“…The evidence from more than fifty years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than like playing poker.”
-Daniel Kahneman, Thinking, Fast and Slow
To sophisticated poker players and readers of this blog, Kahneman’s meaning is clear: dice rolling is pure luck, whereas poker is a mix of luck and skill. Thus picking stocks doesn’t merely have a luck element, it’s all luck.
Upon reading this though I wondered if the analogy would be helpful to the larger population. When I mentioned to one of my chess students that most of the people I play poker against are pretty bad, he responded, “How can they be bad?” And this is a guy who plays poker, albeit casually. I’m not sure if most people know the difference between poker and other casino games like roulette that are pure luck, like dice rolling and stock picking.