Michael Mauboussin - Active Challenges, Rational Decisions and Team Dynamics (EP.36)

January 8, 2018


Michael Mauboussin currently is the Director of Research at BlueMountain Capital, a multi-billion dollar hedge fund and asset manager.  He spent the majority of his professional career thinking and writing about decision making, behavior and complex systems, with long stints at Credit Suisse and nearly a decade alongside Bill Miller at Legg Mason.  Michael has been an Adjust Professor at Columbia Business School for 24 years.

Our conversation covers Michael’s early career, the paradox of skill, academic research more favorable to active management, decision-making, optimal size and composition of teams, unsettling features in the market, data analysis in sports, career risk, the Santa Fe Institute, and Michael’s new research on the horizon.

Every time I speak to Michael I come away thinking better and feeling smarter, and this time was no exception.

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Show Notes  

1:48 - What was Michael like as a kid 

2:26 – How Michael found his way to Wall Street 

6:18 – His start as an analyst in consumer and packaged goods  

7:52 – Why there are no .400 hitters in active management and the paradox of skill 

8:15 – Full House: The Spread of Excellence from Plato to Darwin 

14:26 – Why have there been massive flows into index funds over the last 3-4 years 

15:44 – Academic research supporting active management 

16:09 – Mutual Fund Flows and Performance in Rational Markets 

16:25 - On the Impossibility of Informationally Efficient Markets 

22:52 - Indexing and Active Fund Management: International Evidence 

23:12 – Do these trends also apply in global markets 

24:01 - The Mutual Fund Industry Worldwide: Explicit and Closet Indexing, Fees, and Performance 

25:22 – What has Michael discovered in his new role at Blue Mountain through his new credit lens 

27:49 – Amazon, the world’s most remarkable firm, is just getting started 

30:02 – What are some of the lenses that Michael uses when dealing with allocators 

35:02 – How does Michael go about interviewing for a team while taking into account their biases 

36:19 – The Rationality Quotient: Toward a Test of Rational Thinking 

36:37 – Biggest risks in the markets today 

37:31 – Banks to Funds: Have Some Leverage With That Deal 

39:45 – Liquidity in the markets 

41:26 – What’s most interesting to Michael about the merging of data and sports 

41:34 – The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing 

43:42 – Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak 

44:32 – Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are Won 

45:57 – Psychological bias in sports 

46:16 - Malcom Gladwell Podcast: The Big Man Can't Shoot 

 47:23 – Psychological bias in investment management 

47:40 – Scott Malpass on Capital Allocators 

 48:44 – Michael’s work with the Santa Fe institute  

53:08 – Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies  

 54:40 – Next big piece of research Michael is working on  

57:53 – The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction 

 57:59 – Should Michael be using his skills elsewhere in the context of a world where so many advocate for just indexing  

1:01:36 – Charley Ellis on Capital Allocators 



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