Man vs. Model

I was sitting in my finance class today when it dawned on me. I had been thinking for awhile that people are inherently intelligent. I mean, one has but to walk through a field past a lake enveloped by gigantic man-made structures to note the nature of our impact on this world. The pond...the field...

these things have always been there, but the structures...hangars, wind tunnels, anthropomorphic wonders leading to ever bigger, larger, and greater anthropomorphic wonders, some even leading us to explore the far reaches of space flight. In many regions of the world, one has but to cross over a grassy knoll to realize conceptions that allow us to almost literally touch the heavens.

And yet, there I was in my finance class with the teacher trying to explain Beta. In finance, Beta is not complicated. There is some market, or benchmark, and there is some security or portfolio. Historically, when the benchmark has moved, the security/portfolio has also moved...in some cases, more than the market (a beta greater than 1) and in others, less than the market (a beta less than 1). It isn't rocket science and typically is used to create a "rough" estimate of some figure, such as a required rate of return given a particular unit of risk, or the CAPM model. I'm not sure what it was, but the class was peppering the professor with question after question after question after question. I didn't understand for a few reasons. First of all, the CAPM, or any other of these "models" is just that, a model. You use it and have a deep understanding of it, but, by the same token, you take it with a grain of salt. No one throws down the CAPM and gets the answers to the great secrets of the universe and the stock markets. At least, it hasn't worked for me. Maybe I am using the wrong model... Additionally, beta is frequently based on month data drawn back from history 3 to 5 years. I say again...HISTORY. Also important, but not imbued with all of the answers.
There are many other similar points to be made, but, the big picture is that this is not an exact science. It is a form of educated estimation. In the popular press modern portfolio theory is said to be DEAD. In the common parlance, it just no longer "works." Yes, Nobel Prize winning ideas no longer work. Riiiiight. I would just venture to state that sometimes it isn't these ideas, but rather, our haphazard applications of them.
With every investment, every portfolio manager must cross a point beyond what is known and into what is unknown...sort of where the ART meets the SCIENCE. If anyone wants to be truly impressive, they should stop criticizing what has already been done and start attempting to explain how, with the same PUBLIC information, Buffett became Buffett and the rest of us became, well, ...you know.