[lpolovets]

Hey Namdi!

> it is a major assumption to think that VCs are good at calculating the expected values of companies in which they make investments.

It's not quite the same as proving VCs can calculate expected values well, but VC is one of the few asset classes with persistence of returns -- meaning having a top quartile fund is correlated with the next fund also being top quartile. In most investment classes, being top quartile across funds is basically uncorrelated. So good VCs tend to be reliably good and not good just because of pure chance.

Source: https://www.morganstanley.com/im/publication/insights/articl... (p 51)

> The fundamental randomness is so high here that any ranking a VC made would likely be garbage

A ranking doesn't have to be perfect, just better than random. E.g. let's say you give me a bunch of companies and ask me to rank them, and I put 60% of the actual top 1% and 40% of the next 1% into my top 1%. I'm making mistakes, but that's still pretty good. As long as I'm directionally right on average, I should do well on the investing side.