What matters? SKILL OR LUCK – a thesis paper summarized

In 2013, I read a paper by Credit Suisse – Alpha and the paradox of Skill. In the podcast “How I built this” – the host Guy Raz interviews successful entrepreneurs and ends with the question “Do you believe your success was luck or skill and hard work”? If you look at summary of answers to that question, successful people attribute 60% to luck and 40% to skill – on average.

Back to the paper on paradox of Skill. The summary of the paper in one quote:

In investing, as in many other activities, the skill of investors is improving on an absolute basis but shrinking on a relative basis. As a consequence, the variance of excess returns has declined over time and luck has become more important than ever.

Credit Suisse, 2013

To be clear there are opportunities for skill to shine. Those are opportunities where “game” is played by people with lesser skill.

The main lessons are that sometimes it’s more important to worry about the game you’re in than the skill you bring.