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The Paradox of Skill

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Michael Mauboussin talking about his new book The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing with the WSJ: The key is this idea called the paradox of skill. As people become better at an activity, the difference between the best and the average and the best and the worst becomes much narrower. As people become more skillful, luck becomes more important. That’s precisely what happens in the world of investing. The reason that luck is so important isn’t that investing skill isn’t relevant. It’s that skill is very high and consistent. That said, over longer periods, skill has a much better chance of shining through. In the short term you may experience good or bad luck [and that can overwhelm skill], but in the long term luck tends to even out and skill determines results. WSJ: You say people generally aren’t very good at distinguishing the role of luck and skill in investing and other activities. Why not? Our minds are really good at linking cause to e

Uncategorized | Reading Time: < 1 The Paradox of Skill Michael Mauboussin talking about his new book The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing with the WSJ: The key is this idea called the paradox of skill. As people become better at an activity, the difference between the best and the average and the best and the worst becomes much narrower. As people become more skillful, luck becomes more important. That&#8217;s precisely what happens in the world of investing. The reason that luck is so important isn&#8217;t that investing skill isn&#8217;t relevant

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