7 ms·

Seems like a case of survivorship bias. Unclear what this guy is doing that's particularly unique. He invested a lot in Amazon and Tesla, relatively early. Out

Seems like a case of survivorship bias. Unclear what this guy is doing that's particularly unique. He invested a lot in Amazon and Tesla, relatively early. Out of everyone investing in the time period, someone was bound to be holding the most of some of the stocks that do crazy things. Having Asperger's, starting as a CPA, not using value investing, reading Christensen... I doubt any of these are gonna shake up institutional investing.

TimTheTinker 6y ago
The best investment decisions will nearly always look obvious in hindsight.
- MegaButts 6y ago
  You're saying GME wasn't obvious?
  - TimTheTinker 6y ago
    Yeah, but like many unexpected events, it should have been :-)
smabie 6y ago
Using some simple math (and somewhat inaccurate math), let's calculate the chance of the null hypothesis being true: he has no skill and it is just luck, assuming 10% annualized volatility for the market and 8% annualized return. By my calculation, over the six year period, there's a 4.82e-18 chance that his returns are due to luck and the null hypothesis is true. Of course I'm simplifying a lot, but I think you get the idea. Also, you don't need to do anything "particularly unique" to generate very impressive returns. No firm (besides maybe RenTec) is doing anything that is truly out there and on another level: employees join and leave, ideas get passed around, etc. And yet, there are many top tier firms that end up hitting out of the park, year after year. People on HN always make these cheap throwaway comments about "expert coin-flippers" and "survivorship bias" when talking about finance. I'm not sure exactly why, but I think it comes from disdain for finance. I also think that the idea that some people are just better at generating wealth through the markets can be uncomfortable. Anyways, the chance of his returns being luck is extremely small, any which way you cut it.
- weird-eye-issue 6y ago
  Your comparison of his investing style to the broad market is incredibly far off. If you want to make calculations at least do it off a more accurate benchmark and not the S&P 500. Something like ARKK or at least QQQ.
  - smabie 6y ago
    ARKK? You want to use an actively managed fund as a benchmark? No one does this. You could use QQQ, with pretty much the same results.
    - weird-eye-issue 6y ago
      Depends what he is investing in. "Innovative" growth companies? Then ARKK isn't a bad benchmark. QQQ is a lot more conservative compared to what he was investing in.
- n_io 6y ago
  Although I agree that survivorship bias is a cheaply constructed argument, it’s hard to know how good this fund really is when it’s only been in operation during the greatest bull run of our lifetime.
  - smabie 6y ago
    That is also true, though the portfolio manager did well during bear markets as well. Doesn't say tell us how his current portfolio would hold up, but he's probably as well equipped as anyone to navigate the environment (which maybe isn't saying much).
  - autokad 6y ago
    you mean like warren buffet?
- slibhb 6y ago
  Unlikely things happen all the time. If he lost money, this article wouldn't exist. Also, my disdain for this guy is not due to finance. It's due to his investment strategy being a Seinfeld episode: > I just totally gave up and said, "I'm going to do the exact opposite."
m0llusk 6y ago
The article does not claim uniqueness, but focuses on the difference between basing investments on exceptionalism rather than value. Stand out hedge fund performances typically don't translate even to the same or similar hedge funds at different times let alone scaling to the point of 'gonna shake up institutional investing'.

TimTheTinker 6y ago

The best investment decisions will nearly always look obvious in hindsight.

MegaButts 6y ago
You're saying GME wasn't obvious?
- TimTheTinker 6y ago
  Yeah, but like many unexpected events, it should have been :-)

smabie 6y ago

Using some simple math (and somewhat inaccurate math), let's calculate the chance of the null hypothesis being true: he has no skill and it is just luck, assuming 10% annualized volatility for the market and 8% annualized return. By my calculation, over the six year period, there's a 4.82e-18 chance that his returns are due to luck and the null hypothesis is true. Of course I'm simplifying a lot, but I think you get the idea. Also, you don't need to do anything "particularly unique" to generate very impressive returns. No firm (besides maybe RenTec) is doing anything that is truly out there and on another level: employees join and leave, ideas get passed around, etc. And yet, there are many top tier firms that end up hitting out of the park, year after year. People on HN always make these cheap throwaway comments about "expert coin-flippers" and "survivorship bias" when talking about finance. I'm not sure exactly why, but I think it comes from disdain for finance. I also think that the idea that some people are just better at generating wealth through the markets can be uncomfortable. Anyways, the chance of his returns being luck is extremely small, any which way you cut it.

weird-eye-issue 6y ago
Your comparison of his investing style to the broad market is incredibly far off. If you want to make calculations at least do it off a more accurate benchmark and not the S&P 500. Something like ARKK or at least QQQ.
- smabie 6y ago
  ARKK? You want to use an actively managed fund as a benchmark? No one does this. You could use QQQ, with pretty much the same results.
  - weird-eye-issue 6y ago
    Depends what he is investing in. "Innovative" growth companies? Then ARKK isn't a bad benchmark. QQQ is a lot more conservative compared to what he was investing in.
n_io 6y ago
Although I agree that survivorship bias is a cheaply constructed argument, it’s hard to know how good this fund really is when it’s only been in operation during the greatest bull run of our lifetime.
- smabie 6y ago
  That is also true, though the portfolio manager did well during bear markets as well. Doesn't say tell us how his current portfolio would hold up, but he's probably as well equipped as anyone to navigate the environment (which maybe isn't saying much).
- autokad 6y ago
  you mean like warren buffet?
slibhb 6y ago
Unlikely things happen all the time. If he lost money, this article wouldn't exist. Also, my disdain for this guy is not due to finance. It's due to his investment strategy being a Seinfeld episode: > I just totally gave up and said, "I'm going to do the exact opposite."

m0llusk 6y ago

The article does not claim uniqueness, but focuses on the difference between basing investments on exceptionalism rather than value. Stand out hedge fund performances typically don't translate even to the same or similar hedge funds at different times let alone scaling to the point of 'gonna shake up institutional investing'.