INVESTING INSTINCT

“We know more than we can tell.” Michael Polanyi

“Intuition is a very powerful thing — more powerful than intellect, in my opinion.” Steve Jobs

“The situation has provided a cue; this cue has given the expert access to information stored in memory, and the information provides the answer. Intuition is nothing more and nothing less than recognition.” Herbert Simon

“There is nothing mystical about an accurate intuition .. it’s pattern recognition. With training or experience, people can encode patterns deep in their memories in vast numbers and intricate detail - such as the estimated fifty thousand to one hundred thousand chess positions that top players have in their repertoire. If something doesn’t fit a pattern, a competent expert senses it immediately.” Philip Tetlock

“Big ideas come from the unconscious. This is true in art, in science, and in advertising. But your unconscious has to be well informed, or your idea will be irrelevant. Stuff your conscious mind with information, then unhook your rational thought process. You can help this process by going for a long walk, or taking a hot bath, or drinking half a pint of claret. Suddenly, if the telephone line from your unconscious is open, a big idea wells up within you.” David Ogilvy

“Our intuitions are thoughts that come to mind automatically, through deeply ingrained knowledge.” Steven Sloman

"I don’t like the word ‘instinct’, because it just sounds like a gut thing. I think what we call instinct is really a type of pattern recognition, which comes from experience looking at the companies and industries and situations that work." Daniel Loeb

"Experience builds intuition." Ed Wachenheim

"Experience makes the difference - doing it again and again until it becomes instinctive. Experience builds discipline and insight that sometimes allows you to see over the abyss before you step into thin air. It's being risk aware." Sam Zell

"Intuition, strengthened by experience plays its role in the investment process, but there is no substitute for careful analysis." Ralph Wanger

"My instinct was very good because of my intensity and the extend of experience." Michael Steinhardt

"You can't just graduate an analyst into managing funds. What is it the good managers have? It's a kind of locked in intuition, a feel, nothing that can be schooled. The first thing you have to know is yourself. A man who knows himself can step outside himself and watch his own reactions like an observer." Adam Smith, The Money Game

"Rely more on your intuition and gut feeling. Learn to develop your ability to see what is happening and what is unique. It is better for you to transcend ‘Heard on the Street’ to your own column better titled ‘Seen in the World’." Bennett Goodspeed 1978

"You don't learn consciously as much as you learn subconsciously. In the heat of battle, we'd talk about a trade. Someone would come in and tell me a story and I'd say "no, that doesn't feel right". My instinct was very good because of my intensity and the extent of my experience. The best of the highly experienced traders understand this in ways others in the investment-management world won't. In the course of a career, a money manager can make x decisions or 50 times x decisions. He who makes 50 times x decisions learns more." Michael Steinhardt

"Personal intuition does not mean that you can translate last night's exotic dream into some brilliant choice in the market. Professional money managers often seem to make up their minds in a split second, but what pushes them over the line of decision is usually an incremental bit of information which, added to all the slumbering pieces of information filed in their minds, suddenly makes the picture whole." Adam Smith, The Money Game

"Instincts and intuition are very important. They come from the subliminal mind and are brought to the surface and have to be reconciled with the logical, conscious mind. When the two are aligned, I’m ready to go." Ray Dalio

“Intuition, whether positive or negative, is quite another matter. It is a vital component of my art.” Peter Cundill

“Instinct and Intuition are words used to describe unconscious processes that bear on judgements in a range of human activities… I soon discovered I had a natural instinct for trading, and this became a cornerstone of my career.” Michael Steinhardt

"Superior results generally require insight, judgement and intuition." Howard Marks

"You need a certain amount of intelligence, but it's wasted over a certain level. After that, it's more intuition." Stanley Druckenmiller

“Trading can be intuitive. We are looking at so many factors in the markets [that] a lot of our analysis operates on a subconscious level. All of a sudden you know this is the right trade. If somebody really quizzed you, you probably couldn’t clearly articulate your views and would just say no no no, I know this is the right trade. It’s because all these things have been taken in – the market action, the technicals, the things that you read in the newspapers or on Bloomberg and the conversations you have with other traders, analysts and policy makers. It just comes together.” Roy Lennox

“When it comes to investing, intuition and analysis are inextricably bound together.” Leon Levy

“Instincts are often all one has.” Michael Steinhardt

“In the final analysis you must rely on your instincts for survival.” George Soros

“One of the essential traits of the successful ‘vulture’ value investor is instinct.” Peter Cundill

"Instinct - the subconscious - is much more reliable than statistics. One should follow one's own convictions." Philip Carret

“Who knows when some little fact stored in the back of your mind pops up and really does make a difference.” Warren Buffett

“Gut feel is actually crucial. If something isn’t acting right, it is an indication that you need to go back and recheck the fundamentals.” Martin Taylor

“Better to try and lose, then not to try. You learn through osmosis - learn in real time.” James Dinan

