Guru is a Sanskrit term for a “mentor, guide, expert, or master” of certain knowledge or field. In pan-Indian traditions, a guru is more than a teacher: traditionally, the guru is a reverential figure to the disciple (in Sanskrit, literally seeker of knowledge or truth) or student, with the guru serving as a “counsellor, who helps mold values, shares experiential knowledge as much as literal knowledge.” WIKI
It goes something like this.
Someone has a blow-out investment year. They knock performance out of the park. Word gets out and before you know it, everyone hangs on their every word. They seem to be on all the cable news channels, all the time. Because the media is interested in eyeball counts and nothing glues eyeballs to screens more rapidly and in greater numbers than the new guru…the way to quick riches!
I imagine if the ancient Greeks had cable news, the Oracle at Delphi would have gotten a lot of air time. Don’t laugh, if you’ve read as much investment commentary as I have over the decades, the idea of casting chicken entrails as a forecasting tool resonates.
Gurus are in demand for conferences, offering words of wisdom. They become “thought leaders” which attracts imitators. Their fund/ETF/portfolios blossom into new and bigger assets under management. Their latest “picks” are eagerly awaited and followed.
Finally! Someone has figured it out!
Except that they probably haven’t. That people go for this one all the time is something that bears a closer look.
How does this happen?
We are not speaking of a Warren Buffett who fashioned an investment record over decades, rather, we are speaking of that meteor that flashes across the sky, burns out and fades.
First, we need to consider the statistical landscape. Money manager performance statistics, as a group, encompass the famous bell curve, also known as the Gaussian Distribution:
Each distribution curve varies, depending on several technical factors which we don’t have to get into. Suffice it to say that in large populations, the distribution of the data forms a bell curve, whether average height (a lot of men congregate at 5’-9” to 6’-1”, hardly any at 7’) or protein concentrates in cows’ milk, or IQ, or money manager returns.
Now what we are concerned with here are what are known as the tails…the farthest left and right edges of the curve. The point being that way way out there someone is going to be the last and extreme data point. If you’re populating with height, there is someone who clocks in at 7’ 5” and someone at 4’ 1”.
Thus, the money manager performance ball sails out of the park, but also, the shocking failure at the other tail. But it is in the right-side extreme, those last few data points at extreme out performance, that provides the breeding ground for the guru phenomenon, who thereby enters the space between our ears in our quest for profit.
But here is what people miss. The question is not how well the manager did, because that is obvious and inescapable. They were glorious. The real question is, is it repeatable? Was it merely a flash in the pan, a statistical oddity, or do we really have someone who can do this for us into the future? Is our newly anointed merely the Dot Plot of the Year, what with someone having to fill that role, or are they on the beam of true replicable asset returns and profits?
I’ve seen this movie too many times over 50 years to not reach, with confidence, this simple answer: No, they do not repeat. And so, the media and public fixation with these people sets up an almost guaranteed disappointment. It’s the Law of Unintended Consequences. In the effort to earn investment success, people will ensure they will experience investment failure.
What happens?
Circumstances come together. And then, there is someone who happens to be perfectly positioned for those circumstances. A technology boom, a financial boom, an energy boom. More perfectly positioned than anyone else, which often means they are more speculative and take on more concentration risk (or leverage) than anyone else. But then, once the circumstances mature or subside/explode, the guru remains the same. In part because they are true believers, but also in part, because they become ‘trapped’ in their new public persona and are not about to change that…its profitable and its fun.
Their investment philosophy remains the same, but the facts on the ground have effectively removed their ability to capitalize. And then, they fall back into the meat of the curve, or worse, fall all the way back to the other side. Give a number get a number.
And so, they eventually fade. But I am regularly surprised by how long it can take people to ‘get it.’ And as long as people tune in, the guru will gather airtime, actual results comprising a secondary characteristic of why to watch or read or follow.
I have noted as well that entertainment sells, including in finance. A flashy sport coat, pithy commentary, simplistic but dramatic verbiage, all gathering attention but ultimately often not very thoughtful.
XYZ Screams Higher…A New Supercycle…A New Golden Age…
I recently looked at the track record of a well-known Wall Street technology analyst. Well known because he’s always in the press. Really good PR effort.
Now the website TipRanks ranks analysts according to their investment acumen.
I Googled the analyst’s name and Google reported 21,000,000 hits. OK, that qualifies as widely followed. It’s a pretty good back of envelope way to measure exposure.
As of April 25, 2025, TipRanks placed him 6,790th out of 9,437 analysts for acumen. That 42% of his trailing one-year recommendations were profitable (that’s something of a random coin toss) and the average return per recommendation was a negative 0.40%.
So why do people follow him? Why is he in such high demand? In part, because he’s entertaining, and he explains complex subjects with colorful and pithy language. He has a kind of bullish and positive aspect to his pronouncements which promise wealth. Nothing like the promise of wealth to get people interested.
So, by all means continue to seek opinions and seek a broad range of opinion. But be aware of that bell curve, that the newly anointed is more accurately a statistical anomaly than a new and easy way to win.
A good source is www.realclearmarkets.com. Everything from left to right and up and down and positive and negative…take your pick.
And have your wits about you. I can tell you that one of the most interesting and worth-listening-to experts I know on markets is so incredibly boring, not even his mother could listen to him. I use toothpicks to keep my eyes open.
He: “And then, we have the stochastic second order value of the exponent which brings us to the cyclical rendering…”
Me: “If I pay you more, will you stop?”
He’s brilliant, but he’ll never make your favorite cable channel, in small part, because he prefers his anonymity. But in greater part because he just doesn’t present in a style that translates to today’s audience attention span, doesn’t ignite those ravenous cravings for profit because he’s modest. And more, he can’t explain things in sound bites. It takes a mathematic chain to get him to his point.
Remember: “Prediction is very difficult, especially if it’s about the future.” Physicist Neils Bohr
So if you’re going to forecast, I suggest you forecast, and forecast often, point out your wins relentlessly and bury your losers and hope people forget about them.
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