The paradox of skill. As people become better at an activity, the difference between the best and the average and the best and the worst becomes much narrower. As people become more skillful, luck becomes more important.
The reason that luck is so important isn't that skill isn't relevant when you bring the best of the best together. It's that skill is very high and consistent. That said, over longer periods, skill has a much better chance of shining through.
In the short term you may experience good or bad luck [and that can overwhelm skill], but in the long term luck tends to even out and skill determines results.
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You may do the right things and get bad outcomes or do the wrong things and get good outcomes. So performance results can be very deceptive.
The better way to do it is to focus on the process of decision making that people use and to look for numerical measures that can be proxies for that.
If you look at streaks, not just in investing but in any endeavor, almost by definition they combine skill and luck. You have to have above-average skill and above-average luck to have a streak. If you look at it in the realm of sports, all the streaks are held by the most skillful players, although not all skillful players have streaks.
http://online.wsj.com/article/SB10000872396390444734804578062890110146284.html
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