I recently finished reading Primal Intelligence: You Are Smarter Than You Know by Angus Fletcher, and found it one of the more thought-provoking books I have read in some time.

Fletcher is a professor of story science at Ohio State University whose research explores a distinctly human form of intelligence—our capacity for intuition, imagination, creativity and common sense, particularly when we are confronted with situations we have never encountered before.

His central idea is deceptively simple: human beings possess an extraordinary ability to function in uncertainty.

Computers and, increasingly, artificial intelligence are exceptionally good at processing enormous amounts of information, identifying patterns, and calculating probabilities. Human ingenuity becomes particularly valuable when the pattern breaks: when something happens that the available data did not anticipate, and there is no obvious precedent or formula to follow.

That idea resonated with me. But it was Fletcher’s discussion of Benjamin Graham and Warren Buffett that really caught my attention.

You Don’t Have to Predict the Future

Benjamin Graham, the father of value investing and Warren Buffett’s teacher, came to an enormously important realization about investing. Rather than trying to forecast tomorrow’s stock price, Graham focused on understanding the value of the business he was buying today.

It sounds obvious, but think about how much of the investment world revolves around prediction. Where are interest rates going? What will the next election mean? Is a recession coming? What will markets do next year? There will always be intelligent people (and now computers) offering answers to these questions.

The problem, as Fletcher points out, is that the future inevitably contains things we cannot know. Graham’s insight was not to become better at predicting those things. It was to develop an investment approach that did not depend upon predicting them.

Warren Buffett took Graham’s thinking further. He understood that businesses are not simply collections of numbers on a spreadsheet. They are human enterprises. Their long-term value depends upon management and the employees’ ability to make good decisions, innovate, respond to setbacks, and adapt when circumstances change. As a result, he focused on owning exceptional businesses capable of prospering for decades.

That is where Fletcher sees something distinctly human in Buffett’s extraordinary investment record: common sense in the face of uncertainty. As I read this section, I found myself thinking about our own 10 Principle Rules for Long-Term Wealth Creation.

One of our principles is Market Predictability: The economy cannot be consistently forecast, nor can the market be consistently timed.

Another is Avoiding Reactionary Policies. Investment strategies based on short-term economic, financial or political developments often fail precisely because circumstances arise that no one foresaw.

And then there is Business Resilience.

History shows us that successful companies continually innovate and adapt to changing environments. That capacity, not our ability to predict every challenge they will encounter, is one of the fundamental reasons we remain optimistic about owning enduring, high-quality businesses over long periods of time.

Seen through Fletcher’s lens, these principles share an important idea:

We do not need to know exactly what happens next in order to invest intelligently for what comes next. Our job is not to build portfolios around forecasts. It is to build a thoughtful financial plan around your goals, and then invest in a diversified collection of enduring businesses with the financial strength, leadership and human ingenuity to navigate a future none of us can fully anticipate.

Volatility Is Not the Same as Change

There was another aspect of Fletcher’s discussion of Buffett that I particularly liked.

Markets are volatile. They always have been.

Yet when markets decline sharply, our very human instinct is to interpret the decline as evidence that something fundamental has changed. Fear makes the present moment feel exceptional.

Buffett has spent a lifetime resisting that impulse.

Fletcher describes this as an exercise in common sense: recognizing the difference between an environment that has genuinely changed and the normal volatility inherent in that environment.

That distinction matters enormously to investors.

We have lived through wars, recessions, inflation, financial crises, political upheaval, pandemics, technological
disruption and countless events that were either unforeseen or unfolded very differently from what experts predicted.

Through it all, people continued to solve problems.

Businesses adapted. Scientists discovered. Entrepreneurs created. Technologies improved. Productivity advanced. New industries emerged, and old ones reinvented themselves.

That human capacity for adaptation is easy to underestimate when the headlines are frightening. Yet it is one of the most persistent forces in economic history.

Investing in Human Ingenuity

This may be what I appreciated most about Primal Intelligence. It gave me another way of thinking about something I have believed throughout my career: long-term investing is, at its heart, an act of optimism about human ingenuity.

When we own great businesses, we are not betting that the world will remain unchanged.

We are investing in the ability of people and businesses to respond when it doesn’t.

That is why our portfolios are driven by your long-term goals rather than short-term forecasts. It is why we favour enduring businesses over speculation. It is why diversification matters. And it is why we remain invested through periods of uncertainty rather than continually trying to anticipate the market’s next move.

Our 10 Principle Rules for Long-Term Wealth Creation were not written with Angus Fletcher’s Primal Intelligence in mind. But reading his discussion of Graham and Buffett, I was struck by how closely the ideas align.

We cannot know what the next ten or twenty years will bring. History tells us quite clearly that some of the most consequential events will be things almost no one predicted.

Fortunately, successful investing has never required us to know the future.

It requires a sound plan, patience, discipline, enduring businesses—and perhaps most importantly, continued faith in the remarkable ability of human beings to imagine, innovate and adapt when the future surprises us.

That, Fletcher would argue, is our primal intelligence.

And I think it is one of the most compelling reasons to remain optimistic about the future.