Ed Thorp, not only a leading thinker on markets and investing, but also one of the most successful hedge fund managers out there was quoted a few years back regarding trade idea generation and how money managers need to evolve. It is a great quote and should lead anyone in the business to refocus on the essentials:
“Where do the ideas come from? Mine come from sitting and thinking, academic journals, general and financial reading, networking and discussions with other people.
In each of our three examples (blackjack, convertible bonds, statistical arbitrage), the market was inefficient and the inefficiency or mispricing tended to diminish somewhat, but gradually over many years. Competition tends to drive down returns, so continuous research and development is advisable. In the words of Leroy Satchel Paige, “Dont look back. Something might be gaining on you.”