[extropy-chat] WSJ: A Cold Calculus Leads Cryonauts To Put Assets on Ice
pharos at gmail.com
Wed Jan 25 09:14:39 UTC 2006
On 1/25/06, Robert Bradbury wrote:
> It is worth noting that the money managers who earn the "big bucks",
> including those who manage the endowments for Harvard, Yale, etc. are
> managing returns of something like 14-18%/yr. I would guess that the
> average frozen person's assets are probably getting 1/2 to 1/3 of that.
> Designing a *good* investment strategy for what is coming and taking into
> accout the various reanimation scenarios is *not* easy and I would argue
> that most people who would be tasked with doing it (today) are likely to
> significantly underperform the rate of growth that the singularity may
> bring. [How many investment strategies detail precisely *when* you turn the
> money over to a self-evolving, improving AI investment fund manager?]
You are perpetuating the myth that investment managers have a skill
that is worth the fees they skim off your investments.
Many surveys have shown that picking stocks at random does just as
well as the average of mutual funds, better than some, worse than
Of course the ideal is to pick the best performing fund every year,
but you need hindsight for that.
Fooled by Randomness is loaded with crackling little insights, but the
best one is that what looks like skill is often plain old luck, so
beware of investment geniuses. They will get their comeuppance, just
as Solon warned. Solon was an upright ancient Greek legislator, known
for speaking his mind. When King Croesus of Lydia, the richest man of
his day, bragged to Solon about his wealth, Solon admonished, "The
uncertain future is yet to come, with all the variety of future." And
it did. Cyrus defeated Croesus and nearly burned him at the stake.
"When people buy stocks," wrote Meir Statman, a finance professor at
Santa Clara University and one of the leading experts on markets,
"they think they are playing a game of skill. When the stock goes down
rather than up, they think they have lost their knack. But they should
take heart. All they have lost is luck. And next time, when the stock
goes up, they should remember that was luck, too."
CEOs of companies use a similar technique. If the company has a good
year, they claim it must have been due to their wise management and
they deserve their 5 million in compensation. If the company has a bad
year they claim that it was due to circumstances beyond their control
and take their money anyway.
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