[HN Gopher] Unattractive funds managers outperform funds with at...
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Unattractive funds managers outperform funds with attractive
managers by over 2%
Author : donsupreme
Score : 77 points
Date : 2023-12-14 20:51 UTC (2 hours ago)
(HTM) web link (papers.ssrn.com)
(TXT) w3m dump (papers.ssrn.com)
| PessimalDecimal wrote:
| A good maxim is to employ people who are hired and promoted for
| their ability and not for extraneous reasons.
| JumpCrisscross wrote:
| > _A good maxim is to employ people who are hired and promoted
| for their ability and not for extraneous reasons_
|
| More specifically, identify which attributes your peers select
| against for no good reason and chase those.
| optimalsolver wrote:
| Red pill: people would rather surround themselves with
| attractive people and pay the 2% tax than be more successful
| with a team of Quasimodos.
| thot_experiment wrote:
| I bet the second order effect of being surrounded by pretty
| people generally leads to better outcomes. In the surgeon's
| paradox you actually care about the raw skill of the
| individual and nothing else. If whatever you're trying to do
| involves any sort of interpersonal interaction, you're gonna
| make the 2% up and then some.
| PH95VuimJjqBqy wrote:
| it's certainly true that attractiveness is part of being a
| prostitute but outside of vocations where attractiveness is
| built into the work itself I don't think what you said
| actually applies.
| ladberg wrote:
| It could definitely be applicable when trying to convince
| people to invest in your fund!
| thot_experiment wrote:
| Are you kidding me? Being attractive is like playing life
| on easymode! It's a bonus to every interaction you have
| in life, have you never had to interview for a job?
| fshbbdssbbgdd wrote:
| Why would that when you're picking someone to manage your
| money? You're hiring a fund manager, not a personal trainer.
| Animats wrote:
| 2% is huge.
|
| Is there a non-paywalled copy of this?
| FuriouslyAdrift wrote:
| found this dangling out there
|
| https://d1e00ek4ebabms.cloudfront.net/production/uploaded-fi...
| raphaelj wrote:
| Is it 2% or 2 percentage points?
|
| Like, if the attractive fund manager gets a 4% ROI, is the
| unattractive one getting 6% or 4.08% (0.08 is 2% of 4%).
| NovemberWhiskey wrote:
| Generally speaking, in finance, if you mean the former you'd
| say "by 200 basis points" in order to disambiguate.
| dmurray wrote:
| "2% per annum", per the abstract, so the ugly manager returns
| 6%. I agree the effect seems too large to be believable.
| april7 wrote:
| "Utilizing the state-of-art deep learning technique to quantify
| facial attractiveness" we're really there
| tayo42 wrote:
| Forget the research, release this as an app lol
| angarg12 wrote:
| Relevant XKCD
|
| https://xkcd.com/882/
| jack_riminton wrote:
| This is Nassim Taleb's "Surgeon Paradox": "If you're choosing
| between two surgeons of equal merit, choose the one who DOESN'T
| look the part, because they had to overcome more to get to where
| they are."
| optimalsolver wrote:
| I automatically know that if he was facing extensive brain
| surgery, Nassim would choose the tall, chisel-jawed surgeon,
| not the Urkel-looking guy with a noticeable speech impediment.
| hef19898 wrote:
| Sometimes, every number should come with error margin bars...
| talldatethrow wrote:
| This was true IMO until diversity agendas, like the ones that
| make it harder for an Asian student to get into med school than
| an African American one.
|
| So now if you have to choose between an Asian doctor and an
| African American one, you'd have to be pretty foolish to pick
| the African American one. In the 80s, I would have totally
| believed the African American doctor must be amazing to make it
| through. Now we know he was possibly let into medschool with
| scores that would have gotten an Asian doctor rejected.
| space_fountain wrote:
| Have there been follow up studies finding this?
