Humans, he argues, are not nearly as intelligent as we think they are. Remove them from the culture and environment they have learned to operate in and they fail quickly. His favorite example of this are European explorers who die in the middle of deserts, jungles, or arctic wastes even though thousands of generations of hunter-gatherers were able to survive and thrive in these same environments. If human success was due to our ability to problem solve, analyze, and rationally develop novel solutions to novel challenges, the explorers should have been fine. Their ghastly fates suggest that rationality may not be the key to human survival. The point here is that cultural evolution is often much smarter than we are. [source]
In industries where tacit knowledge² reigns, culture is the main driver of future performance, enabling each individual of a high-caliber team to achieve its potential. No matter what, you need a group working coherently, with the same drive and passion towards the same direction. In 10 years working as an investor, I have seen high-potential analysts working with “average” groups and I have seen “okay” analysts join high-performance, mastery-driven teams. And I have seen the “okay” guys become oustanding professionals.
It’s funny we like to analyze historical performance charts (be it of a hedge fund or a listed company) as if history repeated itself, as if everything was the same. Actually, when people leave and the company does not have a strong culture, it loses its ‘mojo’ and the performance standard is modified forever - think of the Bulls post Michael Jordan departure.
² the kind of knowledge that is difficult to transfer to another person by means of writing it down or verbalizing it.
With regard to “Investing” and the issue of “average guy” in “great teams” doing great work, my own experience suggesta it happens because great teams typically are much better at creating an edge by reducing mistakes. Great teams typically are used to removing noise, by focusing on what is simple, doable, marginal useful changes that compound over long stretches of time.
Seemingly smart and sophisticated groups stand behind a curtain of complex that might just not work.
Over my investing career doing less has proven more useful than doing more.
I find that great teams keep each other from overanalyzing, overtrading, overestimating their own abilities, etc.