those folks at Goldman Sachs who wrote this book really knew anything worthwhile about investing, why would they put it together in a book where all of their competitors could find it?" It's a good question, because it leads naturally to the kind of thought process this book is really all about. The question might be rephrased in a way that makes our motivation for writing the book a little more clear: "Why, in equilibrium, would a successful investment manager write a book about investment management?" By "in equilibrium" we mean in an investment world that is largely efficient and in which investors are fairly compensated for risks and opportunities understood and well taken. Suppose there is wealth to be created from careful and diligent pursuit of certain rules of investing. Suppose further that one were to write those rules down and publish them for everyone to follow. In equilibrium, wouldn't those sources of success disappear? Somehow it doesn't seem to make sense for good investment managers to write books about their craft. Indeed, many sources of investment success, in particular those with limited capacity, would eventually disappear with increased competition. What we have tried to do in this book is to focus on other types of phenomena, those with a capacity consistent with the equilibrium demand for them. In equilibrium these types of phenomena would remain. Consider an example of a phenomenon with limited capacity. Suppose it were the case that looking at publicly available information one could easily identify certain stocks (for example, those with small capitalization) that would regularly outperform other stocks to a degree not consistent with their risk characteristics. We would expect that if such a strategy were published and widely recognized, then the prices of such stocks would be bid up to the point where the costs of implementing such a strategy just about offset any remaining excess returns. In other words, we would expect such a phenomenon to disappear. Now consider a phenomenon in the equilibrium camp. Suppose a rule of portfolio construction, for example a rule suggesting increased global diversification, were published that allows an investor to achieve a higher level of return for the same level of portfolio risk. The actions of investors following this suggestion will increase their expected wealth, but their implementation does not in any way reduce the strategy's effectiveness. Even though other investors might implement the change (in equilibrium all investors will), it will nonetheless remain a rule that makes sense for each investor individually. In this book we write about the latter class of phenomena, not the former. In equilibrium this is what a reader should expect us to do. Despite this equilibrium approach, our view is that the world is clearly not perfectly efficient, whatever that might mean. There might be a little bit of extra