Bangkok: As AI becomes more sophisticated, "emotional intelligence" may become even more important.
As artificial intelligence (AI) rapidly develops its thinking, analytical, and processing capabilities, skills that once relied heavily on human expertise-such as mathematics, science, and programming-are increasingly being assisted by AI. In the world of investing, if AI becomes capable of analyzing and selecting stocks more effectively, will investors still need a high IQ? And what will be the key skills for success?
According to Thai News Agency, Dr. Niwes Hemvachiravarakorn discussed the topic of "IQ vs. EQ in Investing" on the program "Knowing How to Use and Understand Money," arguing that, from the past to the present, investing, especially Value Investing (VI), still requires a high level of analytical thinking skills. IQ is important for "stock selection" because investing in stocks is not just about choosing an attractive company; it requires studying and understanding their business, marketing, and finances, as well as being able to analyze various data logically.
Therefore, in addition to IQ, investors also need specialized knowledge. Even if someone has high abilities in another field, such as science or astronomy, it doesn't mean they can immediately use those abilities for investing. They need the combined knowledge and understanding of investing. Dr. Niwes believes that high-level value investors (VIs) must possess strong analytical and logical thinking skills, and an understanding of cause and effect relationships. Looking back at many world-class VI investors, we find their educational backgrounds to be quite remarkable.
Dr. Niwes cited 10 examples of world-class investors: Warren Buffett, Benjamin Graham, Charlie Munger, Peter Lynch, Sir John Templeton, Seth Klarman, Howard Marks, Walter Schloss, Joel Greenblatt, and Philip Fisher. Many of them have studied at top universities and have backgrounds in fields that require analytical thinking, such as economics, business administration, mathematics, and law.
For example, Warren Buffett studied at Wharton before transferring to the University of Nebraska and then pursuing a master's degree at Columbia, where Benjamin Graham taught. Charlie Munger studied mathematics before specializing in meteorology and law, while Peter Lynch earned a degree in business administration and went on to obtain an MBA from Wharton. However, education isn't the only deciding factor, as Walter Schloss is a prime example of an investor who didn't attend university but instead took Benjamin Graham's course at Columbia and later worked directly with Graham.
These overall observations suggest that many world-class investors possess a foundation reflecting high levels of learning and analytical thinking abilities. However, IQ is only one aspect of investing, because even if the stocks are chosen correctly, what happens after the purchase can be a completely different matter. Choosing stocks can be done with IQ, but whether you can actually "hold those stocks" requires EQ.
Once shares are purchased, investors face uncertainty at all times. If the market experiences a crisis and stock prices plummet, can you tolerate seeing your portfolio lose money? How would you decide if others are selling off? Or conversely, when stock prices rise, would you rush to sell and take profits out of fear of a subsequent drop? This is where EQ, or the ability to control emotions, comes into play.
Dr. Niwes gave an example of the concept that when others are fearful, investors may need to be able to see opportunities and be "greedy" at the right time. This is not easy, as it requires withstanding pressure and not letting market emotions dominate decision-making. One of the key qualities, therefore, is "patience." Warren Buffett once compared investing to baseball. In a game, players are forced to make decisions about incoming pitches. Investing is different. Investors don't need to buy stocks every time an opportunity arises; they can wait months or years until they find a truly suitable opportunity before making an investment decision.
The ability to 'do nothing' may therefore be a skill just as important as finding good stocks. Admitting "I don't know" is also a skill for investors. Another important quality is acknowledging that there are things we don't know or understand. If a business is too complex for investors to analyze, they must be able to reject the opportunity and stand idly by, instead of investing simply because they see others making profits.
Dr. Niwes cited Warren Buffett as an example of accepting the limits of one's own knowledge, especially in the technology business, which Buffett once considered beyond his understanding. Furthermore, investment discipline is a crucial component of EQ, including establishing your own investment strategy, diversifying risk, and not allowing fleeting emotions to alter your plans.
As AI becomes more sophisticated, emotional intelligence (EQ) may become even more important. In the past, investors with high IQs and strong analytical skills might have had an advantage in finding and evaluating stocks. However, that advantage is changing as AI can increasingly assist humans in thinking, analyzing data, and identifying investment opportunities.
Dr. Niwes believes that in the future, the importance of IQ in investing may decrease as AI can replace some human tasks. Meanwhile, EQ may become even more important because AI lacks human emotions, and the crucial task for investors doesn't end with simply finding good stocks. But it also includes patiently waiting for opportunities, daring to go against the trend, accepting what you don't know, controlling fear and greed, and maintaining investment discipline on days when the market doesn't perform as expected.
Ultimately, value investing (VI) still requires both IQ and EQ. However, in a world where AI can increasingly assist humans in "thinking," what might differentiate investors in the future won't simply be "who can analyze better." But perhaps the question is, "After analysis, who can control themselves better?"