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Insight is hard to coach
A different view
The logic starts with a simple point: if you see nothing different from everybody else, you can't possibly be superior. So there has to be a variant perception, such as the view that the consensus of investors overstates a company's quality, its growth rate, its earning power, or the multiple it deserves. Then you have to bet on that perception, and it has to turn out right.
Can it be taught
Whether second-level thinking can be taught is unclear. Its importance can be taught, but how to have perceptions that are at odds with the consensus and also correct is a different matter, and the answer leans more toward no than yes. In basketball, you can't coach height, and insight may work the same way: some people seem to have it.
The AI question
That raises a question for AI. Artificial general intelligence means a computer that can do everything a human can, and whether it could ever do this is unknown. Whether there are things AI won't be able to do even when it reaches full flower is one of the big mysteries.
Where did variant perception come from?
Hedge fund manager Michael Steinhardt, who ran Steinhardt Partners from 1967 to 1995, used the term variant perception for holding a view that differs from the market consensus and turns out to be correct. He described the idea in his 2001 memoir No Bull. The phrase has since been picked up by analysts and fund managers across the industry.
Why is beating the market so hard?
Economist Eugene Fama formalized the efficient market hypothesis in a 1970 paper, arguing that prices already reflect available information. If that holds, no investor can reliably find bargains by using public information. S&P Dow Jones Indices' SPIVA reports have repeatedly found that over ten- and fifteen-year periods, a large majority of actively managed US large-cap funds trail the S&P 500.
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