Efficient market hypothesis is nonsense. A lot of institutional investors are long-only. That is their mandate. All the information they may have does not change that fact.
It is unlikely that you will beat the market in the long run and if you do, it may well be down to chance, but it is possible, because the market is not perfect.
Furthermore, you can not "buy the market" in the first place. You can buy ETFs replicating stock indices, but that is not the same. If you bought the S&P you will have performed differently than if you had bought MSCI world. Ultimately, stock picking is just a less diversified version of buying an index.
> It is unlikely that you will beat the market in the long run and if you do, it may well be down to chance, but it is possible, because the market is not perfect.
Sure, I should have phrased my claim more carefully: You cannot beat the market consistently every year. Beating it by chance is irrelevant when what you're looking for are sustainable, continuous profits.
> A lot of institutional investors are long-only. That is their mandate. All the information they may have does not change that fact.
There are also lots of institutional investors that are involved in day trading. My claim merely was that: 1) There are enough of them for new information to get priced in faster than average private individuals could take advantage of them on a consistent basis. 2) Private individuals are not likely to beat institutional day traders.
> Efficient market hypothesis is nonsense.
As with all real-world applications of science, the match between theory and practice is not perfect. IMO it is good enough, though. If it were possible to foresee stock prices on a consistent basis, then we'd see tons of successful investors. I have yet to hear of an investor or a fund manager, though, who consistently beats the market. All instances where an investor has been able to do that over, say, a 10-year period can be explained by statistical outliers. (In the sense that, yes, there will always be outliers but unfortunately, it's impossible to predict who it's going to be and how long their run is going to last. There are countless fund managers who were successful for a number of years, only to be very unsuccessful during the following years.)
> Furthermore, you can not "buy the market" in the first place. You can buy ETFs replicating stock indices, but that is not the same. If you bought the S&P you will have performed differently than if you had bought MSCI world.
That's true, I was being a bit sloppy here. I was referring to MSCI-like indices as, compared to smaller indices, they minimize risk due to additional diversification and still yield higher profits on average. (This is the usual paradox: diversification usually leads to lower risk and higher profits. It's the only free lunch you'll ever get.)
> Ultimately, stock picking is just a less diversified version of buying an index.
Sure, but in contrast to stock picking, there are 140 years of world market history backing the claim that long-term investments (over at least ~15-20 years) in "the" world market (i.e. MSCI-like indices) will, on average, yield profits in the order of 4-8% p.a., depending on what exactly your definition of "world market" is. There is no such data supporting investments in single stocks.
>I have yet to hear of an investor or a fund manager, though, who consistently beats the market.
Renaissance Technologies? Funny enough, it's always the people outside the industry with the least amount of information who believe in EMH.
To be clear, there are other great many firms that consistently crush it (including mine), but you probably haven't heard of them, or they are proprietary trading operations vs mutual/hedge funds.
But regardless, the point of a hedge fund manager isn't to beat the market anyways: it's to provide uncorrelated return.
> I have yet to hear of an investor or a fund manager, though, who consistently beats the market.
Renaissance's Medallion fund is one such outlier. They have averaged crazy returns over decades now, but they are likely only able to achieve such returns by being a small employee-only fund.
Unfortunately, the self-styled "anti-racists" of today are giving me a tough time convincing actual Neonazis that there isn't some sort jewish marxist conspiracy out there to censor them.
The point is that people want to know what's going to happen before it happens. If I believed a Democrat was sure to win, I would want to allocate my stock portfolio different than if a Republican were to win.
Also, you can make money betting on the outcome itself. If the odds you get are underpriced relative to an accurate forecast, that's a great bet to take.
Furthermore, these forecasts influence where politicians put their focus. Let's say you're Hillary in '16 and you think Wisconsin is yours despite the forecast showing a narrow lead, maybe you should reconsider.
