Going Against Instinct: In Investing and Entrepreneurship Alike

#AgainstInstinct Entrepreneurship and investing have something in common: you cannot let instinct govern you. Start with instinct: a built-in response. Instinct is in + stinct = instinct, an innate, internal nature. It is a reflexive response we make without realizing it. It is our own response, yet, strictly speaking, it is not. An invisible hand pulls an invisible string, leading and manipulating us into responding. Before instinct, we are more like little marionettes—mere puppets. These are controlling, driving forces of which we are often unaware. In that sense, each of us is preconfigured, with programs installed in advance. ----- #GoingAgainstInstinctMakesYouMoreCompetitive In the boxing ring, when an opponent punches toward your face, most people instinctively tilt their head away to dodge it. But your head moves slowly and through a limited range, making the punch harder to evade. What you need is a counterinstinctive decision: instead of moving your head away, immediately reach out to catch the opponent’s hand. Your hands are much faster and more agile than your head. “If you want to become a good boxer, you must learn from the very beginning not to blink.” When an opponent’s fist comes at us, we blink or even close our eyes. That is most people’s instinctive reaction to protect their eyes. But it is an ostrich policy: when something is too frightening, we simply choose not to look at it. Unless you overcome that response, instinct becomes a liability. ---- In stock investing, those who truly make money over the long term understand the weaknesses of human nature. One important weakness is instinct. Most people rush to buy when they see everyone else buying, and rush to flee when they see everyone else fleeing. Following the herd is an ability formed over humanity’s long evolution. When you see others running, you had better run too, rather than wait for the tiger behind them to arrive. This instinct kept us out of the tiger’s jaws. Those who lacked the instinct or habit did not pass on their genes: they were left in the tiger’s mouth. When we say we should develop some ability to resist instinct, however, we mean resisting instincts so universal that virtually everyone has them. When investing, we should all ask ourselves: if our knowledge and information are the same as everyone else’s, and our response patterns are the same, why expect our results to differ? In the stock market, the 5% are always making money from the 95%. So when Buffett says to be fearful when others are greedy and greedy when others are fearful, both greed and fear can be considered instincts. The key is to be fearful when others—when most people—are greedy, and greedy when most people are fearful. Going against instinct is therefore a question of becoming more competitive. If, when faced with an opportunity, all we rely on is an innate internal response—a default program shared by everyone—we have already consigned ourselves to the undifferentiated majority, to the crowd. The crowd is a vast number of people who surrender entirely to instinct and conventional thinking, while imagining they are expressing individuality. In reality, they are profoundly unfree. If we place ourselves in that crowd, we should not expect to be winners. We often speak of the retail-investor mindset: a way of thinking controlled almost entirely by instinct, and almost completely homogeneous. ----- Robin: “Going against instinct is necessary not just to profit from investing, but also in entrepreneurship. Success in entrepreneurship fundamentally requires being different and differentiated, rather than copying whatever others do. Successful entrepreneurs may be even rarer than successful investors, so you need an even greater ability to go against instinct. Do not follow the crowd or react reflexively. Look deeper into the nature of things and seek enduring truths. You have to think more deeply than others.”