Retired, with nothing left to defend, I finally ran the test on my own strategy that I could never afford to run while my income depended on the answer.
I’ll start with the ending, because it’s the straight way to tell it: The most useful thing I carried out of a long career managing money was a quiet distrust of my own track record.
Let me tell you how I came by it — and why I’d put the same question to you. It begins with how sure I once was.
I started in 1986 as a trader in a bank’s trust department and spent the 1990s and early 2000s as an equity-strategy partner—fifteen years, earning about a point a year over the S&P 500. I say it that plainly, because rounding it up to “we beat the market” is the small self-flattery this essay is about. Later I ran my own firm and after that served as one of Mitch Zacks’ early regional vice presidents, selling his earnings-revision approach for a living. I believed in it. Then, in 2009, I left the business.
One major reason was that I could no longer square it with myself that I was adding value in a market that had come unmoored. I spent the next fifteen years in a different industry—still the same job at heart: keeping the customers who trusted us.
Last year, I reactivated my CFA charter. With nothing to sell and no book of business to protect, I finally did what no working manager can afford while his income depends on the answer. I took the strategy I still invest my own money by—Peter Lynch‘s improving story, Hilary Kramer‘s cheap and overlooked, the earnings-revision discipline I’d sold for Mitch Zacks—handed it to an AI, and told it to tear the thing apart.
It did. I tested the strategy as a skeptical allocator would, correcting for survivorship bias, using point-in-time data, measuring returns before fees, and comparing the results with random selections from the same investment universe. The strategy showed no advantage over chance.
A plain index fund beat it. I was in ordinary company: the SPIVA scorecard finds a large majority of active large-cap managers trailing the S&P 500 nearly every year, and close to ninety percent over fifteen years. Of the few who reach the top half, almost none stay—S&P’s persistence data puts their odds worse than a coin flip. What I’d taken for skill was mostly strong years in a rising market and an ordinary basket of names.
Humility cuts both ways. What I tested was my own crude, mechanical fusion of these ideas, not the careful processes the originals run—the ranking method I sold for Mitch Zacks is far more sophisticated than my shorthand, and I still believe in it. What was humbled was my implementation and my certainty, not Lynch, Kramer, or Zacks. I learned only that I was partly fooling myself, and that the finding out was worth more than the belief.