> Because a PhD is useful for a lot more than getting a permanent academic position. My first "proper job" was at a research division of a big corporation. They had ~20 PhDs when I started and expanded to ~100 over 3 years. I don't think any of those people would say their PhD was wasted because they didn't get an academic job at the end of it.
Why do they have so many more PhDs now? Because PhDs are a now a dime a dozen, not because a PhD itself is valuable. The opportunity cost of a PhD is four years of lost income during prime employment age, plus extra student loan debt.
Even with a higher salary (and higher tax burden), it's not clear that you come out on top during your lifetime. If you don't come out on top, it's a waste, unless maybe these years you spent doing your PhD were the best years of your life (probably not).
Because these jobs are researcher jobs, and research is a distinct skill-set than what is learned in the typical undergrad and masters program. Could we train researchers in another, more efficient way? Maybe, but PhD program are the current means of training specialized researchers.
> plus extra student loan debt
For researcher jobs, this will almost never be true. The vast majority of STEM PhD students are fully-funded and given a stipend (although usually small). The dynamics of course change if the student has to support other dependents.
> Even with a higher salary (and higher tax burden), it's not clear that you come out on top during your lifetime
For fields like Computer Science, there are many viable and high-salaried career for non-PhDs, so a PhD will likely lose lifetime money. For other fields like biomedical research, then they will probably profit over a full career. But really, people don't do PhDs for the money, people like their fields, they like the university environment, they like being around other researchers, or they like the independence—all of these things can be valuable beyond lifetime salary.
In engineering possibly not. Often tuition is paid for plus a stipend.
>If you don't come out on top, it's a waste,
I don't know. I didn't get a PhD but I did spend a couple of years getting a Masters. I didn't really use what I specifically researched but, who knows, may have helped me get a couple jobs and I enjoyed the time well enough. Of course, engineering salaries tended to be a lot lower then relative to what many CS people today consider normal so I don't think losing out on a couple years salary was a big deal.
This isn't going to piss off current customers though, it's going to piss off customers from fifteen years ago, who haven't upgraded, or maybe the freeloaders that used CS2 lately.
A lot of people were pissed off about Adobe stopping perpetual licenses, but that didn't hurt their bottom line. In fact, they increased revenue because a subscription is a low upfront cost.
Most of the people complaining about this are non-customers whose strong-held beliefs on how to license software have been offended. These people don't matter to Adobe's business.
Subscription revenue is also in and of itself valuable purely due to the fact that it's automatic. In fact, Adobe actually reduced the cost of their software significantly when they moved away from perpetual licensing. That's because it's far healthier for a business to get $50/mo out of you rather than thousands once in a blue moon.
The cost of CS6 Master Collection was around $2,500 or so; whereas a CC All Apps subscription is $53/mo. The thing is, though, that Adobe frequently updated their software to newer versions that had significant backwards compatibility problems. That $2,500 would only get you about a year or two of "the latest version", upon which you'd have to spend another $900 for an upgrade.
So Adobe went from a pricing model of effectively $2,500 + $450-900/yr, to one of $53/mo. Your first "year" of Adobe CSwhatever cost you $208/mo, followed by upgrades which were effectively $37-75/mo depending on how quickly Adobe released their software. Creative Cloud was and still is a bargain if you need Adobe's software.
Sure, you could have just stuck with CS2 or 3, and amortized your software cost over multiple years. However, by doing that, you wouldn't be able to practically collaborate with anyone else in the industry. The moment someone you work with updates from CS3 to CS4, all their files are going to start throwing weird errors and not working when you load them up in your older version. And remember: Adobe Creative Suite was THE standard in a lot of industries, it wasn't like you could just insist everyone remembered to click the save-as-old-version option (if that was even available). Not upgrading was a business disadvantage.
This article does seem a bit P hacking, and certainly wouldn't be enough to make treatment recommendations, but it might help on HN to link to the relevant XKCD and provide some context since I don't know how many other people are going to immediately remember the comic and understand that you're calling out evidence of intentional or unintentional P hacking.
