Key Highlights

• Unlike most finance professionals, stock analysts can maintain a low accuracy rate and still be considered excellent, since consistently beating the market is exceptionally difficult.

• Investment styles fall in and out of favor over long periods, with Value Investing giving way to momentum strategies and even top quantitative investors enduring career-threatening losing stretches.

• Great investors combine two seemingly contradictory traits: the stubbornness to persist through periods when a strategy appears broken, and the humility to abandon a position entirely when the facts genuinely change.

• These qualities rarely coexist in the same individual, making truly exceptional investors an unusually rare combination of arrogance and self-doubt.

Persistence as a Defining Trait

Asness stuck with his approach and emerged intact, illustrating what may be the defining trait shared by truly great investors: a genuine oddness of character. Sticking with a strategy that isn't working, while clients lose faith and even one's own children begin to doubt the underlying premise, requires more than simple stubbornness. It demands an unusual temperament altogether, particularly in a financial world where, unlike the physical world, the rules governing what works are ultimately whatever the collective market agrees they are. Asness's persistence was eventually rewarded once his quantitative strategies began performing again.

But persistence alone is not sufficient when a strategy genuinely stops working. Great investors must also be capable of changing their minds entirely. Consider the scenario in which fellow hedge fund managers might have turned decisively against a famous bet, such as George Soros's wager against a central bank's currency defense. It is difficult to imagine an investor with the conviction to risk 200% of his fund's Capital against a Central Bank also possessing the humility to admit error and abandon the position entirely if circumstances demanded it. Yet Soros has been making outsized bets since the 1970s, a track record that requires knowing precisely when to hold a position and when to fold it.

A Rare and Contradictory Combination

Even this pairing of arrogance and humility falls short of the full picture. Great investors must be able to cut losses decisively without avoiding risk altogether in the first place. They must immerse themselves in granular detail while still communicating their ideas plainly to others, particularly when a position is not working out as planned. They must know every position in their portfolio intimately while remaining sufficiently detached to abandon any of it the instant the underlying facts change.

These traits do not typically coexist within the same person, and when they do, the resulting individual is likely to strike others as genuinely unusual. The practical implication for anyone searching for an exceptional money manager is to look for precisely that kind of person: someone eccentric enough to combine unwavering conviction with a willingness to change course entirely, who also happens to be capable of rolling favorable outcomes with unusual consistency.

Conclusion

The rarity of this combination, persistence bordering on stubbornness paired with genuine intellectual humility, helps explain why so few investors sustain truly exceptional performance over long careers, since most people who possess one trait tend to lack the other entirely. For anyone unable to identify such a rare individual with confidence, the more reliable alternative remains simply investing in a broad index fund instead.