a lot of patience. Certainly years - with the possibility of decades. You'd have to be sure of your strategy and sure of your belief in your strategy, changing tact when offside is the worst thing you can do if you are playing a deep value game.

It remains a winning strategy because of that cost.

Comment by 2irons on Twenty basic rules for intelligent money management · 2015-03-27T15:38:56.992Z · LW · GW

My wife had a poor history of saving when we first met while saving and planning ahead financially are one of my strongest areas of discipline. However I think our differences were as much a function of circumstance and nurture as anything innate. Overall I think she wins hands down on discipline, intelligence and foresight vs me.

Because of this core discipline, intelligence and foresight– over time she’s moved far closer to my spending and saving habits having seen their value (and in turn I’ve loosened up, and would still acknowledge it'd probably be optimal for me to do more of that. Time and willpower are often cheaply purchased.)

Of course we have to go on the limited signals we have but remember saving is just a proxy for what we’re really after.

As an aside, I am a portfolio manager – managing circa $2bn of fixed income assets, so fees feed my family – but I wholeheartedly agree retail investors generally do much better by investing in passive funds and avoiding fees.