4 April 2011: Barron’s Reviews The Intuitive Investor!
Posted by Jason Apollo Voss on Apr 4, 2011 in News & Events | 0 commentsThis morning I received news that Barron’s, that scion of the investment world, has reviewed The Intuitive Investor: A Radical Guide for Manifesting Wealth. While I consider the review to be only slightly positive, I am grateful to Gene Epstein and Michael Santoli of Barron’s for selecting my book for review. Purportedly they receive up to 3,000 submissions per year, and to be reviewed at all makes me feel very humbled. Thank you.
To read the review requires a Barron’s subscription, so instead of just providing you with a link, I have included the entire review below for your perusal.
http://online.barrons.com/article/balancing_the_books.html#articleTabs_panel_article%3D1
Beyond the Data
Heeding gut feelings
Reviewed by Michael Santoli
Jason Apollo Voss believes most investors think too much. Or more to the point, he believes they think too much with only part of their brains, the left half. They rely too much on linear logic, extrapolate too freely the facts from the past into an unknowable future, and collect too much data without knowing which of it is salient to an investment decision.
A former manager of the Davis Appreciation growth mutual fund—where he compiled a strong record before retiring from professional investing in 2005—Voss offers here a guide for investors to mobilize the softer emotional and perceptive powers that reside in the so-called right brain.
Investing, he says, “is as much a soft, emotional, subjective, creative, feeling, substantive, organic, right-brained process, as it is a hard, factual, objective, analytical, thinking, structured, linear, left-brained process.”
That’s a lot of adjectives, which, taken together, promise grand and specific examples in evidence. The book does not always deliver on these promises. And to get to the useful parts, it’s necessary to trudge through plenty of New Age riffs on our oneness with infinity and the efficacy of meditation. Not every investment book, for instance, would counsel, “The secret to understanding the universe is accepting paradox,” and then footnote it like this: “Received via meditation on March 6, 2005 in Santa Fe, New Mexico, USA.”
Time-pressed readers could limit themselves to a third of the book (a high batting average for a book that teaches): Chapters 1, 2, 5, 8 and 14. They admirably explain why investors need to understand their own temperaments, to be aware of the ways that adverse or favorable results affect one’s decision-making—and to be sensitive to nonquantitative signals from management and the broader business climate.
Because emotions distort the clear signals communicated by the intuitive, feeling self, it is important that you gain consciousness about your emotions. This allows you to short-circuit their operation.” He goes on to offer exercises such as writing a brief autobiography and then scrutinizing it for emotional resonance. This gives a fair sense of Voss’ habit of making airy assertions followed by rather mundane suggestions on how to achieve his ideal.
In the author’s real-world illustrations of what he means, we can get some sense of the potential benefits that come from staying attuned to more subjective ways of discerning value. He writes of owning AIG shares while at Davis Appreciation, and having a bad feeling about CEO Hank Greenberg’s eccentric Napoleon complex in running the company, which always suspiciously turned out flawless financial reports in those days. However, he concedes that he didn’t give enough weight to his educated gut feeling about Greenberg, and his shareholders were the worse for it.
Voss also offers an updated spin on the Joe Kennedy observation that when shoe-shine boys start offering stock tips, it’s time to get out of the market—inspired by an especially childish billboard he saw in San Francisco for a marginal dot-com business, this near the height of the Internet bubble. He mostly avoided tech stocks from that moment on in his fund.
In a particularly effective thought experiment, Voss asks readers to imagine that a cousin has asked for financial backing to buy a diner. The questions one would likely ask are mostly of the “soft” variety: Is this cousin a hard worker, trustworthy, capable of managing stress, adaptable to changing business conditions? Voss would not ask, he says, such questions as “What is the moving average price of coffee shops sold over the last 270 days?” or “Have the prices for coffee shops gone up dramatically over the last three weeks?”
The author’s program should not be confused with the field of behavioral finance, which is the study of the hardwired cognitive tendencies in humans that lead to certain biases and blind spots in their economic behavior. Voss notes that the left brain is best at evaluating past facts. But there’s no such thing as a future fact, so other tools are needed to make decisions about the investment future—hence, he aims for “higher refinement of the right brain.”
Indeed, Voss is aiming at something like the opposite of behavioral finance—a way to exploit what elsewhere is called “emotional intelligence” in the service of sound investment strategies. Not all investment success comes by way of a spreadsheet.
MICHAEL SANTOLI, an associate editor of Barron’s, writes the Streetwise column.
