Where is the talent headed?
The word talent, like the word love, is used with far too much frequency. Its strength is diluted. “America’s got Talent,” the television program celebrating jugglers and well-intended singers only helps to dilute the punch that the word talent should instill. There really are very few talented people in the world – in the investment world, I am convinced that they are even rarer.
More rare than ‘raw’ talent is the talented person with the skills needed to harness and put some order to the charm of the muses. Still fewer with the luck necessary to actualize the harnessed talent, that is, to put the trifecta together and get results.
Recent reports from the folks at BlackRock explain that they have turned over 80% of the portfolio management staff within the equity practice in the last three years. 80% stragglers, guys just hanging on, flipping coins?
Asset management, of the active type, is a talent management function. Problem is, of course, that the ability to identify talent is nearly as rare as the talent itself. Past performance even when driven by skill is a poor indicator of talent. Raw talent itself is unpredictable and therefore unmanageable.
There is old joke about the famous New York music venue Carnegie Hall that goes something like, “How do you get to Carnegie Hall?… Practice, practice, practice.” Funny or not, the punchline is only partially true of course. Talent, bolstered by lots of skill-developing practice, might get you to Carnegie Hall but you’ll also need a bit of circumstantial luck. None of the three elements alone will work.
It is this triad of skill, luck and talent that work together to form what we might consider ‘actualized talent.’ Comparing one with the other or, as is often the logical framework for discussions, setting up false binary relationships ( driven by the question “skill or luck?”) just doesn’t reflect the way talent functions. It is not skill or luck- it is skill and talent and luck together that I think we are searching for.
Recent work in psychology suggests that ‘lucky’ people have a higher level of perception about the world around them than ‘unlucky’ people do. Yes, finding the $100 bill on the street in NYC was lucky, but she was open to its possibility. Chance and luck are not synonymous.
None of this answers the most pressing questions: what is talent and how do we identify it amongst investors? Is it sustainable? What happens to talent deferred or unhoned? Does it dry up like a raisin in the sun, or does it explode*?
*adapted from Langston Hughes poem.