Legg Mason’s Michael Maubossin looks at the difficulties in untangling outcomes that are based on skill or luck or both as applied to the universe of investing.
• The outcomes for most activities combine skill and luck.
• Separating skill and luck encourages better thinking about outcomes and
allows for sharply improved decision making.
• There are good methods to sort skill and luck in sports, business, and
• We define the key features of skill in the investment business.
This is going to be my train reading on the way home . . .
Untangling Skill and Luck: How to Think About Outcomes—Past, Present, and Future
Fortuna, by Albrecht Dürer
Legg Mason, July 15, 2010