Buffett said the most important thing in investing is not IQ
guess what he said matters most
not information
not connections
and not experience either
his exact words were
investing is not a game where a 160 IQ beats a 130 IQ
once you have basic intelligence
what you really need
is the temperament to control your impulses
I think the word temperament is translated too lightly
after mulling it over for years
I think a more accurate term is quality of consciousness
hey there
hello everyone
this is Leo Wang
today I want to talk about a question that has bothered me for years
why can two investors holding the same information
end up with long term returns a hundred times apart
I have done angel investing for more than a decade
and backed over three hundred early stage projects
looking back at all of them
the finding that stuck in my throat most was this
my best and my worst decisions
had almost no difference in information quality
industry analysis done
due diligence done
long talks with the founders done
competitive landscape fully mapped out
and yet the outcomes were worlds apart
one investment is still vivid in my memory
it was a robotics project
the founder was technically excellent
the team was solid
and the timing was ripe
but that day I was in terrible shape
the day before I had gotten bad news on another project
and my mood was low
through the whole meeting a voice in my head kept telling me
do not take the risk
your luck has been bad lately
I hesitated for two weeks
and by the time I made up my mind and reached out
the allocation was long gone
later on
that project became a unicorn
and the other way around
one investment that lost me a fortune
was made exactly when I was most excited
I had just hit a few good deals in a row
and figured I was on a hot streak
everything looked like an opportunity
one project had obvious holes in its business model
but my winner mindset automatically filtered out every warning sign
the two deals had comparable information quality
but my state of consciousness was completely different
that made me start to suspect
maybe the ultimate variable in investing is not information at all
there is an old Wall Street saying that information is money
but look at today
you open your phone
earnings reports meeting minutes research notes satellite images of any listed company on earth
are seconds away
AI can digest in minutes what takes a human analyst a week to read
the cost of getting information is approaching zero
yet the gap in investment returns has not narrowed
it keeps widening
what does that tell us
information is not the key variable
or at least not the only key variable
so what actually separates people
over more than a decade I boiled it down to one formula
investing ability equals information quality times quality of consciousness
now that information quality is converging
the real multiplier comes from quality of consciousness
so what is quality of consciousness
let me hold off on the definition
and describe a scene you have probably lived through
you buy a stock
and it starts falling right after you buy
down five percent
you tell yourself it is fine
just normal volatility
down fifteen percent
your heart starts racing
you still insist out loud that you are in it for the long term
down thirty percent
now you check the account the moment you wake and before you sleep
you say you are not panicking
but every cell in your body is screaming
run
until one day you see a piece of bad news
or hear that a friend sold everything
and you finally break
you panic sell
and the moment you are out what you feel is not pain
it is relief you finally do not have to stare at that blinking number
and usually
that exit price lands right near the bottom
this story played out in the 2008 financial crisis
it played out in the covid crash of March 2020
and it played out again in 2022
March 2020 left the deepest impression on me
US stocks hit four circuit breakers
the whole world panicked
several veteran investors around me
normally talk about long termism and value investing
be greedy when others are fearful all of it beautifully argued
but when the crash actually came they still could not help selling out
when the market rebounded a month later and they bought back in
they were already down twenty or thirty percent
knowledge did not help
reasoning did not help
what was actually working in that moment
was something else entirely
so let me ask you
what were you missing at the moment you sold
was it information
you knew the fundamentals of the company had not changed
you knew that after every historic crash the market eventually recovers
you knew everything
you just could not do it
what you lacked was not information
it was the ability to keep your mind from collapsing under enormous uncertainty
this is the thing Buffett was talking about
and it is what I call quality of consciousness
this is not mysticism
neuroscience has a concrete explanation
under enormous financial stress
your amygdala reads the signal as a threat to survival
it bypasses the prefrontal cortex that handles rational analysis and long term planning
and fires fight or flight chemistry straight through your whole body
cortisol spikes
your heart races
and cognitive bandwidth narrows sharply
in that state
your brain literally loses the ability to judge complex probabilities
reason goes offline
instinct takes over
this is not weak willpower
it is your hardware running on factory settings from a million years ago
those settings were optimized for dodging predators on the savanna
not for making optimal decisions in a market crash
