Quant Chaos and the Rise of Mood Experts

I see, read AND hear about quants, AI and machines taking over the world all day…but it does not scare this knucklehead:

My friend Josh had an amazing post up the other day called ‘pure comedy‘. It is funny, but sad. At the end, Josh dove into the incredible fees our financial overlords have skimmed:

92% of all actively managed stock mutual funds have failed to beat their benchmark over the last 15 years, according to S&P Dow Jones Indices. Stated another way, only 8% of thousands of fund products have been able to do what they were supposed to have been able to do.

Can you imagine if 92% of the cars sold by auto companies couldn’t drive? Or if 92% of the pills sold by the pharmaceutical industry were placebos, or worse? What if 92% of the pizzas sold by Domino’s were just Ritz Crackers. How is this a thing that exists?

Don’t worry, nobody knows.

For the ten years ending 12/2015, mutual fund investors, collectively, have received returns that were $545 billion below what the indices would have given them. And for that, they’ve paid $437 billion in fees.

No wonder everyone has been rushing to low cost ETF’s and now that the trend has accelerated the banks are in on it themselves.

All this plays into the hands of machines and the too big to fail financials because as Fred Wilson notes in this recent post – the machines are now in charge of voting for you as to how companies run.

No wonder Zuckerberg and Spiegel (Snapchat) want to control every decision for their companies even after they are dead!

No wonder people are chasing private equity at all stages.

If you are not a mood expert or hold some edge with mood data, good luck gathering public market assets in this new world…at least from me.

Also published on Medium.