From the Northeastern Section of the ACS, focusing on career management and development

September 2021
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Mauboussin: Skill and Luck and What reveals Good Companies
Filed under: Position Searching, Job Offer (Situations), Observ. Trends
Posted by: site admin @ 3:23 pm

When we consider at what companies we should
look for a position
in a competitive industry, what
factors should we consider?

Rumor?  Ask someone older or more experienced
than us?  Data?  There are so many measures–What
really counts?

Consider looking into a couple of things:
1.  Earnings per share
2.  Management team’s long term performance.

For we need to realize that when we go to work for
a company we are making a significant investment
in that company,
and the industry it is in.
The WSJ reported one measure to consider
is “diluted earnings per share,” that separates out
performance from complicated financial dealings.

The company’s Management team’s long term
is a second factor.  On  the same
page of the paper told the story of Michael
Mauboussin who has written about the “paradox of
skill.”  Over the short run, luck and skill play
significant roles.  Luck tends to even out in the
longer term and is less of a factor.  Skill in
decision-making revealed in financial decisions and
directions companies’ management teams lead their
companies, the challenges they have faced and
weathered is a noteworthy measure.(Look at
investment firm reports, like Fidelity Investments.)

In addition, Mauboussin assesses “streaks in almost
any endeavor” to be a “combination of above-average
skill and above-average luck.” While all the positive
streaks are held by skillful, but not all skilled have
streaks (for not having luck fall their way).

Thus, when a very skillful person says she was just
lucky, there is an element of truth about it.

One Response to “Mauboussin: Skill and Luck and What reveals Good Companies”

  1. site admin Says:
    Jason Zweig went a quantum level of detail further, for those interested on sizing up investments. Whereas investment outcomes are easy to look at and compare, the process tells more. He cites Mauboussin (as Mr., so he must have him in high regard) might use three gauges– (1) analyze how the portfolio is managed. So look at names and sizes of top holdings or segments. If the same as others, no real future superstar. (2) behavior in market extremes or challenges. The managers letters to investors suggests element. (3) structure of the investments and when in the business cycle actions were taken.

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