in other words
at the moment of that panic sell
the one making the decision is not you
it is the caveman inside you from a million years ago
he does not understand stocks
he does not understand valuation
he only knows a danger signal has arrived
so run
the people who stay calm through a crash
are not born with stronger willpower
their nervous systems have been trained
research teams at Harvard and Massachusetts General Hospital found
that long term meditators have a noticeably thicker prefrontal cortex
and a stronger functional connection between the prefrontal cortex and the amygdala
which means when stress hits
the rational system does not get fully hijacked
the fear is still there
but it no longer holds dictatorial power
you can have the fear present
and still bring your analytical mind online
so how do you train that
the answer might surprise you
Bridgewater founder Ray Dalio
ran the largest hedge fund in the world
he has practiced transcendental meditation since 1968
nearly sixty years without a break
he says meditation is the most important thing he has ever done
nothing else comes close
in Principles he wrote
that meditation gave him an ability
to observe his own emotions and thoughts from a higher vantage point
instead of drowning in them
think about what that means
a man who once managed hundreds of billions of dollars
faced stress and uncertainty thousands of times greater than an ordinary person
and he says the most important tool for handling all of it
was not a better trading model
not faster data
it was meditation
Steve Jobs practiced Soto Zen when he was young
his teacher Kobun Chino was a Zen master who came from Japan to America
Jobs even seriously considered becoming a monk
but Kobun urged him to stay in the ordinary world
and practice through creating
the product philosophy Jobs built later
that drive to strip away everything until only the essence remains
is structurally the same as the heart of Zen
the intuition that cut through noise straight to the essence in his product decisions
was not a shot in the dark
it was trained
Munger approach is even more interesting
he called his investing philosophy sit on your ass investing
you literally sit there and wait
doing nothing most of the time
until a truly outstanding opportunity appears
does that not sound like the Zen practice of sitting and watching the mind
doing nothing most of the time
for someone managing hundreds of billions of dollars
what that takes is not laziness
it is enormous composure
can you hold still while everyone else is moving
can you sit through what looks like doing nothing
and carry the anxiety of possibly missing out
Buddhism has a precise term for this capacity samadhi
meaning concentration
it is not a blank mind
it is not the absence of thought
it is a mind that is not carried off by circumstances
the wind blows
the flag moves
but your attention does not chase the flag
so look at this
the temperament Buffett described
the meditation Dalio practiced
the Zen Jobs studied
the sit and wait method Munger used
four men walked four completely different paths
and they all point to the same thing
training the mind to stay stable inside uncertainty
my own experience says exactly the same
in my first years of angel investing
reviewing my deals revealed one clear pattern
my best decisions came when I was clearest and most at ease
not when I had the most information
but when my mind was most settled
in that state I could listen to a founder tell the entire story
without rushing to judge
without rushing to look professional
just listening quietly
letting the information organize itself in my head
the investments I made in that state
hit at a far higher rate than average
and my worst decisions almost all share one trait
either they were driven by anxiety
feeling like everyone was piling into this sector
and if I did not move now it would be too late
or they were driven by excitement
some project numbers looked too beautiful
dopamine took over
and I wanted to sign on the spot
anxiety and excitement look like opposites
but they share one thing
both take the prefrontal cortex offline
so I started spending twenty minutes a day on mindfulness practice
not to become a buddha
just to train one ability
to see an emotion as it rises and label it
instead of being led around by it
about six months later I noticed a change
I had not gotten smarter
and I still could not predict the market
but the space around my decisions had gotten bigger
there was now a pause between stimulus and response
let me give you a concrete example
one time a stock I held dropped hard after hours
earnings had missed expectations
my first reaction was the same as always
heart racing
palms sweating
a picture flashing through my head sell it at the open tomorrow
but unlike before
I could see the reaction happening
I said to myself
hold on a second
that is the amygdala talking
not the prefrontal cortex
so I turned off my phone
took a shower
and looked at the numbers again the next morning
one figure in the report had indeed come in below expectations
but the growth trend of the core business had not changed
I did not sell
two months later that stock hit a new high
that pause may last only a fraction of a second
but inside that fraction of a second
you get to ask yourself one more question
the decision I am making right now
is it based on analysis or based on emotion
there is a line I love
between stimulus and response there is a space
and in that space lies our freedom to choose our response
it has been widely quoted for many years
