I had the opportunity to speak to Bill Miller and Michael Mauboussin about the book Trend Following at an educational seminar hosted at their offices. As evidenced by the two PDFs below, Mauboussin continues to provide a unique perspective:

Download the Adobe PDF report 1.

Download the Adobe PDF report 2.

The seminar referenced here took place at Legg Mason’s Baltimore offices with Bill Miller, then manager of the $18 billion Legg Mason Value Trust fund, and Mauboussin, the firm’s chief investment strategist. Miller had beaten the S&P 500 for fifteen consecutive years at that point. Out of the blue, Miller invited Covel to the lectern to address the class. The first questions came straight from Miller and Mauboussin: tell us about Richard Dennis and the Turtles. The fact that two of Wall Street’s most respected investment minds wanted to know more about systematic trend following confirmed that the approach had genuine interest at the highest institutional level, not just among practitioners who had been running systematic systems for decades.

Mauboussin’s quote from that period captures his thinking precisely: “Great investors conceptualize problems differently than other investors. These investors don’t succeed by accessing better information; they succeed by using the information differently than others.” This is the complete description of what separates systematic trend following from conventional investment analysis. The information is the same: price data, available to everyone. The conceptualization is different: reading price as the only required input rather than as one variable among many fundamental factors. The edge is in the framework, not in the information.

Mauboussin’s research output at Legg Mason, a substantial portion of which is available through TurtleTrader, covers complexity theory, the psychology of decision-making, the relationship between skill and luck, behavioral finance, and the application of scientific thinking to investment problems. His work consistently challenges the assumptions that mainstream investment practice takes for granted, which is precisely why it is relevant here. A strategist at one of the largest value investing firms in the world who is willing to examine trend following seriously, who asks questions about Richard Dennis rather than dismissing systematic trading as simplistic, represents the kind of open-minded inquiry that Mauboussin himself advocates in his research.

For more of Mauboussin’s work on specific topics covered on TurtleTrader, see the pages on the janitor’s dream, frequency versus magnitude, the life of game, and emotions in trading.

Frequently Asked Questions

Who is Michael Mauboussin?

Michael Mauboussin served as Chief Investment Strategist at Legg Mason Capital Management, where he worked with famed investor Bill Miller. He later became Head of Global Financial Strategies at Credit Suisse and is a professor at Columbia Business School. He is the author of multiple books on investment decision-making, including More Than You Know and The Success Equation, and has produced extensive research on behavioral finance, complexity theory, and the role of skill and luck in investment outcomes.

What was the significance of the Legg Mason seminar?

It represented the interest of two of Wall Street’s most respected investment minds in systematic trend following at a time when the approach was not widely discussed in mainstream institutional contexts. Bill Miller’s fifteen-year streak of S&P 500 outperformance and Mauboussin’s research reputation gave their questions about Richard Dennis and the Turtles unusual institutional weight. Their engagement confirmed that serious investment professionals at the highest level found the trend following story worth examining on its merits.

Why does Mauboussin’s quote about conceptualizing problems differently apply to trend following?

Because systematic trend following is fundamentally a different conceptual framework for processing market information. Conventional investment analysis uses price as one variable among many and attempts to determine whether price correctly reflects fundamental value. Trend following uses price as the only required input and responds to its direction and magnitude without reference to fundamental value. The same price data is available to everyone. The different conceptualization produces different, and for systematic practitioners, consistently better long-run results.

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