I agree that said experts probably don't know enough to justify their cost.
But if the conclusion one draws is that the US large cap stock market is the place to put your money for the next 100 years just because it was great the last 100 years, I think that's the wrong lesson. Of all the markets in all the countries in the world, and all the asset classes, the US stock market has been an outlier for a long time, and it can't continue forever. Like Moore's law, and declining interest rates, and population growth, every trend stops somewhere since it would otherwise eat the world. Generally right at the point almost nobody is left to bet against it.
There is no such thing as completely passive management - someone at least selects components of an index, and you at least choose which index and that is always going to be pivotal with respect to investment success. I don't think there is logically any way around some degree of deliberate selection of assets. All people can do is pay less for the illusion of expertise.
Isn't that last sentence the whole point, though? I thought that index funds didn't generally do better than actively managed funds in terms of raw returns, they just didn't do much worse, and the vastly lower fees mean that you come out ahead overall. The point of an index fund isn't to attain some sort of stock picking nirvana where nobody's really picking anything, it's just to get a fee of 0.04% instead of 2%, or whatever.
One could be cynical, and observe that US business interests have the world's largest, most agressive and equipped intelligence and military force protecting its interests - it can be an outlier just as long as a robber baron can...
Or one could be even more cynical, and observe that China appears to be pouring "hard" power behind decades of "soft" power build-up...
Reading his 'footnote' - he still does not seem to get it.
The fact is precisely because of all these factors (among others) Warren was so confident in this bet. He knew the terms and the environment very well before taking on the bet. Calling the outcome the result of 'anomalous' market behavior is just denial at this point.
That's a pretty weird story. His "expert" ability at picking funds is what was being tested. He then goes on to give his "expert" opinion on why his expert opinion failed.
Yes, it's totally possible that Buffet just got lucky. But of the five stocks, over the 9 year period (45 data points), there are only 9 data points where a fund beat the S&P for the year. They all beat the S&P the first year, then for the next 8 years there were only four instances of a fund beating the S&P, and the S&P won for the other 36 data points.
If we were to assume that the funds vs the S&P was an equal playing field (each side had a 50% chance of winning), then there's just a 20% chance that Buffet just got lucky. But the point of actually paying a fund for advice isn't to just have equal odds, the funds are supposed to beat amateurs, and by a significant margin.
What we consider "significant" is obviously open to interpretation. But the most significant win a fund had over the S&P was in 2015 where fund C beat the S&P 5.4% to 1.4%, almost a 4x higher return. But the S&P had larger than 4x returns than the funds 12 times. I'm not exactly sure how to work all of that into a probability, but it's looking like the odds that Buffet just got lucky is pretty close to zero.
He keeps reiterating his parole that experts who actively select assets know more then the average Joe.
Even though the average Joe just completely blew them out of the water over a whole decade :)