There is a pattern in IPL that every cricket fan has quietly noticed, even if they have never put it into words.
In the early seasons of the IPL — 2008, 2009, 2010 — there were batters who stood visibly apart. When they walked in, the dynamic of the match changed. The bowlers adjusted. The field changed. The crowd leaned forward. A handful of players had a gift that the rest simply did not.
Today, watch any IPL match and something feels different.
Number seven is hitting sixes. The number eight is pulling short balls over mid-wicket. Teams routinely post 220, 230, sometimes 250. Players who would have been considered tail-enders a decade ago are launching balls into the second tier without flinching. The average has gone up dramatically. The floor — the minimum competence required to hold a spot in a franchise squad — has risen sharply.
And yet, for all this improvement, predicting who will win the IPL has not become easier. If anything, it feels more random than ever. Strong teams go out in the group stage. An inspired spell by an uncapped bowler on a good day knocks out a favourite. A last-over finish decides a semi-final more often than individual brilliance does over fourteen matches.
Nobody would say IPL players are getting worse. The training, the analytics, the fitness standards, the specialist coaching — all of it has improved dramatically. The talent pool now draws from every corner of the country and the world.
So why does the tournament feel harder to predict, not easier?
Michael Mauboussin, one of the most thoughtful investment writers of our time, has a name for exactly this phenomenon. He calls it the Paradox of Skill. And once you understand it, it changes how you look at cricket, investing, and every competitive field where outcomes mix skill with chance.
The Paradox, Stated Simply
Here is the core idea in one sentence.
In any activity where outcomes depend on both skill and luck, as the average level of skill rises, luck plays a larger role in determining who wins.
This feels wrong at first. Surely more skill means outcomes are more meritocratic, not less? If everyone improves, shouldn't the best rise more reliably to the top?
Not quite. Because skill does not operate in isolation. It operates relative to the competition.
When the weakest participants in a game are poor, the strongest can win consistently — not just because they are talented, but because their opponents make mistakes they can exploit. The gap between the best and the rest is wide enough that skill clearly shows up in results.
But as the field matures — as coaching spreads, information levels out, and weaker participants are filtered out — that gap narrows. Everyone converges toward a high level of competence. When the gap between participants shrinks, the things that remain variable are no longer differences in skill. They are differences in luck.
The game does not become random. Skill still matters enormously. But its edge — its ability to reliably predict who will win in any given match or season — weakens. Outcomes look noisier. Results become harder to distinguish from chance.
In the IPL context: when every team has four match-winning batters, two quality spinners, two pace bowlers who bowl 145 kmph, and a coach running ball-tracking analytics — a dropped catch in the 17th over, a dew-affected surface, a toss on a two-paced wicket — these small, uncontrollable events start carrying disproportionate weight. The margins are so thin that luck fills them.
This is the paradox. As average skill levels converge, outcomes become harder to predict from relative skill differences alone.
Now Bring It to Investing
The Indian stock market in the 1990s was a very different place from what it is today.
Information was patchy. Institutional research was thin. A dedicated analyst willing to dig into a mid-cap company's balance sheet often knew things about that business that the broader market simply had not caught up to yet. The advantage of doing careful work was real and visible in returns. Skill had genuine room to express itself because the competition was uneven.
Today, that landscape looks nothing like it did then.
Every significant listed company is covered by multiple research analysts. Quarterly results are dissected within minutes of release. Algorithmic trading systems react to price movements faster than any human can process them. Global institutional investors with billion-dollar research budgets are active in Indian markets. The best fund managers in India today are genuinely excellent — better informed, better trained, more disciplined than the average investor of twenty years ago.
And yet, consistently beating the index has not become easier. If anything, it has become harder.
This is the paradox of skill at work.
Mauboussin’s analysis of mutual fund performance suggested that over shorter evaluation periods such as three years, luck may dominate outcomes far more than most investors assume.
The remaining variation — who beat the benchmark this year, who underperformed last year — is largely noise.
