Leopold Aschenbrenner was hailed by many as a genius after publishing his prescient and provocative essay on the trajectory of artificial intelligence. He then put that conviction to work, launching an investment firm that loaded up on highly leveraged positions tied to the AI boom. The results were spectacular, returns skyrocketed before ultimately tanking. The question now is what those returns actually tell us. Is Aschenbrenner an investing genius who saw the future more clearly than everyone else, a lucky fool who made an enormous leveraged bet at exactly the right moment but was doomed to fail, or something in between? Distinguishing skill from luck is one of investing’s hardest problems.
A winning decision and a good decision are not always the same thing. Former professional poker player Annie Duke explains that a great decision that can be expected to produce a good outcome 80% of the time can still lose. A strong decision improves the odds without guaranteeing the result.1
On the other hand, a poor decision can produce a good result, such as massively leveraging a concentrated bet without recognizing that it could eventually blow up.
In investing, skill and luck are difficult to separate. Outcomes usually reflect a combination of both. Returns alone rarely tell us whether a manager possesses genuine skill. Strong performance only evidences skill when it continues for an extended period and endures through different regimes. Even then, luck is never entirely absent.
Every year, Patient Capital runs a fun stock-picking contest. Every employee (including non-investment team members) selects ten stocks they think will perform well for the year. The person with the highest returns at the end of the year wins a prize. The winner is not always a member of the investment team responsible for researching and selecting stocks. In fact, lately it’s more typically been a non-investment team member! The contest is a fun and competitive challenge that demonstrates just how important luck is to returns over short time periods.
In Michael Mauboussin’s book, The Success Equation, he explains that activities fall somewhere on a continuum.2 At one end are activities almost entirely governed by chance where preparation cannot reliably determine the outcome. Mauboussin uses a coin toss as an example.
At the other end are activities in which a skilled participant should win consistently. He points to Roger Federer in his prime, whose skill was so apparent that it took only a few matches to know he would beat all but one or two of the world’s top players. A good way to know where an activity falls on the continuum is to ask whether you could lose on purpose. If the answer is no, luck dominates.
Investing falls somewhere in the middle of these extremes. Research, judgment, and experience matter but luck can still exert a significant influence, especially over short periods of time.
If short-term results offer limited evidence of skill, time gives us a broader record to examine. Because investing involves luck, one year of results tells us very little. Over time, a manager makes more decisions giving us more evidence to evaluate. However, years alone are not enough. It’s helpful to assess skill by analyzing different market environments. For example, a manager could perform well for years simply because the market favors a particular investment style. When market leadership changes, we get a better sense of whether that success came from repeatable and adaptable process, or a prolonged tailwind.
How long does one need to assess investment skill? As is usually the case with investing, it depends. The key is whether an investment process is sound and enduring. What is the edge an investor is exploiting and how easily can it be competed away?
Our partner, colleague and friend Bill Miller outperformed the S&P 500 for a record setting 15 consecutive years from 1991 through 2005 through various market environments including the tech bubble and subsequent bear market. Even then, critics argued the streak resulted from luck.
Michael Mauboussin calculated the probability of Bill Miller’s streak being random chance as 1 in 2.3 million,3 vanishingly small odds. Skill clearly played a role. Though Bill readily admits luck was a factor too. Measured at any other month end (Jan to Jan, Feb to Feb, etc), the streak would not have existed.
At our inaugural investor meeting as an independent company, Bill was asked how long it takes to assess whether an investment manager has skill. Never one to hold back his true thinking, he replied, “30 years.” We think it’s possible (though difficult) to recognize sooner.
The key is to understand the process behind the returns. Michael Mauboussin writes that the goal of the investment process is to identify gaps between a stock’s price and its expected value. Expected value accounts for a range of possible outcomes, the probability of each, and the payoff if it occurs.4
A sound investment process considers not only what an investor expects to happen, but also what could happen and whether that potential reward justifies the risk. Is the process sound and repeatable? What is the investment edge? How might it be competed away? Can the manager and process adapt as market conditions change?
It is also important to evaluate decisions based on the information available at the time, rather than only on the result. A good process can lead to a bad outcome, and vice versa. Even the best stock pickers are only right 50-60% of the time. A manager must be willing to recognize mistakes, learn from them, and remain committed to a sound process they believe in even when short-term results are disappointing. Over time, these qualities help make the distinction between skill and luck clearer.
So, is Leopold Aschenbrenner an investing genius or a lucky fool? We don’t know yet, and that’s precisely the point. A spectacular return, just like a spectacular loss, tells us far less than we instinctively think it does. What matters is the quality of the decisions that produced it: whether the process was sound, the risks were understood, the edge was real and durable, and the investor can adapt when the world inevitably changes. Does Aschenbrenner recognize levered, concentrated bets are almost guaranteed to suffer devastating losses eventually?
Investing has a way of eventually exposing the difference between a good outcome and a good process. In the short run, luck can make almost anyone look brilliant, or foolish. Over the long run, process, adaptability, and judgment have a much better chance to reveal themselves. Time, and patience, are the ultimate arbiters.
The views expressed in this commentary reflect those of Patient Capital Management as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Patient Capital Management disclaims any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Because investment decisions are based on numerous factors, these views may not be relied upon as an indication of trading intent on behalf of any portfolio. Any data cited herein is from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. References to specific securities are for illustrative purposes only and are not intended as a, solicitation, or recommendation of any particular security or investment strategy.
Any third party links, trademarks, service markets, logos and trade names included in the report are property of their respective owners. Any such references do not constitute endorsement of any product, service, information, or disclaimer presented therein. Patient Capital Management bears no responsibility for any third party data and has no control over third-party terms of use or other policies.
Past performance is no guarantee of future results.
