- If one fund manager beats the market by 10% by sheer guesswork, that number alone will make seem like a genius, preventing many people from questioning whether he was just lucky.
- Another manager who outperforms by 0.2% with a sensible strategy over a longer period might never attract your notice at all, even though he is likely more skillful.
- Outcomes don’t just grab your attention more than process does; they are much easier to measure. So most investors look for top performance first. Only then (if ever) do they ask how it was earned.
The rest of the article focuses on Michael Mauboussin, chief investment strategist at Legg Mason Capital Management and advice on how to pick a fund manager. He focuses on looking at the processes underlying success.
Running a Business
- So as you launch new products and services you need to understand your successes as much as your failures.
- Outstanding sales performances should be examined for the luck factor! Was there a windfall, one off factor involved like a fiscal cliff, a competitor going under, a currency swing in your favor?
- Do you have repeatable processes in sales, development, production, finance that supports scaling your business or has your success been a collection of fireworks and flameouts.
- Clearly luck forms a part of business success but I truly believe you can to some extent make your own luck but you need to own the processes that deliver the outcomes.