Read without ads and support Scribd by becoming a Scribd Premium Reader.
See Premium Plans
 
Indianapolis
 
CFA
 
Society
 
Investment
 
Forum
 
Notes
‐
March
 
27th,
 
2012
 
Dustin
 
Hunter,
 
SunRift
 
Capital
 
Partners
 
(www.sunriftcp.com)
 
(These
 
notes
 
are
 
to
 
the
 
best 
 
of 
 
my 
 
recollection
 
and 
 
trusty 
 
ink 
 
 pen.
 
Discrepancies
 
are
 
due
 
to
 
my 
 
error 
 
in
 
understanding
 
&
 
transcribing.)
 
Part
 
1
‐
Michael
 
Mauboussin
‐
Untangling
 
Skill
 
&
 
Risk
 
(Outcomes
‐
past,
 
present,
 
future)
 
 
In
 
general,
 
outcomes
 
can
 
be
 
attributed
 
to
 
skill
 
(use/application
 
of 
 
knowledge
 
readily)
 
and
 
luck
 
(circumstances
 
that
 
either
 
work
 
for
 
or
 
against)
 
o
 
Easily
 
applicable
 
to
 
sports,
 
business,
 
and
 
investing
 
o
 
Example
 
of 
 
luck:
 
Spanish
 
lottery
 
winner
 
who
 
insisted
 
on
 
a
 
ticket
 
with
 
the
 
last
 
number
 
'48'
 
because
 
he
 
had
 
two
 
important
 
factors
 
with
 
the
 
number
 
7...
 
and
 
7x7=48....
 
o
 
Example
 
of 
 
skill:
 
Marion
 
Tinsley
 
was
 
a
 
checkers
 
champion
 
over
 
a
 
period
 
of 
 
six
 
decades...
 
o
 
A
 
test
 
of 
 
whether
 
or
 
not
 
skill
 
is
 
involved
 
in
 
a
 
particular
 
activity
 
is
 
"Can
 
you
 
lose
 
on
 
purpose?"
 
o
 
He
 
gave
 
the
 
following
 
luck
 
vs.
 
Skill
 
continuum
 
for
 
various
 
activities:
 
 
'Fooled
 
by
 
Randomness'
‐
He
 
mentioned
 
this
 
book
 
several
 
times
 
during
 
the
 
presentation
 
o
 
9/10
 
businesses
 
on
 
the
 
'success
 
list'
 
were
 
there
 
by
 
chance,
 
i.e.
 
luck 
 
 
Luck
 
vs.
 
Skill
 
probability
 
example:
 
 
Luck
 
Casino ChessS ortsStocks
SkillLuck
 
3
 
possibilities
 ‐
4,
 
0,
 
+4
 
Randomly
 
pick
 
2
 
and
 
look
 
at
 
range
 
of 
 
outcomes:
 ‐
7,
‐
4,
‐
3,
‐
1,
 
0,
 
+1,
 
+3,
 
+4,
 
+7
 
Skill
 
3
 
possibilities
 ‐
3,
 
0,
 
+3
 
The
 
point
 
here
 
being
 
that
 
the
 
'luck'
 
aspect
 
can
 
drastically
 
impact
 
the
 
outcome
 
and
 
the
 
perception
 
of 
 
skill
 
attributable
 
to
 
that
 
outcome
 
 
 
Paradox
 
of 
 
Skill
 
o
 
Why
 
are
 
there
 
no
 
.400
 
hitters
 
in
 
baseball
 
today?
 
He
 
cites
 
S.J.
 
Gould
 
study
 
and
 
the
 
general
 
level
 
of 
 
improved
 
play...
 
which
 
has
 
led
 
to
 
less
 
variance
 
o
 
Sees
 
similar
 
phenomenon
 
in
 
mutual
 
funds...
 
o
 
This
 
is
 
explained
 
graphically
 
in
 
the
 
distribution
 
below:
 
 
Reversion
 
to
 
the
 
Mean
 
o
 
Back
 
to
 
Luck
 
vs.
 
Skill
 
probability
 
example
 
o
 
The
 
'luck'
 
factor's
 
role
 
in
 
extreme
 
positive
 
or
 
negative
 
results
 
cannot
 
be
 
counted
 
upon
 
and
 
over
 
time
 
will
 
return
 
to
 
a
 
long
 
term
 
average.
 
o
 
The
 
more
 
that
 
luck
 
is
 
a
 
factor,
 
the
 
faster
 
the
 
results
 
will
 
revert
 
to
 
the
 
mean.
 
('in
‐
play'
 
hits
 
in
 
baseball)
 
o
 
The
 
more
 
skill
 
is
 
a
 
factor,
 
the
 
slower
 
the
 
results
 
will
 
revert
 
to
 
the
 
mean.
 
(strikeout
 
rate
 
in
 
baseball)
 
 
Arc
 
of 
 
Skill
 
o
 
He
 
discussed
 
an
 
'arc
 
of 
 
skill'
 
for
 
various
 
activities
 
such
 
as
 
basketball,
 
baseball,
 
golf,
 
and
 
tennis.
 
All
 
peak
 
at
 
relatively
 
young
 
ages,
 
with
 
later
 
peaks
 
for
 
less
 
physically
 
dependant
 
performance.
 
(typically
 
lower
 
20's
 
with
 
some
 
around
 
30)
 
o
 
The
 
pertinent
 
chart
 
for
 
investors
 
follows
 
here:
 
('Peak'
 
investor
 
age
 
is
 
53)
 
o
 
Noted
 
that
 
with
 
increasing
 
older
 
population,
 
there
 
will
 
be
 
$
20 
 
trillion
 
belonging
 
to
 
those
 
with
 
impairments/dementia
 
and
 
needing
 
stewardship.
 
PastPresentPeak
 
Performance
 
Age
 
Level
 
Crystallized
 
Intelligence:
 
ability
 
to
 
use
 
skills,
 
knowledge,
 
and
 
experience
 
Performance
 
Fluid
 
Intelligence:
 
capacity
 
to
 
think
 
logically
 
and
 
solve
 
problems
 
in
 
novel
 
situations,
 
independent
 
of 
 
acquired
 
knowledge.
 
Search
Search History:
Searching...
Result 00 of 00
00 results for result for
  • p.
    • Notes
    Load more