Nassim Taleb: Not enough evidence that Buffett isn't just lucky

Discussion in 'Wall St. News' started by Daal, Feb 9, 2010.

  1. Daal


  2. I know Taleb is just trying to get in the news, but I wonder if he's read Snowball, an excellent biography of Buffet and his investing skills. Saying Buffet's performance is the result of chance is like saying Tiger's 15 majors (or whatever) in 10 years are the result of chance.


    The chance part is someone coming along with such outsized talent.

    If you want to claim 'buy the dip' clown Bill Miller's performance is just luck, go right ahead. I'm with you. Beffet has skills on a higher plane than guys like Miller could ever dream about.
  3. I don't think Buffet is just an outstanding stock picker. Stock picking is all chance.

    Buffet is a great manager and he has the ear of the companies he invests in. That's where his talent really is.

    Taleb is really enjoying the spotlight, though. He comes up with a dumbass strategy of buying teeny options and then waiting for catastrophes. He bled at least one fund dry that way, had one okay year (Universa or whatever it's called was up 38% - not much compared to what most trading companies were up in 2008), and he's been riding that "achievement" ever since.

    His black swan thing is correct, but translated into a strategy, it's like a stopped clock.
  4. Buffett has become one of the richest men in the world by buying toll bridges or atleast businesses that can increase their revenues in an equivalent way to a toll bridge. That isn't luck, that's calculated.

    That said, alot of Buffett's businesses and stock holdings have so far only proven this ability in an inflationary environment. A strong market position will allow a business to increase revenues proportional to or greater than inflation. This ensures their profitability over time. It's still unclear if the same trick will work during a deflationary period though.

    BNSF only acts as a toll bridge during an inflationary period, when the compatativeness with trucking is there due to high diesel prices and the capital intensive nature of the business is subdued because of the lower future value of dollars that are currently being invested. During a deflationary period this will probably be the opposite case because of the higher future value of the dollar, making BNSF a drag on Berkshire earnings for years to come.

    Like Buffett, Taleb has also bet on inflation. Personally I took his recent remark that "every human being should be short long dated US treasuries" as a contrary indicator. I now have a large position in long dated US treasuries.
  5. I like the comment above about Tiger being lucky on all of his majors. If you're saying Buffet is just lucky, you're basically saying nobody can make outsized returns on investments. Which means you should buy the index and stop visiting ET.