How Not to Be Wall Street’s Sucker

长期以来，投资者把扑克和投资相提并论。虽然不是完美的比较，但两者之间有许多相似之处，很大程度上源于心理和概率与金钱的类似互动。

There are some differences to consider, as well.

A great poker player will use statistics and other participants' behavior to separate his counterparts from their money. A successful financial services sector, on the other hand, should facilitate the effective and mutually beneficial flow of capital across the economy between savers, investors and businesses, hopefully at a fair price. In reality, though, the best compensated individuals on Wall Street often excel at separating market participants from their capital.

In poker, you may not always know if the other player is bluffing or not, but at least you always know he is on the other side of the deal. When hiring a financial advisor, consultant, or asset manager, you often can’t distinguish either point.

Of course, to hear them tell it, every manager is always the best at what they do.

Come to think of it, my analyst must be the best scout in the world, because every single private-equity fund I’ve ever met is top quartile. Or, maybe we’re not as good as we think we are at picking managers.

我最近读了一篇题为“不熟练和不知道：如何困难地认识自己的无能导致夸大自我评估”的文章，这篇文章发表在1999年的《人格与社会心理学杂志》上。作者David Dunningand Justin Kruger revealed some interesting tendencies regarding peoples’ perceptions of their own competence, tendencies that have distinct relevance for investors.

他们创建了一系列测试来衡量参与者在某些领域的能力，比如幽默、逻辑推理和语法。实验测量了任务的实际得分，以及参与者对自己认为自己得分的看法。

The top performers across every test modestly underestimated their own performance. Second-quartile groups tended to accurately place themselves, while the third quartile moderately overestimated their results. Strikingly, participants in the bottom quartile on every test vastly overestimated their own competencies, sometimes by 500 percent! Despite scoring in the bottom of the pack, these individuals consistently ranked their performance as well-above average.

The effects of overconfidence on investing behavior have long been documented for professionals and amateurs alike. Dresdner Kleinwort Wasserstein published research demonstrating that roughly 75 percent of equity mutual-fund managers believe they are above average. (The remaining 25 percent deemed themselves average!)Terrance Odeanat University of California, Berkeley has shown that overconfident investors trade more and earn less. And research published in theJournal of Financeon investment consultant recommendations showed that their investment manager picks underperformed funds they did not select. Worse, their top recommendations had even poorer performance.

While Charles Darwin sagely noted over a century ago, “ignorance more frequently begets confidence than knowledge,” the Dunning-Kruger effect showed the phenomenon is most prevalent amongst, and most detrimental to, those who are least competent. They lack both skill and the metacognitive ability to recognize their incompetence.

Context-specific knowledge helps in reducing the effects of overconfidence, so ongoing education about investment strategies and best practices for manager due diligence are a must.

和其他许多认知偏见一样，意识到这一点是抵御这些影响的最好方法。每次我遇到一个经理，我都会敏锐地意识到，几乎可以肯定，我是这个房间里最不知情的人，我偏执地认为自己是个笨蛋。谢天谢地，当你偏执地认为自己是饭桌上的傻瓜时，你的牌会打得更紧。

This heightened awareness of our need for skepticism has resulted in an actionable takeaway that we incorporate into our due diligence: a conscious effort to intentionally underestimate returns and overestimate risk, the manager selection equivalent of playing a tighter hand. By underwriting every manager with a deliberately lower-return expectation, as long as it still meets the required cost of capital, we force a margin of safety into the process.

Underpromise + overdeliver = margin of safety.

至少这是大概的想法，但我不完全有信心。

Christopher M. Schelling is the Director of Private Equity at the Texas Municipal Retirement System.