Success above others is achieved by those who possess foreknowledge : The Deep Collection and Analysis of Business Intelligence

"Thus, what enables the wise sovereign and the good general to strike and conquer, and achieve things beyond the reach of ordinary men, is foreknowledge."

(The Art of War : The Use of Spies)

In The Art of War, Sun Tzu emphasizes that "foreknowledge" plays a critical role in success and is the secret to all victories. What is "foreknowledge"? According to Sun Tzu, "foreknowledge" is not the mythical ability to foresee the future, but rather the ability to "know in advance" the opponent's situation, movements, and deployments. By thoroughly understanding the opponent, one can make corresponding strategies and decisions that lead to victory in war. Sun Tzu believes that wise rulers and capable generals achieve remarkable success not because of their supernatural military skills, but because they have gained early knowledge of their opponent's information.

Sun Tzu argues that obtaining accurate intelligence is the key to victory. In war, intelligence can provide significant advantages, but the prerequisite is that decisions must be based on the correct analysis of that intelligence. Moreover, the intelligence gathered must be accurate and valuable. Sun Tzu states: "Foreknowledge cannot be obtained from ghosts and gods, nor by analogy from events, nor by calculation. It must be obtained from people who know the enemy's situation." To obtain intelligence, one cannot rely on divine intervention, cannot use analogies or assumptions, and cannot verify it through celestial observations; it must be gathered from those who are knowledgeable about the enemy.

Thus, obtaining accurate and useful intelligence, and making the correct analysis of the information gathered, enables one to make advantageous decisions and gain an edge in war.

In stock market investments, those who consistently make long-term profits and create immense wealth through stock investments do so not because they are favored by Lady Luck or possess extraordinary investment skills, but because they know how to collect useful information and make favorable investment decisions based on the correct analysis of that information.

Warren Buffett, one of the most successful investors today, is a prime example of how to gather, analyze, and then make investment decisions based on intelligence. Before making any investment, Buffett places great importance on gathering and analyzing intelligence, especially regarding company operations. He believes that the key to successful investing lies in the in-depth collection and analysis of information about a company's operations.

Gathering Intelligence from Financial Reports

Buffett's main source of intelligence comes from company annual reports and financial statements, particularly the chairman's letter, management's discussion and analysis, and the cash flow statement. These documents provide crucial information about a company's operational status and future outlook. Over the years, reading annual reports has become a habit for Buffett. He spends considerable time reading and analyzing these reports to obtain comprehensive information about a company, which serves as the foundation for his decisions.  

"I read annual reports of the company I'm looking at and I read the annual reports of the competitors - that is the main source of material." – Warren Buffett  

For instance, when Buffett invested in Coca-Cola, he carefully studied the company's annual reports and financial statements, discovering its strong brand value and stable cash flow. Through this intelligence, he understood Coca-Cola's leading position in the global market and its extensive distribution network, which led him to boldly purchase a large amount of Coca-Cola stock in the early 1990s. This decision brought him significant returns, proving his deep understanding of the company's financial health and his ability to seize market opportunities.

Gathering Intelligence from News Reports  

Buffett also places great importance on corporate news reports, which typically cover important company events such as acquisitions, mergers, product launches, and financial reports. During the 2008 financial crisis, Buffett learned from news reports that several well-known financial firms, such as Goldman Sachs, were in distress and urgently needed substantial funds to maintain operations. Through analysis and understanding, he decided to invest in these struggling companies at that time, thereby obtaining favorable terms and discounted stock prices.

In addition, Buffett monitors industry trends and competitor activities. Understanding industry trends helps him assess a company's market position and prospects. For instance, when he noticed the renewable energy trend in the energy industry, he foresaw the future growth potential of this sector, leading him to increase his investments in related companies.

Gathering Intelligence from Everyday Life  

Intelligence does not always have to come from conventional reports; your daily surroundings are full of valuable information if you pay attention. For instance, observe the stores you frequently visit and note the product brands that you or those around you commonly use, and find out which brands are the most popular and have the best reputation. Then, the companies that produce these brands are worth your investment attention.

Buffett often discovers valuable information for his company selection from everyday life. He pays special attention to the shopping habits of his wife and three daughters. One day in 1971, when his wife bought a pair of "L'eggs" pantyhose, he recognized the business opportunity. After analysis, he immediately purchased stock in Hanes, the company that produced the pantyhose. Soon after, as the company's products became popular, the stock price increased sixfold, earning him a substantial return.

Another example is Buffett's 2007 purchase of shares in PetroChina. In his daily life, he observed China's growing energy demand, which sparked his interest in PetroChina's future performance. After thoroughly analyzing the company's financial situation and market outlook, he decided to invest. This decision led to significant profits in the subsequent market.

Both of those stories show how Warren Buffett pays attention to everyday consumer behavior to identify investment opportunities

Throughout his decades-long investment career, Buffett has built a diversified portfolio, including gas stations, farms, textile mills, large retailers, banks, insurance companies, newspapers, oil companies, and cable and wireless TV companies. Whether he holds decision-making power or simply owns shares, Buffett meticulously learns about these companies' operations.

He constantly monitors companies' annual revenue, expenses, cash flow, labor relations, pricing flexibility, and capital allocation, analyzing this information to make advantageous investment decisions. This meticulous collection and analysis of intelligence on the companies he invests in is one of the key factors behind his long-term investment success. This aligns with the investment strategy that emphasizes "foreknowledge leads to extraordinary success."