Nassim Taleb has launched an attack on the investment management industry, suggesting that the randomness of returns makes it a poor career choice for the brains of tomorrow.
Taleb's ‘Black Swan' became a bible for those seeking to understand the credit crisis, but has he got this right?
Taleb has published a new paper entitled Why It is No Longer a Good Idea to Be in the Investment Industry; as the Wall Street Journal reports:
"He says many of the best money managers earn their success based on "spurious performance" and these folks "rise to the top for no reasons other than mere luck, with subsequent rationalizations, analyses, explanations and attributions."
"Once they are at the top, though, they get the bulk of the allocations, creating a "winner-take-all effect" that causes distortions in the marketplace, he says."
His argument rests on the idea that investment management has a ‘spurious tail' - those who have attracted assets by luck rather than judgement. The difficulty of competing with this spurious tail, means that, for Taleb, wannabe investment managers may be better off diverting their talents elsewhere.
He advises: "Pick a less commoditized business or a niche where there is a small number of direct competitors."
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Nassim Taleb - Why you should avoid the investment industry - Investing Strategy - Mindful Money
