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 120 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
Mauboussin: Public equity returns exhibit the same power law as venture capital
“We associate power laws with venture, but if you let it play out in public markets, it's also the exact same power law. It's a power of compounding is the key insight.”
Mauboussin: Mega-Cap Economics Have Defied Classical Theory Since 2000
“Since 2000, roughly speaking, it feels like the economics of the biggest companies have been almost economic law defying by that. I mean, two things. One is they've grown faster than what we would expect big companies to do. And they've sustained very high ret…”
Mauboussin: Magnificent Seven Economic Profit Exceeds Market Cap Share
“When you take a look at the economic profit, so return on capital, less cost capital spread times invested capital, the economic profit Of the Magnificent Seven, it's actually larger than their market cap representation.”
Mauboussin: Companies Ignore Cost of Capital and Rely on a 15% Hurdle Rate
“So it turns out it's really interesting that companies, they calculate their cost of capital. They know it, but they don't use it. For almost everything they do, they use a hurdle rate, and that hurdle rate's roughly 15%. So whether the cost of capital goes to…”
Mauboussin: Portfolio managers underperform by ignoring their own position sizing rules
“Even there's some evidence if you ask portfolio managers to write down Ex ante, what rules they should follow to size their positions. A, they don't follow those rules, and B, there's evidence that they did follow their own rules, they would do better than the…”
Mauboussin: Funds Run by Three Portfolio Managers Generate the Most Alpha
“What it was found was that the funds that delivered the most Alpha were actually funds with three portfolio managers and better than single managers, and by the way, better than two and four.”
Mauboussin: As Overall Skill Improves In Any Field, Luck Drives Outcomes
“And the paradox of skills when both luck and skill are contributing to outcomes, which is most things, right? There are some things that are mostly skill like running races, but most things in life have at least a dollop of luck. It can be the case that a skil…”
Mauboussin: US Active Equity's $1 Trillion Gross Profit Was Erased By Fees
“The cumulative gross profit, I think we have 35 years of numbers, is about a trillion, trillion net positive gross profit. So gross profit positive more than, you know, ok, is a trillion dollars. Now, that also happens to be about what the fees were in that ti…”
Mauboussin: Active Managers Perform Best In Markets With Highest Explicit Indexing
“They found that in markets where the Explicit indexing was highest Active managers often did the best”
Mauboussin: Buying Fired Fund Managers Consistently Outperforms Buying Newly Hired Ones
“Study after study demonstrates that if you bought the funds that were fired and sold the ones that were hired, you actually, just because of regression toward the mean, you do much better.”
Mauboussin: Individual Cognitive Biases Often Cancel Out, Leaving Markets Efficient
“The fact that you and I are suboptimal and it's easy for us to show that we're suboptimal as individuals that doesn't necessarily translate into a market setting, right? Because our errors may cancel out. You're overconfident. You buy, I'm overconfident. I sel…”
Mauboussin: Liquidity, Not Leverage, Will Be The Next Major Market Systemic Challenge
“I don't suspect leverage is going to be the next big challenge, I do think liquidity might be the case.”
Mauboussin: Simple Algorithms Beat Expert Forecasters in Complex Markets
“And so what we know, and this has been extraordinarily well documented by folks like Phil Tetlock, psychologist, University of Pennsylvania, and others is that in quotation marks, expert forecasts, they tend not to be very good at it. In fact, typically simple…”
Mauboussin: Top 2% of public companies generated 90% of US wealth creation
“What's remarkable is if you distill that even one step further, the top two percent of that 28,000 created 50 trillion dollars. Of the 55 trillion in total. So just two percent of all these companies are essentially 90% of the total wealth creation.”
Mauboussin: Top Quintile Public Company ROICs Have Widened Lead
“The ROICs for the top quintile of public companies has distanced itself from the next quintile and sustained at a very high level”
Mauboussin: Tech companies are not overrepresented among top compounders
“The other thing he pointed out technology companies, they're not overrepresented actually.”
Mauboussin: Almost all top compounder stocks suffer 75%+ drawdowns
“He documented that almost every one of these great compounders had massive drawdowns at some point. And it was common to have drawdowns of 75% or more, but some were 80, 85% drawdowns.”
