I’m confused; it seems like evidence against the claim that you can get arbitrary amounts of value out of learning generic rationality skills, but I don’t see it as “devastating” to the claim you can get significant value, unless you’re claiming that “spent years learning all that stuff, and now do it as a day job; some of them 16 hours a day” should imply only a less-than-significant improvement. Or am I missing something here?
Yeah, this. It is a mistake—and I suspect a popular one—to think that rationality trumps any amounts of domain-specific knowledge or resources.
Ceteris paribus, a rational person playing the stock market should have an advantage against an irrational one, with same amount of skills, experience, time spent, etc. Question is, whether this advantage creates a big difference or a rounding error. Another question is whether playing the stock market is actually a winning move: how much is skill, how much is luck, and whether the part that is skill is adequately rewarded… compared to using the same amount of skill somewhere else, and putting your savings into a passively managed index fund.
If you invest your own money, even if you do everything right, you profit will be 1000 times smaller compared with a person who invests 1000× more money equally well. So, even if you make a profit, it may be less than your potential salary somewhere else, because you are producing a multiplier only for a moderate amount of money (unless you started as a millionaire).
On the other hand, if you invest other people’s money, it depends on the structure of the market: how much other people’s money is there to be invested, and how many people are competing for this opportunity. Maybe there are thousands of wannabe investors competing for the opportunity to manage a few dozen funds. Then, even if the smartest ones make a big profit, their personal reward may be quite small. Because the absolute value of your skill is not relevant here; it is the relative value of employing you versus employing the other guy who would love to take your position; and the other guy is pretty smart, too.
I’m confused; it seems like evidence against the claim that you can get arbitrary amounts of value out of learning generic rationality skills, but I don’t see it as “devastating” to the claim you can get significant value, unless you’re claiming that “spent years learning all that stuff, and now do it as a day job; some of them 16 hours a day” should imply only a less-than-significant improvement. Or am I missing something here?
Yeah, this. It is a mistake—and I suspect a popular one—to think that rationality trumps any amounts of domain-specific knowledge or resources.
Ceteris paribus, a rational person playing the stock market should have an advantage against an irrational one, with same amount of skills, experience, time spent, etc. Question is, whether this advantage creates a big difference or a rounding error. Another question is whether playing the stock market is actually a winning move: how much is skill, how much is luck, and whether the part that is skill is adequately rewarded… compared to using the same amount of skill somewhere else, and putting your savings into a passively managed index fund.
If you invest your own money, even if you do everything right, you profit will be 1000 times smaller compared with a person who invests 1000× more money equally well. So, even if you make a profit, it may be less than your potential salary somewhere else, because you are producing a multiplier only for a moderate amount of money (unless you started as a millionaire).
On the other hand, if you invest other people’s money, it depends on the structure of the market: how much other people’s money is there to be invested, and how many people are competing for this opportunity. Maybe there are thousands of wannabe investors competing for the opportunity to manage a few dozen funds. Then, even if the smartest ones make a big profit, their personal reward may be quite small. Because the absolute value of your skill is not relevant here; it is the relative value of employing you versus employing the other guy who would love to take your position; and the other guy is pretty smart, too.