| Dig1t wrote:
| https://twitter.com/eyeslasho/status/1706319646176227391
|
| >The magnitude of Systemic Antiracism in medical school
| admissions: A black applicant with a 3.2-3.39 GPA and a
| 24-26 MCAT had almost a ten times greater chance of
| admission than an Asian-American with the same scores.
|
| I don't know about studies on actual patient outcomes, but
| there are good data WRT admissions, which I think is
| relevant to OP's point about overcoming obstacles.
| space_fountain wrote:
| I think disputing the predictive power of things like GPA
| is pretty common. I'm not sure many people dispute this
| effect where I think downstream impacts are harder to
| quantify
| KittenInABox wrote:
| I'm surprised you'd base a doctor's capacity to do medicine
| off their MCAT score. It'd be like judging a staff software
| engineer by their highschool GPA. If a doctor survived the
| rigors of medical school and the years of near-poverty (if
| not actual poverty) wages of residency, why would you care at
| all about what their initial score on a test was over 5 years
| ago?
| gotoeleven wrote:
| If you think the affirming actions end once the admittance
| decision is made I have a bridge to sell you.
|
| Holding favored minorities to lower standards has permeated
| every institution, including medical schools, at every
| level because people are afraid of being called racist.
|
| "Racist medical school fails african americans at higher
| rate than asians!" would be the headline and there would be
| no defense the critical race theory mob would accept.
| nextworddev wrote:
| There's probably a high correlation between software
| engineer seniority and GPA
| SkyPuncher wrote:
| Heavily doubt that one.
| throwaway_l33t wrote:
| Yeah, and there's at least anecdotal evidence here:
|
| > The admission to medical school of Patrick Chavis, one of
| the black doctors admitted under the medical school's
| affirmative action program instead of Bakke, was widely
| praised by many notable parties, including Ted Kennedy, the
| New York Times, and the Nation. As an actual medical doctor,
| Chavis's many actions of incompetence and negligence were
| broad and widespread. The large number of patients that he
| harmed, the amount of pain and suffering that he caused, the
| video recordings of his many major mistakes, the huge number
| of malpractice lawsuits against him, and the eventual loss of
| his medical license, were all reported by the media.
|
| https://en.m.wikipedia.org/wiki/Regents_of_the_University_of.
| ..
| Aaargh20318 wrote:
| I've noticed a similar effect with women in IT. I've worked
| with only a few female software engineers but all of them were
| above average developers. It's such a male dominated profession
| that it acts as a sort of filter.
| bsder wrote:
| Actually, I would choose the female because she punched her way
| through a mess of obstacles to get where she is.
|
| In addition, she is likely to _pay fucking attention_. It 's
| well documented that female doctors tend to do things like
| _follow checklists and prodcedure_ instead of just half-assing
| it.
|
| Every single specialist female surgeon I have dealt with has
| been way above average. The male surgeons have been a mixed
| bag. Some good--some not so much.
| huijzer wrote:
| Because it's almost Christmas, a related joke from Warren
| Buffett:
|
| "I heard they called off the Wall Street Christmas pageant
| because they couldn't find three wise men"
|
| The point being that most fund managers do not outperform the
| index, so 2% more or less isn't that important.
| toss1 wrote:
| Umm, fun joke, but 2% over- or under-performance is _HUGE_ ,
| especially compounded over years.
|
| It is the reason behind the common recommendation to buy only
| low-load or no-load funds; because a 1% or 2% load vs a zero or
| 0.1% load is almost impossible to overcome -- over time, the
| no-/low-load funds _will_ win.
| hklgny wrote:
| The comment wasn't that 2% doesn't matter. It was that even
| with the 2% from your ugly fund manager you should still just
| buy index funds
| mandelbrotwurst wrote:
| The average fund manager does not underperform by more than
| 2%.
| dustingetz wrote:
| after fees. most managers don't outperform after fees
| junar wrote:
| Related news coverage:
| https://www.ft.com/content/6e299bef-a475-4f6b-9430-d4a8c9772...
|
| Some prior papers linked from the above news article:
|
| https://www.sciencedirect.com/science/article/abs/pii/S22146...
