Picking the Good Stocks Isn’t Enough
Also hedge fund index funds, the rise of passive and illness disclosure.
In general there are two ways to make money investing in public stocks:
I think it is fair to say that, for a long time, the normal approach for most institutional investors was to focus on No. 1 and ignore No. 2. Your expertise was in analyzing stocks and picking the ones that will go up, and you mostly did that. You didn’t tell executives at the companies you owned how to do their jobs, both because you figured they knew that better than you did, and because it might interfere with your main job: If you annoy executives, they will give you less information and you’ll have a harder time picking stocks.1 Telling companies how to run their businesses was a niche left to specialists called “activist hedge funds,” and while big respectable institutions would occasionally get involved in activist battles, they did so uncomfortably and reluctantly.