©2026 Patient Capital Management, LLC
A winning decision and a good decision are not always the same thing. Former professional poker player Annie Duke explains that a great decision that can be expected to produce a good outcome 80% of the time can still lose. A strong decision improves the odds without guaranteeing the result.1
On the other hand, a poor decision can produce a good result, such as massively leveraging a concentrated bet without recognizing that it could eventually blow up.
In investing, skill and luck are difficult to separate. Outcomes usually reflect a combination of both. Returns alone rarely tell us whether a manager possesses genuine skill. Strong performance only evidences skill when it continues for an extended period and endures through different regimes. Even then, luck is never entirely absent.
Every year, Patient Capital runs a fun stock-picking contest. Every employee (including non-investment team members) selects ten stocks they think will perform well for the year. The person with the highest returns at the end of the year wins a prize. The winner is not always a member of the investment team responsible for researching and selecting stocks. In fact, lately it’s more typically been a non-investment team member! The contest is a fun and competitive challenge that demonstrates just how important luck is to returns over short time periods.
In Michael Mauboussin’s book, The Success Equation, he explains that activities fall somewhere on a continuum.2 At one end are activities almost entirely governed by chance where preparation cannot reliably determine the outcome. Mauboussin uses a coin toss as an example.
At the other end are activities in which a skilled participant should win consistently. He points to Roger Federer in his prime, whose skill was so apparent that it took only a few matches to know he would beat all but one or two of the world’s top players. A good way to know where an activity falls on the continuum is to ask whether you could lose on purpose. If the answer is no, luck dominates.
Investing falls somewhere in the middle of these extremes. Research, judgment, and experience matter but luck can still exert a significant influence, especially over short periods of time.
If short-term results offer limited evidence of skill, time gives us a broader record to examine. Because investing involves luck, one year of results tells us very little. Over time, a manager makes more decisions giving us more evidence to evaluate. However, years alone are not enough. It’s helpful to assess skill by analyzing different market environments. For example, a manager could perform well for years simply because the market favors a particular investment style. When market leadership changes, we get a better sense of whether that success came from repeatable and adaptable process, or a prolonged tailwind.
How long does one need to assess investment skill? As is usually the case with investing, it depends. The key is whether an investment process is sound and enduring. What is the edge an investor is exploiting and how easily can it be competed away?
Our partner, colleague and friend Bill Miller outperformed the S&P 500 for a record setting 15 consecutive years from 1991 through 2005 through various market environments including the tech bubble and subsequent bear market. Even then, critics argued the streak resulted from luck.
Michael Mauboussin calculated the probability of Bill Miller’s streak being random chance as 1 in 2.3 million,3 vanishingly small odds. Skill clearly played a role. Though Bill readily admits luck was a factor too. Measured at any other month end (Jan to Jan, Feb to Feb, etc), the streak would not have existed.
At our inaugural investor meeting as an independent company, Bill was asked how long it takes to assess whether an investment manager has skill. Never one to hold back his true thinking, he replied, “30 years.” We think it’s possible (though difficult) to recognize sooner.
The key is to understand the process behind the returns. Michael Mauboussin writes that the goal of the investment process is to identify gaps between a stock’s price and its expected value. Expected value accounts for a range of possible outcomes, the probability of each, and the payoff if it occurs.4
A sound investment process considers not only what an investor expects to happen, but also what could happen and whether that potential reward justifies the risk. Is the process sound and repeatable? What is the investment edge? How might it be competed away? Can the manager and process adapt as market conditions change?
It is also important to evaluate decisions based on the information available at the time, rather than only on the result. A good process can lead to a bad outcome, and vice versa. Even the best stock pickers are only right 50-60% of the time. A manager must be willing to recognize mistakes, learn from them, and remain committed to a sound process they believe in even when short-term results are disappointing. Over time, these qualities help make the distinction between skill and luck clearer.
So, is Leopold Aschenbrenner an investing genius or a lucky fool? We don’t know yet, and that’s precisely the point. A spectacular return, just like a spectacular loss, tells us far less than we instinctively think it does. What matters is the quality of the decisions that produced it: whether the process was sound, the risks were understood, the edge was real and durable, and the investor can adapt when the world inevitably changes. Does Aschenbrenner recognize levered, concentrated bets are almost guaranteed to suffer devastating losses eventually?
Investing has a way of eventually exposing the difference between a good outcome and a good process. In the short run, luck can make almost anyone look brilliant, or foolish. Over the long run, process, adaptability, and judgment have a much better chance to reveal themselves. Time, and patience, are the ultimate arbiters.
Footnotes:
¹ Jenny Grant Rankin, “How to Make Winning Decisions: Luck and Uncertainty,” Psychology Today, updated October 2025, https://www.psychologytoday.com/us/blog/much-more-than-common-core/202507/how-to-make-winning-decisions-luck-and-uncertainty
² Michael J. Mauboussin, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Boston: Harvard Business Review Press, 2012).
³ Michael J. Mauboussin, More Than You Know: Finding Financial Wisdom in Unconventional Places (New York: Columbia University Press, 2006).
⁴ Mauboussin, More Than You Know:
The views expressed in this commentary reflect those of Patient Capital Management as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Patient Capital Management disclaims any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Because investment decisions are based on numerous factors, these views may not be relied upon as an indication of trading intent on behalf of any portfolio. Any data cited herein is from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. References to specific securities are for illustrative purposes only and are not intended as a, solicitation, or recommendation of any particular security or investment strategy.
Any third party links, trademarks, service markets, logos and trade names included in the report are property of their respective owners. Any such references do not constitute endorsement of any product, service, information, or disclaimer presented therein. Patient Capital Management bears no responsibility for any third party data and has no control over third-party terms of use or other policies.
Past performance is no guarantee of future results.
©2026 Patient Capital Management, LLC
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