The real issue is people wouldn’t bring it up if the number wasn’t “shocking”. Which self selects for outliers.
I just hate hearing these same narratives being repeated because... they've already been repeated. Why must stock returns be random? It's predicting whether a company is going to do well or not, which has nothing to do with randomness. And yet people (like this commenter) just keep repeating this stuff, absolutely endlessly. They don't even know why they're doing it (try asking him) -- they just keep doing it.
You're right that that has little to do with randomness. But it also has little to do with investing.
Random paper (Fama et al.) doesn't say it's impossible to predict how well a company performs. It says why do you think you can predict better than the 1000 Ph.D. employed by trading co. inc. when all of you have access to the same public information? So the price of the company's stock is going to converge to some number that already reflects the known information.
Not sure where you're getting the stock returns are random bit either.
If you read hn a lot and built a lot over the past decade it hasn’t been hard to predict better than “a 1000 phds” which companies would win.
NVIDIA, apple, even small plays like twilio. It was obvious these companies had big leads in stuff that made money.
Go back and read the Cloudflare IPO filing thread here. That opened at what, $16?
You read the R2 thread from a few days ago it is again obvious AWS will bleed some of the most influential engineers when this becomes generally available. I don’t have a PhD mind you, but I would presume this will lead to entire companies moving to CF for some primitives, eventually CF pick up entire accounts.
Do PhDs at trading companies get annoyed because some AWS services still will only respond with plain/text in api responses containing json? That they have to write a custom parser as a result?
Or that the UI for AWS SNS in setting up an HTTPS subscriber kinda sucks? Like it was mostly done but worked so people got pulled elsewhere?
Do wall street PhDs realize the bundling of expensive AWS cloud primitives to use other AWS cloud products is anti-customer, and that maybe this is going to translate to devs voting with their feet when CF makes this move?
Heck, even the R2 announcement makes the egress fees issue clear in plain English. There are tons of comments validating that pain. Business people shouldn’t need a lot of convincing.
Do the above observations and experiences working with AWS and reading others experiences add up to more knowledge than 1000 PhDs?
I wouldn’t have thought so, but the value of an academic degree has been on a downward spiral for some time.
Is it obvious? How likely is it that you're right - is the chance 100%? Is it even possible that you're wrong and this don't happen?
Besides, successful trading is more about getting the timing right than it is about picking which companies will eventually increase in value.
well one reason would be that there is something about the market at time X that means conventional wisdom is faulty, since the 1000 Ph.D. employed by trading co. inc will be following the conventional wisdom there is a chance to outwit - years leading up to 2007 housing crash spring to mind as an example where this can happen.
Sure, if you’re correct it’s easy to say the logic was sound, but you never learn the odds just what happened.
That market has a lot of very smart people spending a lot of time making their predictions. If you can consistently identify stocks that are undervalued then either you are smarter than the rest of the market, or you know something the rest of the market doesn't.
It is possible to be smarter than the rest of the market. Particularly if you are investing in relatively low value companies and doing significant due diligence yourself. However, if you work in Congress, it is much more likely that you got your edge by knowing something that the rest of the market doesn't, and we have generally decided that it is illegal to make trades based on that information.
This can't happen because prices rise as a consequence of buying and fall as a consequence of selling. People who bet on a pattern destroy it.
The consequent randomness is easily verifiable. Try running some stock market data through a machine learning library, you won't get any interesting results.