Chapter 1

An Unbelievable Chimp Story

There is a chimpanzee in a remote region of Sierra Leone that routinely performs open-heart surgery. His success rate is higher—and his mortality rate lower—than many of the finest heart surgeons in the world.

I made that up.

But if you read that report in the newspaper, you would think that either:

1. That chimp is really extraordinary; or
2. Those heart surgeons are not very good.

if the story were true, and you needed a heart operation, you might seek out the chimp and avoid the heart surgeons.

The Financial Times of London annually runs a contest, pitting a neophyte investor against market analysts.

In 2002, a five-year-old London girl chose stocks randomly from one hundred pieces of paper listing companies on the Financial Times Stock Exchange.Her results were compared to those of a top financial analyst and those of a woman who used the “movement of the planets” to choose her portfolio.

Over a period of one year, the little girl won handily. Very handily, as a matter of fact. Her stocks gained 5.8 percent. In stark contrast, the portfolio of the professional analyst lost 46.2 percent. The analyst was also bested by the financial astrologer, whose stocks lost only 6.2 percent.

The little girl celebrated by going to McDonald’s. I suspect the analyst continued to dine at more expensive establishments.

There are some excellent peer-reviewed studies that demonstrate that the stocks most highly rated by financial analysts consistently underperform the market.

Dr. Jenner’s answer: "Install mirrors next to the elevators on every floor."

Those reports are fact.

Either the little girl is very good, the analysts are very bad or the much touted skill of stock picking is not something that any smart investor would want to bet the farm on.

And the chimp? Well, he still doesn’t perform open-heart surgery.