|
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1659189
|
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3341835
|
| https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12428
| Animats wrote:
| This is China's mutual fund market, where reliable numbers about
| business financials are hard to come by.
| missedthecue wrote:
| Hard to come by? What do you mean by that? The financials are
| readily available. So you must be under the impression that
| it's an auditing free for all?
|
| Do you actually have first hand experience with this because it
| doesn't match mine.
| karaterobot wrote:
| > Good-looking managers also have greater chance of promotion and
| tend to move to small firms. The potential explanations for their
| underperformance include inadequate ability, insufficient effort,
| overconfidence and inefficient site visits.
|
| This makes sense as a consequence of people's tendency to prefer
| attractive people, and seems related but not identical to the
| Peter principle. They'd tend to get responsibility unwarranted by
| their past performance because they're just so damned good
| looking!
|
| Hmm, if this study has legs, maybe my next resume should
| highlight how ugly I am. And if I put a bag over my head during
| the interview, maybe they'll think I'm so hideous that I must
| truly be a genius.
|
| * 16 years industry experience
|
| * History of delivering blah blah
|
| * Face looks like a mule kicked it
| neilv wrote:
| Is there somewhere I can opt-in to be worse at investing, in
| exchange for doing much better on dating apps?
| guerrilla wrote:
| Yeah, get a sex change.
| callalex wrote:
| Can you expand on this?
| guerrilla wrote:
| OPs name is Neil, so I assume he's a man. The number of men
| per women on dating sites is very high but even if it
| wasn't, women are far pickier than men. As a result, almost
| all women have hundreds of likes and tens of matches for
| every one a guy has.
| hgomersall wrote:
| I have a general philosophy that when outsourcing you should go
| with the company that has the crappiest web presence and least
| good branding because obviously, if they're still in business
| dispute their terrible marketing, they must be good.
| andy99 wrote:
| This is absolutely true with trades. If you're hiring a roofer
| or whatever that has a great website, they will be the worst.
| The good ones have a backlog and no need to waste money on a
| site or other advertising. Essentially it's sales led vs
| product led.
|
| True also for e.g. beer. For a given price point, the one that
| advertised the most (Stella for example) put the money there
| instead of quality.
| ladberg wrote:
| Doesn't seem to be mentioned in any other comments or the paper
| itself, but this is Berkson's paradox.
|
| https://en.wikipedia.org/wiki/Berkson's_paradox
| projektfu wrote:
| You're saying that unattractive, unperformant fund managers
| have nothing to recommend them, and so that makes the
| correlation negative because they're censored from the sample?
| Otherwise it would be roughly flat, if they didn't let the
| unattractive bad managers go?
|
| Could be. But then, it's still a reasonable heuristic, because
| you might find that unattractive managers are uniformly pretty
| good or better, and attractive ones are 50-50. The best manager
| might be one of the really really good looking ones, but
| overall there is less selection pressure on attractive managers
| with respect to performance. (Halo effect?)
| deadbeeves wrote:
| Couldn't this just be statistical noise? 2% isn't a huge
| difference, and if you partition stock funds into two arbitrary
| groups it's almost certain that one will on average perform
| better than the other, but not by a lot. The next question to ask
| should be how much better are stock managers who have an odd
| number of hairs on their head, compared to those who have an even
| number.
| fallingknife wrote:
| If you look at the abstract it's 2% per annum, which is an
| absolutely massive difference in terms of ROI.
| deadbeeves wrote:
| So what's the actual relative difference? The absolute
| difference is completely useless in this context.
| richardw wrote:
| > 2% isn't a huge difference
|
| 2% per annum is a spectacular difference, compounded. Careers
| and fortunes are made of that.
| scott_w wrote:
| If you collect enough data over a long enough time period, it's
| absolutely possible to see a 2% uplift and it be statistically
| significant.
| beepboopboop wrote:
| There's edge cases though, I run a fund and we're one of the top
| perf... oh... oh no.
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