Mauboussin: Taleb Fell Short Providing Frameworks to Measure Luck's Contribution
“I think Taleb's point, which of course is, is correct, is that we tend to underestimate the role of randomness or luck in, in the outcomes that we observe. But he, I think, came up short in actually giving people frameworks to think about the actual contributi…”
Mauboussin: Good Judgment Project found base-rate training most improved forecasting accuracy
“What they found was the training did improve people's accuracy of their forecasts, and it turned out they found the thing that was most important in that training was basically this, is this idea of teaching them about base rates, and reference classes, and ju…”
Mauboussin: Stimulus-fueled retail stock and options trading will end poorly
“We saw some people get a little bit of money, often just from the government and going into the stock market and trading, you know, options and stocks and so forth. You know, that movie hasn't ended yet, but we've seen this movie many times and that movie tend…”
Mauboussin: Entrepreneurs need irrational optimism, but investors must rely on base rates
“If you're an entrepreneur and you actually know the base rates of failures for entrepreneurs, you might never try in the first place, right? So there's this really interesting
tension, I think, between we want that optimism at the global level. We want peopl…”
Mauboussin: PE lockups protect investors from panic-selling at bad prices
“In some ways, I think that one of the advantages of private equity for, I will speak specifically to buyouts,
Is that investors can't pull their money out of these things.
And as a consequence, they don't see the volatility.
They have no chance to transact at …”
Mauboussin: Equities rebound strongly three months after a 20% market drawdown
“After a drawdown of 20% in the S&P 500, you wait three months. So now from the beginning of March through early June, and then you get involved. And then they looked at small cap and large cap value, small cap and large cap growth. And what they found essentia…”
Mauboussin: High market return dispersion reveals true active manager skill
“What we have shown is that it's very clear that the standard deviation of alpha is Is greatest following periods of high dispersion. So that's saying that high dispersion allows, the tide goes out, you know, who's wearing a swimsuit. High dispersion, that allo…”
Mauboussin: Noise explains 50% of the gap between elite and average forecasters
“The punchline of this, which was, I think, really the key lightning bolt, was that when they decompose this, they found that the difference between the best and the rest was 50% attributable to noise, 25 to bias, and 25 to information. So saying this different…”
Mauboussin: Venture capital and buyout returns lack reliable, standardized performance data
“The challenge in these things are things like venture capital is a good example where there just aren't really reliable data. You and I can look at the S&P. 500 returns or the Russell 3000 returns. We can agree pretty much that the numbers are right. Venture c…”
Mauboussin: Accounting losses often mask highly profitable investments in intangible growth
“So saying this slightly differently, you might have two companies They're both losing money, but one where the economics are fantastic, and you want them to lose money because they're engaging in NPV positive investments. Another company losing money that's ac…”
Mauboussin: Individual cognitive biases often cancel out in aggregate markets
“The point I try to stress is that it's not clear to me that those little things actually manifest in markets, right? Because They can cancel out, essentially. So the market is really, you're not competing. It's not me, Michael versus Ted. It's really Ted versu…”
Mauboussin: The wisdom of crowds fails when investor beliefs become correlated
“So the wisdom of crowds exists when you have Heterogeneous agents. Good aggregation mechanisms. So in other words, the information is being brought together and you have good incentives. And by the way, that should be your default assumption is that markets ar…”
Mauboussin: Investing's Biggest Error Is Confusing Fundamentals with Expectations
“The biggest mistake in the investment business is a failure to distinguish between between fundamentals and expectations, which is to say, when fundamentals are good, we all want to buy. Welcome to the human race, right? And when fundamentals are bad, you want…”
Mauboussin: Cognitive Diversity Boosts Fund Returns; Demographic Diversity Is Neutral
“There's only one paper that I've ever seen that attempted to tackle whether it was cognitive diversity or social category diversity that added value, and what that paper found, and it was a couple thousand mutual funds, and it's hard to tag these things really…”
Mauboussin: Additional information increases forecaster confidence without improving accuracy
“The research shows that as you give people additional pieces of information about something, the accuracy of their forecasts don't improve at all, or their bets don't improve at all, but their confidence tends to soar.”