and the original source is untraceable
but that space is not there from birth
it is something you train
what meditation actually does
is stretch that space wider bit by bit
now let me raise a question that may be even more fundamental
why do I say quality of consciousness matters more today
than in any other period in history
because AI is wiping out the information gap
in the past
much of a top investor moat came from information asymmetry
you knew more people
you could get data others could not
you had faster information channels
but today
a college student with AI tools can spend one hour
and generate a research report
no worse in quality than a professional analyst
the information barrier is collapsing
when everyone can get roughly the same information
the axis of competition shifts
from acquiring information to processing it
and the bottleneck in processing is not compute
that is AI strong suit
the bottleneck is this
when the information tells you something you do not want to hear
can you actually take it in
when the data says sell the stock you love most
can you avoid being hijacked by sunk cost and the endowment effect
when the market gives you a counterintuitive signal
can you keep confirmation bias from filtering it out
AI cannot help you with any of that
because in the end you are the one pressing the buy and sell button
you are the one deciding the position size
you are the one lying awake at three in the morning wondering whether to cut losses
AI can hand you perfect analysis
but it cannot bear the uncertainty for you
and investing is fundamentally the game of deciding under uncertainty
your quality of consciousness
determines how much uncertainty you can carry without breaking
and that is the ultimate moat AI cannot replace
I am not saying everyone should sit in meditation or study Zen
meditation is just one way to train quality of consciousness
some people get a similar effect from long distance running
some from journaling and reviewing
some from regular sessions with a therapist
the point is not the specific method
the point is whether you are deliberately training
that ability to create space between stimulus and response
there is one thing I especially want to say here
a lot of people listening to this are probably thinking
I understand all of it
I just cannot do it
pay attention here
not being able to do it is not the problem
knowing that you cannot is where change begins
the real danger is never realizing you cannot
you think you are making a rational decision
when the amygdala already made it for you
noticing that you are being hijacked by emotion
is itself the first step of quality of consciousness
you do not need to become perfectly still overnight
you just need to pause three extra seconds before your next investment decision
and ask yourself one question
the thing pushing me to press this button right now
what exactly is it
if you spend hours every day studying charts earnings and macro data
but never spend even ten minutes noticing your own inner reaction patterns
then all your effort in investing
is like someone frantically upgrading his software
while never checking whether the hardware is overheating
sooner or later
the hardware crashes at the most critical moment
there is a fascinating paradox here
the harder you try to suppress emotion with willpower
the more violently that emotion rebounds
you tell yourself do not panic
and you end up panicking more and more
because suppression is itself a fight
and fighting burns cognitive resources
which makes you break down faster
what actually works is not suppression
it is awareness
you do not need to make the fear disappear
you only need to see that the fear is there
and then choose not to follow it
those two things sound almost the same
but in practice they are completely different
one is wrestling with your emotion
the other is standing beside it watching it come and go
let me close with a recent observation
I have found that the people who survive longest in the market
are not necessarily the smartest
but they always have the best relationship with their own emotions
it is not that they feel no fear
it is that when fear arrives
fear is not the boss
it is only a signal
they can receive the information the signal carries
without being hijacked by the signal
Buffett said investing does not run on IQ
Dalio said meditation is the most important reason for his success
Jobs found in Zen the ability to cut through noise straight to the essence
Munger spent a lifetime proving that composure is the greatest weapon
four men walked four completely different paths
and they all arrived at the same place
the ultimate moat in investing
was never what you know
it is whether when everything you know is drowned in fear
you can still see clearly
at the end of the day
every investment methodology in the world
value investing trend investing quantitative investing
all of them assume the executor is rational
but if the executor quality of consciousness is not up to it
even the best methodology warps at the critical moment
methodology is the map
quality of consciousness is how steady the hand holding the map is
if the hand shakes
no map is accurate enough to save you
and whether those hands are steady
is not talent
it is training
so in your own investing experience
how big a role has quality of consciousness played
have you ever made a decision you deeply regret because your emotions took over
if you have
how did you deal with it afterward
share your real thoughts in the comments
this is Leo Wang
see you next time