Fair enough, Ted. You're right, the fees-versus-selection question certainly didn't get a fair hearing.
You may already have seen this, but if not it's worth checking out "How Smart Are the Smart Guys? A Unique View from Hedge Fund Stock Holdings," published in 2009 by Griffin & Xu (http://www.jgriffin.info/Research/smart.pdf). They put together data from 13F forms to compare stock selection (on the long side) by hedge funds and mutual funds. They found that "hedge funds are better than mutual funds at stock picking by only 1.32% per year on a value-weighted basis," and that the entire outperformance was concentrated in 1999 and 2000. (Their full historical period was 1986-2004.) They also found "there is no evidence that on average hedge funds have an ability to time styles or pick better styles."
Their conclusion basically sums up The Bet: "over our sample period, the unlevered hedge fund earning the average return did not come close to justifying its 20% performance fee on its long-equity investments."
Thanks.