VALUE: After Hours (S07 E35): Why Character Beats IQ in Investing Every Time

During their recent episode, Taylor and Carlisle were joined by Justin Carbonneau, Jack Forehand, and Matt Zeigler. They discussed: Why Character Beats IQ in Investing Every Time.

Justin: All right. So, the last one was by Pim van Vliet. He’s a Robeco guy over in Europe, a big quant guy. And his thing was character is more important than IQ. And so, he said when it comes to long term investment success, character is more important than IQ. Character meaning sticking to your philosophy, not giving up at the wrong moment. There’s a big gap between the investor and investment returns that’s purely due to adverse market and adverse style of timing of investors.

It reminds me of that famous Buffett quote that, “It’s not the guy with 160 IQ that outperforms the guy with 130 IQ. It comes down to temperament and your ability to stay disciplined and stay unemotional.” I think that’s an important characteristic of good investors and I think that’s something that a lot of investors can try to learn from.

Tobias: Yeah, I couldn’t agree more. I think he means temperament rather than character there. I think that’s what he’s referring to, even if it’s character.

Justin: Yeah. That’s true. Mm-hmm. But I think the three of mine– I was thinking about it and I think they’re all in this behavioral finance discipline, decision making, good investor behavior. That’s so much of what can lead to good outcomes, I think. I think a lot of that gets missed.

[crosstalk]

Jack: It is. I put all the hundred lessons into ChatGPT at one point just to say. It was basically like that. They’re all rooted in behavioral psychology. Not all of them, but the vast majority of them are in some way or another.

Tobias: Jack, you want to hit us with your last one?

Jack: Yeah, I went in the trading world this time. So, we had Jack Schwager on the podcast and we did a lightning round at the end where we asked him the greatest lesson from each of the various traders, Steve Cohen, whoever he’s talked to. His lesson from Paul Tudor Jones was view every position as if you put it on today. I think that’s really good– If you carry that to a broader level, because obviously I’m not trading, I think you can start at individual stocks and you can work your way all the way up to an asset allocation with that, which is we always just because we have it, we think it’s the thing we should have. But if we take a step back and say, “If I was doing it over today, would I still have these same things? Would I still have the same asset allocation? These same stocks, whatever it is, these same ETFs.” I think that’s a great way to look at things.

Obviously, in the real world, there’s taxes and transaction costs. I can’t just change my portfolio to whatever it would be. But I thought that was an interesting lesson that carries down from the lessons of a great trader to something anyone can apply.

Jake: Obviously hasn’t put any money in private equity.

Jack: That is true. Yeah.

Tobias: It’s a little bit like–

Jack: The bubble no one can sell that right?

Jake: Hard to get out of.

Jack: That was one of my better titles we used on YouTube– [crosstalk]

Tobias: The bubble that no one could sell?

Jack: The bubble no one could sell. We used it for Dan Rasmussen, because he was talking about private equity. That was one of our better performing episodes ever, because that title resonated with people.

Jake: That was a great episode. I really enjoyed that one.

Jack: I said I wasn’t going to use the talk about titles and thumbnails, Matt, and I got to what–

Matt: That’s okay. That was an awesome bars on that title. Absolute bars, Jack.

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