11: Jack Gray - GMO, Probability and Jeremy Grantham

[i3] Institutional Investment Podcast

Dr Jack Gray is an renowned academic, investment practitioner, teacher and investment philosopher. He was previously Co-Head of Asset Allocation at GMO Boston, having worked with GMO between 2005 and 2008, and prior to that between 1998 and 2003. He was also previously Chief Investment Officer at SunSuper, one of Australia’s largest Superannuation funds, and an Executive Director at AMP Asset Management. He speaks with MarketFox columnist Daniel Grioli about the difficulty of explaining probabilities and the limitations of mathematics, his days at GMO and working with Jeremy Grantham; and finally, Artificial Intelligence and robo-advice. As usual, Jack speaks his mind, but always thoughtfully and knowledgeably. Jack Gray Podcast overview: 4 min: ‘You don’t need a lot of maths to be comfortable in investing’ 11 min: Discussing Gerd Gigerenzer on heuristics 12:30 min: Most people can’t handle probability thinking. In Latin there is no word for probability. 18 min: What would you have done differently? 19:30 min: The efficient market hypothesis was beautiful, but it didn’t make me a better investor 26 min: Days at GMO: ‘I was Jeremy Grantham’s handbag and that is okay’. 37 min: Neuroscience and biases: ‘We can’t control fear; you need to have brain damage to do that’. 39:50 min ‘Be patiently impatient.’ 40 min: ‘Investing is a bit like marriage; we get it about 50 per cent of the times right. 50 min: Increasing specialisation; how do you deal with it? 52:30 min: Factors: this is an industry driven by fashion, but not all fashions are bad. 53:50 min: Scale: on the administrative side there are some efficiencies, but on the investment side there are inefficiencies. 1:02 min: AI and advice: most parts of advice is routine. People are 80 per cent the same. 1:04 min: Building AI in the 1980s; I failed and learned the limitations of mathematics