The Sirens of Wall Street

One of the assumptions I carried for many years was that better decisions naturally followed from better information.

At the time, it seemed entirely reasonable. If an investor had access to more research, more data, more expert opinions and a deeper understanding of the companies they were analysing, surely that investor would make better decisions than someone operating with less.

In many ways, the world has moved in exactly that direction. Information that was once available only to professional investors is now accessible to almost anyone with an internet connection. Financial statements, earnings calls, analyst reports, specialist newsletters, podcasts and investment platforms have dramatically reduced the informational advantage that large institutions once enjoyed. More recently, AI has accelerated this process even further by making it possible to analyse and summarise vast amounts of information in seconds.

We appear to live in the most informed period in financial history, but consistently good investment decisions remain remarkably rare.

In fact, the more information became available, the less convinced I became that information itself was the primary differentiator. The investors I admire most rarely strike me as the people who know the most. What distinguishes them seems to be something else entirely.

Part of the reason investing fascinated me was precisely because it appeared to reward knowledge.

The logic seemed straightforward. The more you learned about businesses, industries, management teams, competitive advantages and financial statements, the better positioned you would be to identify opportunities that others had overlooked. Better information would lead to better analysis, better analysis would lead to better decisions and, eventually, better outcomes.

Experience gradually made me less certain.

Over time, I noticed that access to information was becoming increasingly democratic. Research became easier to obtain, financial media expanded dramatically and entire communities emerged around the analysis of companies and markets. If information was the primary source of advantage, one might reasonably expect investment outcomes to improve as access improved.

Yet that does not seem to be what happened.

The gap between average and exceptional investors did not disappear. If anything, it sometimes appeared to widen. That observation forced me to reconsider an assumption I had rarely questioned. Perhaps the challenge was no longer obtaining information. Perhaps the challenge had become something else entirely.

The more I reflected on it, the more I realised that the nature of the problem had changed.

For most of history, information was scarce. Investors competed to obtain it faster, access it earlier or discover something that others had missed. Today the challenge often feels very different.

A single company can generate thousands of pages of reports, presentations, interviews, analyst opinions, social media commentary and news articles every year. Most of it is available instantly and often accompanied by countless interpretations from people eager to explain what it supposedly means.

At first glance, this looks like progress. In many respects it is.

The difficulty is that abundance creates a different kind of challenge. When information is scarce, the problem is finding it. When information is abundant, the problem becomes deciding what deserves attention in the first place.

That sounds like a subtle distinction, but I have come to believe it is an important one. The quality of a decision increasingly depends less on access to information and more on the ability to filter, validate and interpret it without becoming distracted by every new development that appears on the horizon.

The irony is that investors today may spend less time searching for information and more time deciding which information can safely be ignored.

One of the things that gradually challenged my original assumption was observing the investors I admired most.

What struck me was not how much information they consumed, but how differently they seemed to relate to it. While many investors appeared to be in a constant race to absorb more news, more opinions and more analysis, the people I respected most often seemed remarkably selective. They certainly did their homework, sometimes in extraordinary depth, but they did not appear obsessed with knowing everything.

For a long time, I found that puzzling.

If investing was primarily a knowledge game, one might expect the biggest advantage to belong to those who accumulated the most information. Yet experience repeatedly pointed in a different direction. Some of the most informed investors I encountered still made poor decisions, while others achieved remarkable results without appearing to possess any meaningful informational advantage over the rest of the market.

Looking back, I was reminded of this lesson more than once in my own investing decisions. During the SPAC boom, for example, I understood perfectly well that I was not investing based on the intrinsic value of a business. In many cases, there was no business yet. I was effectively betting on the reputation of a handful of smart people and the possibility that market enthusiasm would continue.

The interesting part is that the information was not missing. I knew exactly what I was doing. What attracted me was not the underlying investment case but the prospect of easy gains.

That experience forced me to confront something I had previously underestimated. Some investment mistakes are not informational failures. They are behavioural ones.

The investors who probably influenced my thinking most were Warren Buffett and Charlie Munger.

What increasingly appeals to me about them is not that they predicted the future particularly well. It is that they managed to apply essentially the same framework through decades of technological change, market cycles, bubbles and crises.

What I find interesting is that neither built their reputation on possessing superior access to information. In fact, many of the principles they advocated seem almost unfashionable in a world obsessed with speed, constant updates and immediate reactions.

One of Munger's observations has always stayed with me. He once remarked that you do not need to be brilliant, only slightly wiser than the other participants on average and for a long period of time. It is a remarkably unglamorous idea, particularly when compared to the image many people have of successful investors.