I don't buy the "bugs caught early are cheaper to fix" paradigm. Most bugs are caught early without special precautions, but special precautions can be quite expensive. Most software doesn't have truly catastrophic failure cases.
If there's a bug slipping through, someone will run into it, report it, and it'll get fixed. If nobody runs into it, the bug doesn't cost anything.
This is the most economic way to go about it, which is the reason why pretty much all successful software is kind of buggy. We all like to complain about it, but then we don't want to wait an extra year for the next version either.
At the other end of the spectrum, if you need really reliable software, the solution is not to eliminate all the bugs, that's impossible. Even with perfect software, hardware can fail, bits can flip the wrong way. The solution is to make sure that errors can't bring down the airplane.
I don't think so. When one is fixing bugs locally before the thing goes into production one can use each and every debugging strategy under the sun to find the bug. If it runs 10 times slower because of generating massive logs that is acceptable when debugging locally. In production one is constrained to debugging techniques that do not disturb production. This constraint quite often makes debugging times longer by factors of 10 if not 100 while at the same time a customer is getting somewhat impatient.
Also, the bug that would be discoverable locally but not in production is a bit of a strange animal. It does happen for cases where the developer has a better idea than the user what should be happening so the user will not even notice the bug. That sounds more like features that have been specified in too much detail than true bugs, though. More commonly everything that can go wrong locally will go wrong in production sooner or later. And in production you will, on top of that, hit all of the bugs that occur once every month and that only occur if the order of inputs is a bit strange while the database is under some load. If you have not done all possible debug/test work locally the application will hit production when there still is a lot of debug work to do and there will probably be so many problems that they even start interacting with one another and produce some really 'interesting' failures.
This is just pushing testing to the customer. Why would the customer report a bug instead of switching to a less buggy product?
Why do you think the customers are going to report bugs? I can't say that I've ever attempted to report a bug on an iPhone app, Windows, etc. It's like yelling at the wind.
> Why would the customer report a bug instead of switching to a less buggy product?
All products are buggy to varying degrees. As a user, you can't easily tell if another product is "less buggy". Would you risk investing time into figuring out another program that may turn out just as buggy? No. You most likely move on with your life.
Once users are invested into your product, it takes a lot to make them switch. Every single piece of software that I use regularly is either extremely simple or somewhat buggy. I haven't switched once because of it. It's a nuisance, but not a dealbreaker.
That's not to say that I like this situation, of course I would prefer software that doesn't have bugs and glitches, but I also prefer software that exists today, not tomorrow.
The market has spoken: worse is better.
> Why do you think the customers are going to report bugs?
If it's an important bug, somebody will most likely report it. If it's not an important bug, not having it reported is most likely not important either.
> I can't say that I've ever attempted to report a bug on an iPhone app, Windows, etc. It's like yelling at the wind.
So, did you switch to Android or Linux/MacOS then? Is the grass really greener on the other side?
The cynicism in this comment really bums me out. You think it's ok to give customers a buggy product, and expect them to report the bugs, because they don't really have a choice and every other product is buggy too. You say you don't like the situation, but you're doing nothing to challenge it either.
Is your motto "When life gives you lemons, make a market for lemons?"
Fair enough, it's arguably cynical to tell the children that Santa Claus isn't real. However, we're all adults here.
The highest-quality software can not win in the software market. This is evident from the software that is out there owning the market.
Quality is a trade-off, if you spend too many resources on it, you can not compete. Catching those last few bugs takes exponentially more effort.
Moreover, there are snake oil salesmen at every corner, telling you that if only you adopted some methodology, your defect rate would plummet. It's easy to get lost in that, not actually delivering a product.
It is unlikely that you will beat the market in the long run and if you do, it may well be down to chance, but it is possible, because the market is not perfect.
Furthermore, you can not "buy the market" in the first place. You can buy ETFs replicating stock indices, but that is not the same. If you bought the S&P you will have performed differently than if you had bought MSCI world. Ultimately, stock picking is just a less diversified version of buying an index.