Weekend Reads for Advisers: Love and Math, Luck versus Skill

Here, in case you missed them,  are some of the most interesting blog posts, articles, videos, and photographs that I came across during the past couple of weeks:

 Math

• The Art of Algorithmic War (Scribd)

• Two reviews of Edward Frenkel’s new book Love and Math: The Heart of Hidden Reality, a few weeks apart: Brilliance Triumphs Over Rejection: In ‘Love & Math,’ Fighting Discrimination Through Numbers and It all Adds Up (The New York Times)

• Science Confirms: Politics Wrecks Your Ability to Do Math (MotherJones)

Luck versus Skill

• Bob Seawright (@rpseawright) recently wrote about luck and skill in investing, arguing that we tend to underestimate luck’s role pretty dramatically. He opened with the story of the 2006 TradingMarkets/Playboy 2006 Stock Picking Contest that was won by Playboy’s Miss May 1998. “She won out over many professionals with lots of experience and vast resources who spent pretty much all day, every day studying the markets,” he says. “That result provided still further evidence for what we should already know – market success (however defined), especially over the relatively short run, is more a matter of luck than of skill.” So when the Wall Street Journal‘s Jason Zweig (@jasonzweigwsj) tweeted about the blog post, asking: “when you beat the market, was it luck or skill?,” it didn’t take longer for someone to chime in with “how many years in a row would make it skill?” For Seawright’s answer, read The Wyatt Earp Effect (The Big Picture).

• The Luck Factor in Great Decisions (HBR Blog Network)

• In We Owe the Beatles to Luck, Cass Sunstein asks: “Are some people destined for success, or is the whole idea of destiny a myth, a comforting tale that we tell ourselves? When artists or political leaders become household names, are they just lucky? You might think that the Beatles, probably the most successful popular musicians in the last 50 years, were bound to succeed. But an astonishing new book, Tune In, by Mark Lewisohn, suggests otherwise. (Bloomberg)

• Video blog: Fund Managers Uncovered, part one, featuring interviews with Richard Taffler, professor of finance at Warwick Business School, and psychoanalyst David Tuckett, visiting professor at the University of London, the co-authors of Fund Management: An Emotional Finance Perspective. (Sensibleinvesting.tv)

How Many of Our Successes and Failures Should Be Attributed to Luck? by @CHenneman http://t.co/DKZ5xHCfrk via @CFAinstitute #investing

— Lauren Foster (@laurenfosternyc) November 15, 2013

Investing

• GMO’s latest quarterly letter (PDF): Breaking News! US Equity Market Overvalued! and Ignoble Prizes and Appointments (GMO)

Funny! RT @VolSlinger: fed deflation in one pic pic.twitter.com/gMauHVEHPk

— Lauren Foster (@laurenfosternyc) November 15, 2013

• The Fallibility of Efficient Markets Theory (Enterprising Investor)

• Fool’s Gold: Why most back-tested performance histories are bunk, and how you can identify the ones that probably aren’t (Morningstar)

• Find Your Favorite Analyst by Following Fowl? Twitter might do for Wall Street what YouTube did for undiscovered artists. (Institutional Investor)

• Making Your Investment Policy Statement (Morningstar)

• Investing is Still More Art than Science (The Motley Fool)

RT @LarrabeeCFA: @AswathDamodaran on why you should welcome uncertainty: http://t.co/f479vjCMc4

— Lauren Foster (@laurenfosternyc) November 19, 2013

Retirement

• The Impact of Taxes on the Safe Withdrawal Rate (Nerd’s Eye View)

• The Payoff in Waiting to Collect Social Security (The New York Times)

• Lifetime Income for Women: A Financial Economist’s Perspective (Wharton Financial Institutions Center, April 2008 policy brief – PDF)

And Now For Something Completely Different

• Why do boxers box? Why do we watch? Reconciling a Sport’s Violent Appeal as a Fighter Lies in a Coma (The New York Times)

• “Happiness is love. Full stop.” A new look at the famous Harvard study of what makes people thrive (The Atlantic)

• One of my favorite photo projects: Big Appetites (Boffoli Photography)

• Volvo Trucks – The Epic Split feat. Van Damme (YouTube)

• The Best Coin Ever Spent (amazingoasis.org)

• “A lot of people run a race to see who is fastest. I run to see who has the most guts” – Steve Prefontaine. Why is Steve Prefontaine Important? (Runner’s Goal)

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

Photo credit: ©iStockphoto.com/JLGutierrez