> Take some risk profile and then bet that low cost automatically balancing stock/bond Vanguard fund beats 90% of hedge funds over 10 years based on risk adjusted return.

That would be a closer "apples to apples" comparison vs. Buffett's bet.

Do you believe the following investments are equally attractive?

1. You invest $100,000 into a fund which has a 1% chance of returning 100% and 99% chance of returning -100% each year.

2. You invest $100,000 into a fund which has a 20% chance of returning 100% and a 80% chance of returning -100% each year.

The possible payouts are the same. The expected values are not. Given the opportunity to invest in both with no difference in fees or other structure, would you leave your decision up to a coin flip?

I think a better example might be:

1. 10% chance of returning 100%, 90% chance of 0%

2. 90% chance of returning 10%, 10% chance of 0%

Same expected value in year 1, but totally different proposition. And, with compounding returns, the expected value over time is very different.

exactly AM-GM inequality, volatility drag, etc

> But this risk-adjusted thing is just silly: either you have the money or you do not

Money is not a limiting factor, risk is. If you have a low risk strategy, you won't have problems borrowing money to invest in it.

Its not silly, because the amount of reward depend on amount of risk.

So, if you compare returns of different strategies/funds, you need to first rescale them to the same amount of risk