Innovation Is Inherently Controversial
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We’re speaking of a chat application...
Or, what can advocates of Matrix (and open protocols more generally) do to try to replicate that success and catch-up?
Source for this? It would make sense to me if your claim was that future performance for this cohort is average. But, you seem to making a stronger claim -- that is, this cohort of outperforming funds performs worse than average going forward.
Here are a couple articles that try to analyze the phenomenon [2][3].
[1] https://www.bogleheads.org/wiki/Mean_reversion
[2] https://peeranalytics.com/2018/05/21/hedge-fund-mean-reversi...
[3] https://www.valuewalk.com/2015/05/hedge-fund-mean-reversion-...
A quote from your second source: The average subsequent performance of the historically best- and worst-performing long U.S. equity hedge fund portfolios is practically identical and similar to the market return.
A quote from your third source: Due to hedge fund mean reversion, yesterday’s nominal winners tend to become tomorrow’s nominal losers.
So, it seems like there are differing conclusions based on how you slice the data. I'm familiar with mean reversion, but I don't understand why this would predict underperformance for outperforming funds. If you flip a coin 10 times in a row and get heads 10 times in a row, you don't expect to get heads less than 50% going forward (but do expect the average rate of heads to trend back towards 50% over time).
Furthermore, if OP's strong claim ever held true, surely there would be funds that outperform by simply indexing the broad market minus the holdings of top performing hedge funds. As more and more money gets invested in these new inverse fund, the pattern the strong claim is based on would slowly cease to exist. Unless you're saying the underperformance is due to fraud or exorbitant fees.
https://www.ifa.com/articles/despite_brief_reprieve_2018_spi...
That means it is very, very hard to outperform.
Then, if you do outperform, that tends to be an exceptional year followed by not so great results.
https://www.morningstar.com/articles/1017292/what-to-expect-...
Key comment:
"Of the 123 stock funds that gained 100%-plus between 1990 and 2016, just 24 made money in the three years following their big gain, with the average fund losing around 17% per year."
Now, is it possible that ARK is an exception - of course. But the math would tell you that is highly unlikely.
Quote from the same article: "Eighty-eight of the 123 funds were go-go tech/Internet darlings that soared in 1999 but crashed after, losing 24.1% per year from Jan. 1, 2000, to Dec. 31, 2002."
So, it seems like the data comprising the "after-years" is highly skewed towards years when the overall market crashed, which explains the negative returns.
If your claim is true, shouldn't there be a fund that simply indexes the broad market minus top performing hedge fund holdings? If not, why not?
https://www.spglobal.com/spdji/en/documents/research/researc...
"We observe little to no evidence of performance persistence among active managers, except in the large-cap value and real estate categories. For example, out of 1,034 large-cap funds that existed in the universe as of Sept. 30, 2013, only 19.73%, or 204 funds, outperformed the S&P 500. In the following year, 15.69% of those 204 funds outperformed the benchmark. By the end of the third year, none of those original 204 funds were able to outperform the S&P 500 on a consecutive basis."
What is implied from this data is that if a manager has a good year, they are unlikely to match it going forward. So only 20% beat an index, and then only 16% of those that did beat it the next year.
Not only does it make sense from a mean scenario, but it makes sense from a human scenario too. When i see a company like Tesla skyrocket to 700, every day that it posts a 10% gain i think it's at the end of it's rally. Eventually, the firm gets way too hot and pressure to buy cools down. Market cap is just how much people are willing to pay for something * outstanding shares. If suddenly everyone thinks the rally has gone on too long, buying pressure ceeds and thus market cap/ stock price.
E.G. I believe in crypto, but when btc went from 20k - > 50k i took all my profit except my initial investment. It was purely speculative sure, but it drastically reduced my risk without reducing too much profit potential if i still believe in the long term.
Interesting to pick up on how she maps investments across "innovation themes" like robotics, AI, etc admittedly without deep domain knowledge herself, depending on the input of analysts.
Also known as 'automobile' or 'motor vehicle.' Cars are really just a subset of automobiles. It's less weird when you phrase it like that, using established terminology, right?
I think there is a lot of value in understanding that context. Without looking at that historic context, people are more likely to let their imaginations run wild and inadvertently come to believe things that aren't true (a significant portion of the general public believe Henry Ford invented cars...) or come to view technologies with an unwarranted level of awe and tunnel vision (the way 3d printing seems to be viewed by some, as mystical Star Trek replicator technology that came out of nowhere.) More generally, if people don't understand the true historic context of technology they become more likely to believe things that aren't true about technology. There is inherent value in dispelling myths and providing historic context for technology does exactly that.
And why is it important to break a technology down into it's constituent fundamental traits or properties? Because almost always the historical context of a technology includes technologies that did not share the same name. If you're talking about the history of cars but limit the scope of your consideration to things called cars, you won't get back much further than the 1890s. But if you break the concept of a car down, it becomes clear that you need to consider the history of wheeled vehicles and the history of motorized vehicles. Self-propelled traction engine are one of the conceptual predecessors to the machines we now call cars. They share 'abstract concepts' with cars (a wheeled vehicle, not on rails, which can move around under its own power), but not a name. Traction engines aren't cars, but are important historic context for cars. If you aren't willing to consider the abstract attributes that constitute a car, you cannot consider the true historic context of cars.
I'm confused, is this an objectionable statement? A lot of people seem to treat 3d printing as something truly special and unique, but actually 3d printing is a form of CNC; additive rather than subtractive like a CNC mill, but a form of CNC nonetheless. It's a technology firmly rooted in a broader tree of established technologies.
I guess some people think of these machines as printers foremost, and thus perceive a huge conceptual jump or paradigm shift from 2d desktop inkjets to 3d printers. If somebody comes from a computer background rather than a manufacturing background, it's easy to see why this framing might be chosen. But I don't think that's the right way to look at 3d printers. Rather, 3d printers are the synthesis of two already well established concepts in manufacturing: making things by adding material, and controlling machines using computers.
Edit:
> Wouldn't 2D printers then also be a subset of autonomous technology and robotics?
The modern familiar forms of 2d printers are such a subset, yes (and I never implied otherwise.) These machines were preceded by other forms of 2d printing which are not autonomous but were nonetheless mechanical. They were also preceded by autonomous forms of 2d printing that didn't fit inside your living room, but were nonetheless familiar technology to the general public (because everybody knows books exist.) I believe this is the reason 2d printing is generally considered more mundane than 3d printing, which is treated like sci-fi technology that came out of left field. Again, understanding the historic context of these machines gives us insight into the reasons they are perceived the way they are.
But from another angle, printing and publishing paper is a different industry than manufacturing objects, so the distinction is in their context
Your point here about CNC and additive versus subtractive manufacturing is also near to my hobbyist interests.
Extending the idea a bit, I suspect the history of social changes that resulted from the advent of the printing press are an entryway into understanding the public's reaction to social media today.
Aside from living through the history, can you recommend a way to build more of this knowledge? If it's a matter of being widely read do you know of something like a survey introductory text?
I will google more, but thought I'd ask.