“I learn and I’m curious about all businesses. That’s why when opportunities come, within a few seconds you can smell it. How can you develop that smell. The only way to really do that is just reading page after page.” Li Lu

"You really learn everything valuable through osmosis. It’s the same with play-writing or movie-directing or acting. You love either reading or watching films or plays or listening to music. And in some way, over the years, without making any attempt, it gets into your blood, into the fibre of your body. The art of investing is made out of the same framework." Francois Rochon

“Beginning at a very early age, I have made cumulatively more judgements, and more investment decisions based on the same kinds of data, than almost anyone else. This process unconsciously leads to a sharpening, a fine tuning, that over time, results in fewer mistakes. In this repetitious behaviour, a learning occurs that is not consciously understandable but allows one to ferret out the higher probability from the lower. Thus one develops ‘good instincts’. Often listening to an idea led me to an entirely different conclusion than the proponent of that same idea, whose knowledge was far deeper than mine. It seemed knowledge was necessary but insufficient.” Michael Steinhardt

“Another common illusion some people have is that they can do anything – buy and sell stocks, dabble in real, estate, run a business, engage in politics – all at once. My own experience is that few men can do more than one thing at a time – and do it well. A skilled operator in any field acquires an almost ‘instinctive’ feel which enables him to sense many things even without being able to explain them. In a few instances, and in coffee, where I went into speculations where I lacked this ‘feel’, I have not done too well.” Bernard Baruch

"One of the things I most want to emphasize is how essential it is that one's investment approach be intuitive and adaptive rather than fixed and mechanistic." Howard Marks

"People make more of a science out of it than I think is necessary – for me it’s really a much more intuitive process." Shad Rowe

"With the benefit of hindsight, at critical inflection points over the last decade it appears that the intuitive thinker was better equipped as a problem solver than the analytical one. Intuition tends to rise in relative importance when the environment is undergoing rapid and dynamic change, wherein present analytical models are suspect and, post mortem, proved obsolete." Frank Martin

"Warren’s [Buffett] skills as an investor have often been compared with a musician, and I think that’s exactly right. The ‘money mind’ is an instinct, almost a sixth sense, of sniffing where there is an opportunity to make money and knowing how to exploit it." Alice Schroeder

"If we have a normal lifespan, we’ll see a few more [big ideas] before we get done, but I can’t tell you that — exactly how. I can’t tell you exactly what transpires in my mind that says, you know, flashes a neon sign up that says, ‘This is a big idea.’” Warren Buffett

"As in music and sports, the best professionals tend to develop a rhythm and feel that comes with long practice and that leads to optimum results. In my opinion, the intuitive feel (or sixth sense) that most good investors develop partially comes from an innate ability and partially from experience." Ed Wachenheim

"The market has a life of its own, and a lifetime of investing has allowed me to develop instincts for the ways in which the markets and the economy affect each other." Leon Levy

"I believe many operators have had similar experiences with that curious inner mind which frequently flashes the danger signal when everything marketwise is aglow with hope. It is just one of those peculiar quirks that develops from long study and association with the market." Jesse Livermore

"I find that, in the stock market, it is best to be flexible and not be tied to conventions or rules. Sometimes, it is best to follow your intuitions." Ed Wachenheim

"Trading securities requires a lot of intuition, something you can only develop as a student of life. In Paris, and ever since, I have been studying constantly. I study people, I study life, I look and listen and read. I never found learning about anything a waste of time." Roy Neuberger

“Sometimes a flippant remark allows the spikes of reason to penetrate the brain. I should be reading plenty of poetry, if for no other reason that it deals directly to the intuitive side of the brain.” Peter Cundill

"My real theory is that the investment superstars have some special magic with markets that enables them almost intuitively to do the right thing most of the time. Somehow, the superstars fertilise their minds with meaning and wisdom so they, too, can "perceive things about to happen." Barton Biggs

“Being an investor and running a fund requires you to be part financial analyst, part accountant, part financier, part social scientist, part philosopher. You have to tie the right brain and the left brain together. If there’s an edge to be had, it’s in understanding the different components of the analytical process or the selection process. Understanding there’s an element of creativity, emotion, analytics and intuition. Maybe the thing we call intuition is the ability to tie all those things together.” Dan Loeb

"[Intuition, instinct, hunch] .. it's critical. And it's also by the way what the computer can't do well. In other words, it's the subconscious. As you know, man, although it's only 200,000 years old, the brain is much older. And we came programmed with many of these things in our brain, intuition and those things. And they're in our subconscious. And so by opening up one's subconscious to one's consciousness so they come up, you know, creativity comes from not working hard at it, it comes from relaxation. It bubbles up from the subconscious. Transcendental meditation has been invaluable to me because it helps to do that. But that intuition, that creativity, man is still unique at being able to do those things. So you let that bubble up, but you have to reconcile it with your logic. So when the subconscious creativity and intuition comes up and replicate it with your logic, it's fabulous." Ray Dalio