Kay is a Financial Times columnist who writes lucidly about things usually wrapped in layers of murkiness and opacity.
His recent column on how and why Warren Buffett continues to be successful (shares of Berkshire Hathaway, for sale to anyone with $37 in 1967, are expected to reach $100,000 - apiece - soon), was a model of demystification.
Kay noted that financial experts write books telling why Buffett's investing theories can't be right, yet hedge their bets by buying Berkshire for their own portfolios, somewhat akin to Pascal's wager.
Others attribute his triumph over four decades to anomalies in Nebraska insurance law.
As Buffett himself has said, adherents of efficient market theory, "observing correctly that the market was frequently efficient, went on to conclude incorrectly that it was always efficient. The difference between these propositions is night and day."
Kay writes, "There is a contradiction at the center of the efficient market hypothesis. There is no point bending down to pick up a $10 bill because someone will have done it already. But if there is no point in bending down to pick it up, it will still be there."
Joseph Stiglitz demonstrated this mathematically, one of the reasons he was awarded the Nobel Prize for economics.
Kay concludes, "The efficient market hypothesis is 90% true, and and you will lose money by ignoring it. The search for the elusive 10%, like the search for discarded $10 bills, attracts effort greater than rewards. But for the very few skilled searchers, the rewards can be large indeed."
Nassim Nicolas Taleb, the author of Fooled by Randomness, is one of those rare few. His homepage is a treasure-trove of useful information and insight for those who would aspire to join this gifted - and rich - club.
I'm always amused when someone like Peter Lynch comes out with a "how I did it" book, and it rockets to the top of the best-seller list.
Yes, you can read his book, and do exactly like he says to do with your money, and you'll still lose. Why? Because he's Peter Lynch, and you're not.
To expect to follow the recipe of a wizard and get the wizard's result is like buying a pair of Air Jordans and expecting to dunk. Ain't gonna happen.
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