Market Wizards: Lessons From History’s Best Traders | Jack Schwager

In this episode we speak to Jack Schwager. Jack is the author of the Market Wizards series of books and has been studying the best traders for decades. He has interviewed some of history's most successful traders and investors for the series, including Paul Tudor Jones, Steve Cohen, Joel Greenblatt, Michael Steinhardt and many others. We discuss the biggest lessons investors can learn from these legendary investors and get his take on a variety of other topics including what makes a good interview, the impact of technology on trading and his outlook for the new Robinhood traders that have entered the market in recent years.
00:00 - Introduction and background on the Market Wizards books
03:07 - How Jack got top investors like Paul Tudor Jones and Stanley Druckenmiller to agree to interviews for the first Market Wizards book
08:15 - Jack's process for interviewing top traders and investors
14:10 - What track records Jack looks for when selecting traders to interview
21:50 - The importance of finding a trading methodology that fits your personality
28:30 - Why having an edge is critical for trading success
34:35 - The stupidity of the saying "even a poor system can make money with good money management"
40:50 - Balancing patience with cutting losses quickly
44:45 - Limiting risk with position sizing while also being able to bet big on high conviction trades
55:10 - Do quantitative tools and increased data make it harder to have an edge in markets today?
1:02:10 - Jack's views on Robinhood and the influx of new retail traders
1:04:56 - Greatest lessons Jack learned from Paul Tudor Jones , Joel Greenblatt, Steve Cohen and Michael Steinhardt
1:10:35 - Some of the most likeable and interesting people Jack has interviewed
MORE ABOUT JACK SCHWAGER & THE MARKET WIZARDS BOOKS
jackschwager.com/
ABOUT THE PODCAST
Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long term investors.
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[@ExcessReturns]

Thank you for checking out Excess Returns. If you found this video valuable, please like it 👍, leave a comment ⌨ and subscribe to our KZbin Channel 💥 www.youtube.com/@ExcessReturns

[@jaysteve4442]

Jack has never met a mic he didn’t love. Jack loves some Jack

[@TravisWizard]

Jack Shwager the goat

[@AsiaStreet365]

Great interview.

[@HepCatJack]

At 38:24 "It was amazing how badly the system did when it stopped working". This makes me wonder why someone in this situation wouldn't then short his picks instead of purchasing them, I imagine a trader would be comfortable doing that. A bit like how George Costanza in Seinfeld began to do the opposite of what his natural inclinations were to start having success.

[@trainaryanstyngergmailcom1412]

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[@skdx1000]

this is because its hard to differentiate between reverse signal and noise, the reversal of the signal could still have significantly high drawdown

[@mulemule]

Slight correction: why wouldn't someone then _fade_ his picks?

[@leophotographyhk5248]

It depends on whether the previously blow up of the system was due to continuous losses, or just a few big losses at the end. If it is the second case, then it may not be profitable just going the other direction.

[@jking1343]

​@leophotographyhk5248 im thinking it would be if he was selling options. Even sideways makes theta.

[@flash521]

Cohen gets outside when he gets inside information.

[@timcastle9506]

I think its very interesting that this video on has 15 comments. Its the old, dont teach me anything, just tell me what to buy. ;)

[@kanokkeereelang2915]

Best

[@chrisf1600]

I enjoyed this interview but my inner skeptic kept on whispering in my ear : "how do we know this wasn't just blind luck ?" I can accept that before the arrival of desktop computers, it was possible for a human expert to beat the other humans. These days, i'm much more doubtful. I can see why people want to believe in star traders, because their stories offer hope that perhaps - with enough hard work and perseverance - you can emulate their success. Personally I believe that markets are effectively random, that there's no longer any conceivable 'edge', and that you're better off just sitting back and harvesting the risk premium. With that attitude, I guess I'm never going to be featured in one of Mr Schwager's books :)

[@ExcessReturns]

Hi Chris, thanks for watching and commenting. That is a perfectly fair comment, and I think Jack would say luck and good timing are important variables and probably do have some impact on the success of each trader, especially early on. However, over a long enough period of time and throughout different markets, luck becomes less important and skill matters more (this is why we asked Jack about the track record question). It sort of reminds me of Michael Mauboussin's, "Alpha and the Paradox of Skill". You can download the paper here, tinyurl.com/ffs96emz. Here is the summary from the paper: *There are two aspects to success in investing: proficiency and choosing an attractive game. The key to an attractive game is dispersion in skill, where more skillful participants can benefit at the expense of less skillful ones. *The paradox of skill says that in activities where results combine luck and skill, luck is often more important in shaping outcomes even as skill improves. In many competitive interactions it is the relative level of skill that matters, not the absolute level of skill. In many fields, including investing, the dispersion of skill is shrinking, which leaves more to luck. *There is a positive correlation between the breadth of opportunities and the dispersion of fund returns. *Pockets of inefficiency persist. These include diversity breakdowns, institutions competing with individuals, and trading with distressed counterparties. Thanks again for watching!

[@chrisf1600]

@@ExcessReturns Thank you very much for such a comprehensive reply ! I'll read the paper later, much appreciated :)

[@Leon-ur5uk]

Pretty simple actually. Just go short the SP500 for the next month :) But with low leverage

[@liam-n8098]

How lucky could you get in a casino? Could you get lucky 50 times out of 100? Probably not But you can be lucky 40 times out of a 100 in trading and you can still make a killing

[@flyinghedgehog3833]

Nothing burger...waffling on n on...

[@funcola123]

Interesting to see matthew mcconaughey intervewing jack

[@ExcessReturns]

Alright Alright Alright 😏