Returning to science, the field of physics continues to be a fascinating field to observe for the curious lay person. More than eighty years after Neils Bohr and Albert Einstein tried to reconcile the mathematical contradictions between Quantum Mechanics and General Relativity, the effort to do so continues. Both theories are considered valid. Practical applications for both theories have changed the modern world in ways too extensive to describe here. But the mathematics of the two theories still cannot be reconciled.
In investing there are also competing thought processes and principles. Some portfolio managers employ strict quantitative strategies. Others rely more heavily on qualitative approaches. Anytime we make a presentation to a consulting team they want to know about the nature of our thought processes and principles. The majority of consultants are particularly interested in data. They want to know what data we consider relevant, how we gather it, how we organize it, and how we make decisions based upon it. Because data is so widely available there are many professionals in the investment industry who lean towards the quantitative data-centered approach. Some view the idea of delving into qualitative thought processes, like assessing the durability of competitive advantages, as too subjective.
Mathematics and extensive data aggregation are certainly critically important tools for us and for professional investors. However, we recognize that tool of “imagination” is also crucial. Einstein once said, “Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.” Like the good physicist, a seasoned professional investor should answer “yes” when asked if he or she relies on quantitative or qualitative approaches.
