Michael Mauboussin is head of Global Financial Strategies at Credit Suisse and the author of several books, including “The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Harvard Business Review Press, 2012). He and I spoke about the role skill and luck play in investing.
Charles Rotblut (CR): A big theme in your recent book is the distinction between skill and luck. Could you explain what the difference between the two is?
Michael Mauboussin (MM): One of the ways I like to think about this is as a continuum of activities from pure luck and no skill on one end to pure skill and no luck on the other end [Figure 1]. Obviously, most things reside somewhere between the extremes, and where an activity sits can be very important. But before we get going, it is important to define the terms.
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