PODCAST
MUTINY PODCAST, EPISODE 54: KRIS ABDELMESSIH – ALPHA IS ILLUSIVE
The whole interview is great but the part when Kris talks about the paradox of provable alpha (around minute 54) is particularly interesting. Especially to debunk charlatans.
“The problem is that you can’t invest in them [quant, replicable strategies] because if it was that provable, then they get to choose their investors. And that manifests in several ways. A, they don’t take advances at all, they choose to have none. B, they set their fees so high that they capture all the alpha, and then you are still left with something that looks like a beta, or C you get to pick who your investors are. You’re not just going to open that up and to anybody. You’re not going to go on some platform on the internet and just ask for money.
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the only place where there actually is alpha is in the discretionary strategy that cannot be proven, so where the LP always has to worry that the GP is full of shit and that it’s not repeatable, and it’s just they’re always going to be worried that I’m just trusting. But that’s probably the only place where you’re ever going to find alpha in that situation because if it was provable, you would never see it.”
Invest like the Best – Daryl Morey – Systems Thinking in Sports
“If there is a player that looks completely different, succeeding in their area, they are probably even an extra cut above everyone else in that industry. Because they had to battle that [you have to look like past successful players] bias each step and overcome. It is like women or minorities breaking into many industry. You have to be extra good relatively to everyone else or the immune system of that industry is going to reject you”.
I am a white man, so not exactly a minority, but I spent only 10% of my career in my home country and/or speaking my mother tongue. I always found curious the fact that having experience in many industries, in different countries, speaking different languages was, for the most part, seen as a minus instead of plus on my cv. When it was my time to recruit, I was victim of the same bias (and my past) since I hired only people that “looked like me”, more as a ‘revenge’ than anything else.
I learned to be better but I also explicitly mention my experiences as strong positives during interviews, making any match an even better match.
How to Manage $50bn ft. Jason Morrow
Great to understand how to select investment managers, in particular quant strategies. Questions to ask managers to mitigate behavioural biases from the point of view of the asset allocator.
“The role of the decision maker is not necessarily to be right but to understand the odds and play them well”
The Game of Trading with SIG Alums Kris A, Tina L, & Steiner
Great episode if you are curious about trading, in particular if you’re interested in learning how big trading firms find and teach their traders. Around minute 52 Kris provides a superb explanation of the difference between trading and investing.
Invest like the best – Mitch Lasky – The Business of Gaming
Mitch is a partner at Benchmark and one of the leading figures in the video game industry. Over the last 30 years, he has built, led, and invested in a number of the best gaming companies in the world, including Activision, EA, Riot, Snapchat, and Discord.
“The venture business is a hard business. It is not hard to be like a broken clock, occasionally right. But to deliver return consistently across decades is a very hard thing.”
Around minute 46, Corey and Jason explain why you should worry if you have an hedge with positive carry. You are supposed to pay a premium when you buy insurance; if you receive the premium, the risk is more likely somewhere else. Treasuries as an hedge for equity risk in the period between 1980 and 2020 where hiding a path dependence risk that got evident in 2022.
The Diary of a CEO – Episode 195
I would love my son to grow with the pod host English accent…but I am also the one taking him away from London so…recurrent story of my life? Since it was my wife that suggested me the pod, I only listen to female guests ¯\_(ツ)_/¯. At minute 19 they talk about the “philosophy of leaning into stuff”, exploring. They just briefly mention crypto but I think it is a great example (I listened to the pod while FTX was imploding so I was a bit biased). Being dismissive of “anything new” without dedicating time to understand it, might offer strength in numbers (most novel ideas fizzle into nothing) but it is not a profitable approach: when you are right, you get repaid in multiples. But becoming a maximalist, just to bow to the sunk cost fallacy, ain’t right neither. Lean in, but if you do not feel right, do not be afraid of leaning out!
Top Traders Unplugged – The Art of Volatility Investing ft. Dave Dredge
“I am not gonna save money on my car saving on brakes. You want brakes all the time, yes they will come with a cost, they should come with a cost, but you find out that by having them, using them wisely and driving faster you will never see the cost, even if the brakes themselves do not directly contribute to speed”. Great metaphor on the benefit of tail hedging/long vol/adding convexity to your portfolio.