The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
why aren't all 11 resolved? a statement only gets an assessment when the public record can support or contradict it. opinions and what-ifs never can, and 0 checkable ones are still open, waiting for their date. predictions held up or didn't; assertions are supported or contradicted. on every card: ▮▮▮▮▮ certainty · ▮▮▮▮▮ debate potential. speakers are clickable
Hight: Stock-picking hit rates degrade to coin-flip randomness past position 30
“The batting average for our clients was right around 51%. This is on an alpha adjusted basis, so the top 10 positions was 57%, next 10 was 55, next 10 Was 52, and then it went into, right after 30, it sort of went into randomness. Basically, it was a coin flip…”
Hight: Managers unable to name their sixth-best idea have flawed processes
“Really the question that an allocator could ask is say, hey, what's your sixth best idea? And pause. And wait for them to tell you what their sixth best idea is. Now, if they can turn to a sheet, or a dashboard, or something like that, that says, that's my six…”
Hight: Simple equal-weighted algorithms outperform expert judgment across studies
“They've done hundreds, maybe even thousands of these studies now, and the little simple algorithm wins every time.”
Hight: Mental heuristics do not outperform systematic models for ambiguous inputs
“As a portfolio manager without the system, we're doing the exact same thing. We're already taking that information in, and we're processing it mentally, and it's implicit, and we believe that our mental calculator is better at taking those ambiguities and refi…”
Hight: Managers suffer 'probability inflation,' predicting 74% win rate versus 51% actual
“On average, our clients assume they're going to be right 74% of the time. But guess what? They're only right 51% of the time. So there's a big gap, and we can point out those gaps. We call it probability inflation.”
Hight: Active managers must concentrate into ~30 stocks to generate alpha
“If we as active managers want to survive, we need to do what we're good at, which is picking good stocks, and not diluting ourselves with portfolios of 100 plus stocks. If we can pick 30 good positions, 30 may not be the, there's no magic number here, it's gon…”
Hight: Portfolio managers should trim winning positions as expected return declines
“We find managers should be trading around positions more. They're generally not, and the positions that's easiest to ignore is the one that's working and making you money, and so what happens in that situation is the price is going up, which means the position…”
Hight: Positions with explicit price targets deliver 7% ROIC versus 1% without
“It's basically seven percent was the return on invested capital for positions with price targets. One percent was the return on invested capital for positions without price targets.”
Hight: Process discipline correlates with ROIC from 9% down to 0%
“The top was around nine percent return on invested capital. The second was like seven. The next was like three. The bottom was like zero. And there is a distinct correlation, at least in our small sample size. Once again, keeping in mind the small sample size,…”
Hight: Knowing about cognitive biases does not change human behavior
“Just knowing about a bias doesn't change human behavior.”
Hight: Decision making improves when implicit assumptions are made explicit
“I think it's something that's specific to all forms of decision making is that we take things that are generally implicit and we use them to make decisions when we're better off taking things that are implicit, making them explicit, using those explicit assump…”