Thus spake Taleb:

Conclude, if you are starting a career, move away from investment management and performance related lotteries as you will be competing with a swelling future spurious tail. Pick a less commoditized business or a niche where there is a small number of direct competitors. Or, if you stay in trading, become a market-maker.

Well, making markets seems to be doomed, too. It has mostly been supplanted by the 'bots, and the pockets of fleshly franchise remaining are a diminishing and endangered species.

Taleb is wrong. Investment management and advisory is, always has been, and always will be a confidence game. There will always be men who can inspire confidence, and there will always be men who lack it and are willing to pay for it. This rule trumps the ability of the confidence man to provide investment performance– as long as he can inspire confidence, his AUM will runneth over. This basic voltage imbalance among men is an immutable characteristic of the human condition, and can never be replaced by computerized automation. It will remain the driving force behind this so-called "industry".

It reminds me of this H.L Mencken quote:

Perhaps the most valuable asset that any man can have in this world is a naturally superior air, a talent for sniffishness and reserve. The generality of men are always greatly impressed by it, and accept it freely as a proof of genuine merit. One need but disdain them to gain their respect. Their congenital stupidity and timorousness make them turn to any leader who offers, and the sign of leadership that they recognize most readily is that which shows itself in external manner. This the true explanation of the survival of monarchism, which always lives through its perennial deaths.

As always,

Gibbons Burke





Speak your mind

5 Comments so far

  1. Andre wallin on September 25, 2012 5:01 pm

    The market is the best psychologist in the world and if you don’t mind losing a lot of money and have high pain tolerance its a great boot camp. It seems people spend ten years learning the game, have a couple great years, and either retire or give it a lot back before they realize that the game that they mastered changed.

  2. Ed on September 25, 2012 11:54 pm

    That is remarkable. Taleb has completely misread the entire basis for the investment management industry. He then has the nerve to tell people not to get involved. Is it possible that Taleb being correct is black swan event? And if so, does he have the humility to accept such an uncomfortable truth?

  3. Sanjay Kohli on September 26, 2012 6:46 pm

    Two points:
    1. How does one make markets ethically in price order anonymous markets and still make a return.
    2. Confidence for the most part comes from knowledge & is generally given a high value by society.

  4. Saucy on September 27, 2012 2:30 am

    Haha, I know that Mencken must have been talking about the financial industry. I mean, isn’t this where all the superiority exists? The comments below miss this. Is there such thing as a mooching mistic quote-taker? That would be me. Is that how you spell mistic? Majectic….blah,blah. Victor, can you contact little John Stuart Mill? I don’t know myself.

  5. Saucy on September 27, 2012 2:42 am

    By the way,

    Mr. Burke,

    If I could come back in the next life….besides being a stock tick quote, I would gladly like to be reborn and known as the man with two last names.

    “There goes the man with two last names…. that’s one hell of a man.”

    Saucy Socks doesn’t ring well with the women…. I need something tougher.


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