The point is obvious. In financial circles the intellect rules. That
is our belief system. Wall Street is full of brilliant analysts, making
huge sums of money, who have never demonstrated any ability to
perform. Yes, they are marvelous debaters. Yes, they weave con-
vincing arguments on any given scenario. But when we look be-
hind their intellectual curtain, we see a little man with no magical
powers of prediction. Isn’t it ironic that an industry that is so
obsessed with the bottom line produces so many “stars” who don’t
give results?
Consider the same scenario in a different industry, say, auto-
mobiles. Imagine a really smart car salesman (I hear those snick-
ers) who gave you brilliant explanations of all the working parts
of the engine and braking systems. He wowed you with his knowl-
edge of cars. The problem, though, is that the cars he sold didn’t
work. Would you buy another from him? Fat chance. The product
doesn’t work! End of story.
Not so in the investment industry.
Interestingly, the “product” basically doesn’t work. Very few
firms outperform passive strategies. (Even Peter Lynch, one of
our masters, who is pictured in print ads and seen on TV, might
not have been able to maintain his superior record during the
1990s.) Despite the failings of the product, which is reflected in
the rapid growth of index funds, there is tremendous resistance to
experimenting with different approaches. In fact, in 20 years of
professional investing, I’ve never heard a colleague suggest that
we should rely more on intuition. It would be heresy. One might
as well report regular Elvis sightings—they would be taken more
seriously.
Still, not all the heretics are crackpots. Proponents of intuition
are not all running around in the streets waving signs that pro-
claim, “The End is Near.” In fact, in his book The Intuitive Trader
(John Wiley & Sons 1996), Robert Koppel interviews many suc-
cessful traders on the topic of intuition and its role in their strat-
egy. Every one of the traders in the book agrees that the highestOperating on All Cylinders 24326-29 ware 243 1/19/01, 1:20 PM