Curiosity@Intelsense
Weekly dose of learning
1.
The market cycle and why you should invest in multistrategy funds
Industries in which capital has become abundant and optimism unbridled often end up disappointing investors. Echoes of these capital cycle pitfalls are also evident in active fund manager selection. In the ‘alpha cycle’ a certain area of the market delivers high returns, stories then emerge not only about the compelling opportunities to be found but also about the savvy investors who are exploiting them. This intoxicating mix of unusually strong performance and seemingly irrefutable narratives draws increasingly large flows from investors who either believe the tales being woven or are compelled to chase the momentum. The more extreme this performance dynamic, the more investors are likely to mistake luck for skill, and the cyclical for the structural. Leading them to make the wrong decisions at a terrible time.
At the heart of this alpha cycle problem is our propensity to believe that what is cyclical is in fact a structural shift. We are prone to see an active manager delivering strong performance in an in-vogue area of the market as someone with durable skill, rather than simply benefitting from largely unpredictable tailwinds that will at some point reverse. The most dangerous situation is when we begin to believe that there has been a permanent change in markets (XYZ is the only way to invest) and a particular active manager is the exemplification of this approach. Here we have the glorious opportunity to be wrong twice – about both markets and skill.
And this is the reason I always suggest investing in multistrategy funds or fund managers.
2.
The pursuit of mastery transcends monetary rewards
What kept Buffett and Munger mentally fit for such a long time? Their work kept them engaged (and surely the live adulation by 40,000 fans helped). Working on interesting problems, lifelong friendships, respect and admiration, and being a master of your domain — these money cannot buy.
By contrast, the merely rich can struggle with meaning. Comedian Jerry Seinfeld, a keen observer of human nature and estimated to be a billionaire, pointed this out in a recent interview with the New Yorker. “I know a lot of rich people,” he said, “they don't feel as good as you think they should. They're miserable.”
At 70 years old, Seinfeld keeps working because “the only thing in life that's really worth having is good skill. Good skill is the greatest possession.”
These are my kind of people.
They care deeply about the process and quality.
They approach their work as a craft to be mastered, not a job to be done.
These people have found their calling and they pursue it with zeal. They keep showing up long past the point where more money makes a difference.
Pic of the Week
Thought of the Week
“The irony is that this is a money game and money is the way we keep score. But the real object of the Game is not money, but it is the playing of the Game itself. For the true players, you could take all the trophies away and substitute plastic beads or whale’s teeth; as long as there is a way to keep score, they will play.” ~ Adam Smith
Video of the Week
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