The Cruelest Part of the Paradox
Here is what makes this genuinely difficult to sit with.
Human beings are pattern-seeking creatures. We are wired to look at outcomes and assign cause. When a fund delivers 18% in a year when the index returns 12%, we conclude the fund manager is skilled. When another fund lags by 5%, we question their competence.
We do this automatically, instinctively, and usually incorrectly.
Think about how we talk about IPL captains. After a winning campaign, every tactical move is described as brilliant. The rotation of bowlers, the promotion of a pinch-hitter, the decision to field first — all of it gets credited as strategy. After a loss, the same decisions look reckless or naive. The outcome changes how we read the decision, even when the decision itself was identical in both cases.
Investing is no different. The fund manager who had a strong year may have made three excellent decisions — and also been helped by a regulatory change nobody predicted, a currency move nobody modelled, and a global macro shift that happened to benefit their particular sector. The manager who lagged may have been equally sound and simply been on the wrong side of events that had nothing to do with their analysis.
We hand out credit and blame with great confidence. The actual signal — the underlying skill — is far harder to isolate than we instinctively believe.
What This Means for the Average Investor
The practical implications of this idea are quieter than they sound, but they are important.
First, it reframes how you evaluate fund performance. A fund that has outperformed for two or three years deserves respect, but not certainty. Over short windows, luck contaminates the signal. Mauboussin's work suggests you need long periods — many years, sometimes decades — before skill reliably separates itself from luck in investment returns. Most of us evaluate funds over one to three years. That window is usually not long enough to know anything meaningful.
Second, it makes costs matter more, not less. In a world of narrow skill differentials, the one reliable advantage available to almost every investor is cost. A fund that charges 1.5% per year needs to generate 1.5% of additional return just to break even with a low-cost index fund — before luck even enters the picture. When the skill gap is small, costs can easily overwhelm it. This is one of the clearest arguments for index investing in efficient, well-covered markets.
Third, it tells you where active skill is more likely to matter. Mauboussin's conclusion is not that skill is irrelevant — it is that you need to look for it in the right places. Skill is more likely to show up in markets where information is uneven and competition is less intense. In India, this might mean genuinely active small-cap and mid-cap strategies where institutional coverage is lighter, rather than large-cap funds whose every holding is simultaneously analysed by dozens of well-resourced teams.
The Honest Caveat
The paradox of skill does not mean all active management is futile.
Skill does compound over time. Mauboussin is careful to note this — over very long periods, the signal of genuine skill begins to emerge from the noise of luck. A truly skilled manager, given enough time and enough decisions, will eventually produce results that cannot be explained by chance alone.
The problem is that most investors do not give skill that time. They rotate out of underperforming funds after one or two bad years — exactly the window where luck is most dominant — and chase recent outperformers who may simply have been fortunate. They buy the IPL champion's jersey and expect the trophy to follow.
The paradox of skill does not change what good investing looks like. It changes how patiently you have to wait to see it.
The Money Vichara Reflection
The next time you look at a fund's three-year return and feel certain about what it tells you — pause.
The certainty itself is worth examining.
In a market full of capable, well-resourced, hardworking professionals — much like an IPL where every franchise now has world-class players, analytics teams, and specialist coaches — the idea that any one participant will consistently stand apart on skill alone is a genuinely high bar.
Not impossible. But rarer and harder to verify than the fund industry would like you to believe, and rarer than we, as hopeful investors, would like to believe too.
We celebrate returns as if they are entirely earned. We blame underperformance as if it is entirely deserved. And somewhere in between, the actual signal — durable skill, sound process, the quiet compounding of good decisions — gets lost in the noise.
Mauboussin did not give us a reason to stop looking for good investments or good managers. He gave us a more honest way to think about what we are actually seeing when we look at returns.
Because in a tournament where every team is excellent, sometimes the winner is simply the one the conditions favoured on the day.
And knowing that changes how carefully you should trust the winner's story about why they won.
That is the real vichara.
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