The Invisible Hands Quotes

“Fund management is a skill—you cannot run money through consultants or committees. If you have a committee, you should buy an index fund and stop trying. Committees settle to the lowest common denominator, which is the lowest risk. A committee will not take risk. By the time a committee decides to buy tech, it is already March 2000. Fund management is like cooking, whereby 10 chefs have the same ingredients but make 10 different things. You have great chefs who get three stars and lousy chefs who make horrible food. Fund management is similar in that what is important is what you make out of the mix, how you interpret information, how you structure trades and build portfolios. But with committees somehow the results are always the same. When you have a committee, you cannot be the only guy making the decision because, at some stage, you will be wrong in the short-term and everyone will get fired. So the whole groupthink model makes things very difficult, as does the visibility of these posts. Making or losing a lot of money always makes headlines—there is no upside or solution for that.”
― Steven Drobny, The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money

“2008 was a reminder that it really matters to care about liquidity and correlation, that it matters to worry about a large range of risk indicators rather than just one, that counterparty risk is important, that your balance sheet is important. Most of these lessons are as old as the hills, which is why I really cannot understand all this talk about black swans. When the same thing happens over and over again, how can you be surprised? “Black swan” may have become the most confusing phrase in markets. Nassim Taleb's recent use of the term is commonly understood to denote an unlikely and unforeseeable event, but this is not the main story of 2008. I saw a crisis as highly likely given people's beliefs and behaviors. Many people seem to use the “black swan” idea to reassure themselves when some bad things happened that they did not expect. They use it to claim that it was not their fault, which I do not think was Taleb's meaning. Too often, people use it to avoid taking responsibility for their actions by claiming the events—and their losses—in 2008 were unforeseeable, whereas in fact their hypothesis of how markets worked was just disproved. The other hypotheses always existed. The metaphor of the black swan is of course an old one and was used by Karl Popper in the 1930s to illustrate the fallacy of induction. It is an example of something that can falsify a hypothesis. If you have a hypothesis that all swans are white, a single black swan falsifies that hypothesis. In this usage, the existence of a black swan is of course neither unforeseeable nor even a low probability event, since hypotheses are falsified all the time.”
― Steven Drobny, The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money