Taking Buffett's idea about the EMH being good for him one step farther

I was listening to a relatively old book about Warren Buffett in my car.  In the book, the author mentions that Buffett likes to talk about how MBAs who are taught to believe in the efficient markets hypothesis are making his job much easier because he has competitors who aren't thinking clearly about investment opportunities.  I find it funny that the same thing can be said about Buffett's ideas on the impossibility of forecasting.  

The MBAs who believe in the EMH and the followers of Buffett* both believe that forecasting the future macro environment is too hard.  A more subtle version is that even if someone is right slightly more often than not the transaction costs make trading off of the forecasts useless. 

The net effect of this is the same as the impact of the efficient market hypothesis being popular - the more people who believe that forecasting is irrelevant then the less accurate the current market forecasts are, which means there is more reward for those right forecast.  We saw this during the housing bubble, with many investors making a lot of money off of a forecast that was pretty accurate in hindsight. 

In the immediate aftermath of a bubble which shook many businesses to their core there will be more focus on forecasts in the short term, but identifying under appreciated or unsustainable trends is usually an undervalued approach.

*Buffett does forecast in that he has a slight bias towards inflation. 

About

I studied Bioengineering at the University of California at San Diego. While there I served as a trustee on the investment committee of the UCSD Student Foundation, a group that manages an endowment to fund scholarships. While in college I applied my interest in finance and economics by working as a summer associate at Clarium Capital Management, working part time my senior year, and joining full time when I graduated in 2006, staying there through August 2010. I am currently working as a portfolio manager at another global macro hedge-fund in the Presidio (And blogging about more directly market related ideas at their restricted blog). I’ve been focusing on quantitative finance, currencies, commodities, the interplay between finance and politics, demography and other long term trends.

Disclaimer: You shouldn’t consider anything on this site to be a recommendation or solicitation to buy, sell, or hold any securities or commodities. I’m not offering you investment advice. I or the company I work for may hold positions in securities that I mention.