In Long Run, There’s No Such Thing as an Einstein Investor

There are no easy answers in investing. It is tempting to replicate a successful strategy — one created by an outstanding investor, like Warren Buffett, or through in-depth statistical analysis of the wisdom of crowds — and such approaches can actually work for long periods.

But paint-by-number portfolios won’t succeed forever. And without deep expertise, it makes little sense to veer much from a simple market portfolio — one that seeks to match the overall performance of the market, and not beat it.

These reflections are prompted by the television series “Genius” (based on the Walter Isaacson biography “Einstein: His Life and Universe”), which I’ve been watching on National Geographic TV. The series also inspired me to reread Einstein’s own popularization of his theories, in the book “Relativity: The Special and General Theory.”

Albert Einstein, who may have been the most famous person ever to be publicly identified as a genius, had a disrespectful attitude toward the dignitaries of the physics profession of his time, and a lonely and unique approach to science.

Yet great as Einstein’s theories were, others in the scientific community had been on the verge of discovering them when he came along. In fact, it is possible to argue that large numbers of collegial scholars who do not keep secrets, do not pretend to know everything and share freely will eventually surpass the achievements of a lone genius.

Similar debates dominate professional investing. For help in making important financial decisions, some of us are looking for Einsteins, others for communities of scholars or professional money managers with solid ideas.