Jun 15, 2015
Michael Covel discusses one of Michael Mauboussin's white papers, “The Babe Ruth Effect”. This paper first caught Covel’s eye over a decade ago. It makes the critical point that big wins can pay for small losses (expected value thinking). Covel discusses the expected value mindset and how it relates to other fields, especially venture capital through a blog entry by Chris Dixon. Next, Covel connects a podcast episode titled “Good Bubbles, Bad Bubbles, and Where Unicorns Come From” with Bill Janeway, a venture capitalist and partner at Warburg Pincus. Covel shares a few excerpts covering liquidity and survivorship bias (all in this frequency v. magnitude mindset and all relating back to the Babe Ruth effect). Covel brings these topics to trend following as well. Want a free trend following DVD? Go to trendfollowing.com/win.