A potential reader of this book with a cynical bent might well ask an obvious question: “If those folks at Goldman Sachs who wrote this book really knew anything worthwhile about investing, why would they put it together in a book where all of their competitors could find it?”
It’s a good question, because it leads naturally to the kind of thought process this book is really all about. The question might be rephrased in a way that makes our motivation for writing the book a little more clear: “Why, in equilibrium, would a successful investment manager write a book about investment management?” By “in equilibrium” we mean in an investment world that is largely efficient and in which investors are fairly compensated for risks and opportunities understood and well taken. Suppose there is wealth to be created from careful and diligent pursuit of certain rules of investing. Suppose further that one were to write those rules down and publish them for everyone to follow. In equilibrium, wouldn’t
those sources of success disappear? Somehow it doesn’t seem to make sense for good investment managers to write books about their craft. Indeed, many sources of investment success, in particular those with limited capacity, would eventually disappear with increased competition. What we have tried to do in this book is to focus on other types of phenomena, those with a capacity consistent with the equilibrium demand for them. In equilibrium these types of phenomena would remain.