Warren Buffett: Success in investing doesn't correlate with IQ • Hacker News Board

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#11

Post by mc-lovin » Tue, May 21, 2013, 4:18 AM UTC

adventured wrote: post #7

mc-lovin wrote: post #4

Earlier quoted context omitted.

It should be the other way around: below a certain IQ all you need is the efficient market hypothesis and you will be an adequate investor.

I assume you're joking, since the stock market is anything but efficient. If it were, as Buffett has noted frequently, his success would have been completely impossible. Indeed, the most money is made from the highest inefficiencies. And there's no inherent or guaranteed mechanism that drives under or over valued stocks back into any theoretical fair value line. Stocks are governed by human judgment ultimately - whic…

I wasn't joking.

> If it were, as Buffett has noted frequently, his success would have been completely impossible. Indeed, the most money is made from the highest inefficiencies.

Survivorship bias? I don't know, but in any case market efficiency is a very general claim, it doesn't rule out some "special" people with innate talent to predict future prices.

>And there's no inherent or guaranteed mechanism that drives under or over valued stocks back into any theoretical fair value line. Stocks are governed by human judgment ultimately - which typically swings emotionally to extremes - there's nothing efficient about that.

Just empty rhetoric. Look into the literature of econometric tests of the efficient market hypothesis.

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#12

Post by frozenport » Tue, May 21, 2013, 4:20 AM UTC

jcampbell1 wrote: post #10

I once talked to someone that worked for one of the brokerage houses, and they ran a report to measure the investment performance of the aggregate portfolio of people with M.D. in their title (doctors). It turns out that they were systematically terrible investors with low returns and high volatility for every period and any measure. I think the problem physicians face is that they spend everyday all day as the smart…

I hold the unconventional opinion that physicians spend 15 years memorizing flashing and steadying their hands.

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#13

Post by bcoates » Tue, May 21, 2013, 4:23 AM UTC

gfodor wrote: post #5

mc-lovin wrote: post #4

Earlier quoted context omitted.

It should be the other way around: below a certain IQ all you need is the efficient market hypothesis and you will be an adequate investor.

Buffett's entire investment philosophy is rooted in the idea that the market is not always efficient.

I don't think that's true. Buffett's investment philosophy involves active intervention in the companies he owns, not just blind stock picking.

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#14

Post by thewarrior » Tue, May 21, 2013, 4:24 AM UTC

tokenadult wrote: post #9

ekm2 wrote: post #8

Earlier quoted context omitted.

Some fields have a cognitive threshold. I seriously doubt if an IQ of 120 is sufficient to become an eminent mathematician.

I seriously doubt if an IQ of 120 is sufficient to become an eminent mathematician. That is an empirical question, and the historical answer is that that IQ level suffices.

Could you please lead me to the sources .Its just to console and motivate myself . Because I find this very hard to believe .

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#15

Post by michaelpinto » Tue, May 21, 2013, 4:27 AM UTC

sachingulaya wrote: post #3

Actual text: Success in investing doesn't correlate with IQ once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. Warren Buffett

This is sort of what nassim taleb is talking about with his character "fat tony" who isn't an academic but a street smart investor

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#16

Post by hkmurakami » Tue, May 21, 2013, 4:27 AM UTC

jcampbell1 wrote: post #10

I once talked to someone that worked for one of the brokerage houses, and they ran a report to measure the investment performance of the aggregate portfolio of people with M.D. in their title (doctors). It turns out that they were systematically terrible investors with low returns and high volatility for every period and any measure. I think the problem physicians face is that they spend everyday all day as the smart…

Well they also probably have less time than even the average person to read, learn, and do research.

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#17

Post by 20100thibault » Tue, May 21, 2013, 4:36 AM UTC

I find it quite unbelievable that this is an actual quote from buffet... With any basic knowledge of statistics you know that 125 isn't ordinary intelligence ...

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#18

Post by cynicalkane » Tue, May 21, 2013, 4:46 AM UTC

bcoates wrote: post #13

gfodor wrote: post #5

Earlier quoted context omitted.

Buffett's entire investment philosophy is rooted in the idea that the market is not always efficient.

I don't think that's true. Buffett's investment philosophy involves active intervention in the companies he owns, not just blind stock picking.

Actually, Berkshire Hathaway is known for being mostly hands-off. Primarily they just place important people in key positions when they need to. Their corporate HQ has a few dozen people.

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#19

Post by jsnk » Tue, May 21, 2013, 4:50 AM UTC

This title, "Success in investing doesn't correlate with IQ " is horribly misconstruing Warren Buffett.

The title conveniently left out "once you're above the level of 125.", which yields a completely different statement from the title.

What Warren Buffett said actually allows room for IQ to correlate to success in investing. From the way he said it, it actually seems as though he believes that IQ might correlate with investing under 125.

Re: Warren Buffett: Success in investing doesn't correlate with IQ

#20

Post by tikhonj » Tue, May 21, 2013, 4:51 AM UTC

This makes sense for investing where you actually make decisions about what to invest in. I'm completely guessing, but it is probably different for quantitative finance where rather than investing yourself, you come up with a strategy and follow or even automate it.

Of course, that also requires more than just intelligence--you won't get far without the discipline to test everything thoroughly and to follow the strategy even if it loses money in the short term.

Also, I imagine the two styles of investing require vastly different sorts of intelligence and are best suited to people of different temperaments. Making decisions about investments is very different from making decisions about how to make decisions about investments :P.