Mauboussin: Computers cannot model multi-order future effects missing from historical data
“Well, what would the world look like, and what are the primary, secondary, and tertiary effects of that happening? There is no program that can help you, computer that help you do that, because this is not in the data, right?”
Mauboussin: Retail Investing Surges Almost Always End Poorly For Individual Investors
“It's almost always the case when individuals get excited and start directly investing that the story doesn't end happily for them.”
Mauboussin: Zero $100B+ Companies Have Grown Revenue 15% Annually Over Ten Years
“Let's look at every company that had initial revenues of one hundred billion or more, so obviously adjusted for inflation, and look at how they did in their subsequent growth rates for the next 10 years. And by the way, because this is such rarefied space, you…”
Mauboussin: Genuine Consensus Is Rare Because Good Investment Ideas Are Controversial
“I've always thought that in the world of investing, it's just really rare to have an honest consensus. You know, most good investment ideas are controversial. It's very rare that everyone says this is obviously brilliant or obviously right.”
Mauboussin: Low Market Volatility Suppresses Active Fund Manager Performance Differentiation
“The small variance and performance of active managers, part of that's also a function of the volatility being low. And we can demonstrate that. So, you know, it's very difficult to distinguish yourself either favorably or unfavorably when the volatility of the…”
Mauboussin: NFL Teams Still Make Suboptimal Fourth-Down Decisions Despite High Stakes
“It's amazing that even like in the NFL, where there are huge stakes, There's still a lot of suboptimal decisions made. You know, the famous one is fourth, going forward on fourth down.”
Mauboussin: Outcome Bias Creates Crippling Career Risk For Under-Established Decision-Makers
“Bill Belichick goes four and a fourth down, and it doesn't work out. People give them the benefit of the doubt, but if you're a coach who's got a 500 team, it may be the correct decision, but you lose that game. People don't think about the quality of your dec…”
Mauboussin: Statistically Evaluating Managers Requires Longer Time Horizons Than Practice Allows
“Some of the academic work and some of the simulation work suggests that the time horizon is a little bit longer than it is practically. But the flip side is if I'm an allocator and I have someone who's underperforming, I don't really don't know if it's just a …”
Mauboussin: Margin Requirements, Not Interest Rates, Actually Drive Market Credit Cycles
“John's, I think, very provocative point is that it's not about interest rates. It's about margin requirements. It's about the ability to borrow. And we tend to think that if we lower interest rates, the world is going to be better and we raise interest rates i…”
Mauboussin: Managing $70 Billion Is Far Harder Than Managing $7 Billion
“At Lake Mason Capital Management, we, you know, the AUM got to, I think, 65 or seventy billion dollars. It's a lot harder to run seventy billion dollars than it is to run seven billion dollars than it is to run seven hundred million dollars, and that's somethi…”
Mauboussin: Genuine Expertise Requires a Predictive Model, Not Just Experience
“I guess the way you could say it is all experts have experience, but not all experienced people are experts. And so what Northcraft says is an expert is someone who has a predictive model that works.”
Mauboussin: Intuition and Expertise Only Function in Stable, Linear Environments
“One of the ways to think about this, and this actually frames pretty much the whole report as well, is that you're likely to see expertise work or intuition work, candidly, is when you have environments that are relatively stable, where the relationships are l…”
Mauboussin: Pattern recognition works better on micro than macro levels
“So I do think it's going to be more effective on the micro level than it's going to be on the macro level, because it's just a much simpler problem to try to parse.”
Mauboussin: Fundamental investors underutilize available decision aids
“Many fundamental investors don't really use those decision aids, or they don't use them as much as they possibly could, and so that's a fascinating area for us to explore, which is, are there decision aids at our fingertips that we're not accessing as fundamen…”
Mauboussin: Fundamental investors lack structured, quantitative position sizing
“I think most fundamental investors have some sense of why their position sizes are what they are, but in a sense, they're not quantitative or they're not completely structured.”
Mauboussin: US expected real equity returns reached mid-6% in January 2024
“January first, 20, 24, expected equity returns are eight and a half percent nominal. You take out the inflation expectations. Your real equity returns are from the mid sixes, low to mid sixes. Not great, not compelling, but a heck of a lot better than Real thr…”