Credit Suisse' Michael Mauboussin Reflects on Thirty Years of Markets, Cognitive Biases, Luck vs Skill, and More

From FT Alphaville:

Michael Mauboussin, head of global financial strategies at Credit Suisse, joins us again to discuss his recent paper, Thirty years: The ten attributes of great investors. The paper is a reflection on much of what Michael has learned about investing throughout his career, and how the investment landscape has changed over time. Michael thinks deeply about epistemological issues and cognitive biases. One of his books, The Success Equation, is about the difficulty of untangling the roles of luck and skill in our lives.

Here’s an excerpt from the opening to the paper:

My first breakthrough occurred when a classmate in my training program handed me a copy of Creating Shareholder Value by Alfred Rappaport. Reading that book was a professional epiphany. Rappaport made three points that immediately comprised the centerpiece of my thinking. The first is that the ability of accounting numbers to represent economic value is severely limited. Next, he emphasized that competitive strategy analysis and valuation should be joined at the hip. The litmus test of a successful strategy is that it creates value, and you can’t properly value a company without a thoughtful assessment of its competitive position.
The final point is that stock prices reflect a set of expectations for future financial performance. A company’s stock doesn’t generate excess returns solely by the company creating value. The company’s results have to exceed the expectations embedded in the stock market. …

And a later passage:

8. Know the difference between information and influence. In classic markets for goods or services, prices are a highly informative mechanism. In microeconomics, the equilibrium price is one that balances supply and demand. A higher price creates more supply than demand, and hence excess supply. A lower price creates more demand than supply, and hence excess demand....

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