Yet it may explain more than most sophisticated investment theories.

The longer I have observed markets, the less convinced I have become that investing is primarily a test of intelligence. There are plenty of highly intelligent people who struggle as investors. What Buffett and Munger seemed to understand particularly well was that success often depends less on analytical brilliance than on the ability to remain patient and rational when circumstances make both difficult.

This may also explain why some of the best investment decisions often feel surprisingly uneventful. They are not the result of discovering a hidden piece of information or making a brilliant prediction. More often, they come from recognising a good opportunity, acting on it and then allowing time to do most of the work.

My own experience during the COVID crash reinforced that lesson. At one point, my portfolio had fallen by more than fifty percent. Strangely, I never felt particularly tempted to sell. My strongest belief was that markets would eventually recover and that the sharp decline had created opportunities rather than invalidated them.

Looking back, the frustration was not the fall itself but the fact that I did not have enough capital available to invest more aggressively.

Some of my best-performing investments emerged from that period. Not because I discovered information that others had missed, but because I remained invested when many others were reacting to uncertainty.

It sounds simple when written down, although experience has convinced me that it may be one of the hardest disciplines in investing.

What makes this question particularly interesting today is that technology is becoming extraordinarily good at many of the activities that investors traditionally associated with expertise.

Research that once took days can now be completed in minutes. Vast quantities of information can be collected, organised, summarised and cross-referenced almost instantly. AI systems are increasingly capable of identifying patterns, surfacing relevant data points and highlighting connections that would be difficult for any individual to discover unaided.

Viewed through the lens of information processing, this is a remarkable development.

Yet the more capable these tools become, the more I find myself returning to a different question.

If access to information is no longer the primary constraint, where does the remaining advantage come from?

The answer may not lie in processing more information but in deciding what significance to attach to it. Markets rarely present investors with a shortage of facts. More often, they present them with ambiguity. The challenge is not determining what happened but deciding what matters, what changes the underlying thesis and what should simply be treated as noise.

AI is exceptionally good at identifying patterns across large bodies of information. What remains less clear is whether pattern recognition alone is enough. Markets have repeatedly demonstrated that large groups of informed people can still reach poor conclusions. A herd of fools remains a herd of fools, regardless of how much information it possesses.

Markets have provided countless examples of this over the years. Speculative bubbles, manias and periods of collective pessimism rarely emerge because information is unavailable. More often, they emerge because large groups of people reach similar conclusions at the same time.

Which leaves an interesting question. If wisdom occasionally requires departing from the crowd, can a system trained primarily on the crowd ever fully replicate it?

The more I think about it, the more I suspect that many discussions about investing are still framed around a problem that is gradually disappearing.

For decades, information was the scarce resource. Investors competed to obtain it, interpret it and act upon it before others could do the same. Much of the industry's structure, language and mythology was built around that reality.

Yet despite all these improvements, exceptional investors remain surprisingly rare. The playing field is undoubtedly more level than it was a generation ago and the tools available to individual investors are more powerful than ever.

If information were the primary source of advantage, one might reasonably expect the gap between average and exceptional investors to narrow significantly. Experience suggests otherwise.

The investors who continue to stand out are rarely distinguished by access to information alone. More often, they seem distinguished by their ability to remain patient when others become restless, focused when others become distracted and disciplined when circumstances encourage the opposite.

And they may become increasingly valuable precisely because information itself is becoming easier to obtain.

Looking back, I think one of the reasons I became less convinced by the importance of information was that I gradually realised how many areas of life reward qualities that have very little to do with information itself.

Investing is one example, but it is hardly unique. Most meaningful decisions are made under conditions of uncertainty. The relevant facts are rarely complete, the future is never fully visible and there is almost always more information available than any individual could reasonably process. At some point, the challenge stops being informational and becomes something else.

Perhaps that is why I have become increasingly sceptical of the idea that better decisions naturally follow from more information. Information remains valuable, of course. So does knowledge. Yet both seem most useful when combined with the ability to place them in the right context and act upon them appropriately.

Which may explain why the investors I admire most rarely strike me as the people who know the most.

More often, they seem to be the people who have built systems that prevent them from reacting to everything they know.

Looking back, some of my worst decisions came from abandoning that discipline. Some of my best came from doing remarkably little.

The longer I invest, the less convinced I become that the greatest advantage comes from knowing more than everyone else.

Increasingly, I suspect it comes from knowing what can safely be ignored.