Echoes: Pattern recognition works until history fails to repeat itself

Sanjay Ayer, PM at California-based WCM Investment Managers, describes how the Covid pandemic reinforced many of the firm’s core principles, allowing the team to double-down on its culture of challenging established thinking and adapting quickly to new information.

Is there a single market moment of the past 25 years that’s left a unique mark on the financial landscape and how you think about investing?

Sanjay Ayer (SA):  At the risk of falling prey to recency bias, I believe the post-Covid period has been the most transformative. It was a real structural break, exposing some of the ‘muscles’ and toolkits that investors grew conditioned to from the Global Financial Crisis all the way up to 2020.

During that era, you could apply a relatively stable set of rules and thrive. There were disruptions, of course, but broadly the playbook stayed the same and rewarded discipline and long-termism. Covid forced all of us to rewire – strategies that worked for over a decade suddenly became liabilities if you didn’t adapt.

For me, it’s made obvious the necessity of both clear ‘game selection’ and the need to have a toolkit that is flexible and adaptable. Without that, even the best investors risk sliding into irrelevance when the backdrop changes for real.

Can you recall the reality of the early days of the pandemic, both on a personal and portfolio level?

SA: The initial shock was enormous. As with all major events, everyone rushed to offer ‘hot takes’, which with hindsight, were mostly way off. Actually, we built an app called Everest that’s effectively a team journal for tracking our views – primarily to encourage learning but also to promote the right temperament, for instance reminding everyone to zoom out and stay objective rather than letting headlines or price action drive their internal narratives.

Post Covid, markets were initially whipsawed by headline interpretations. Take Shopify. As economies froze, consensus saw only disaster for online retail. But within weeks, demand surged as everyone shopped from home. You see the same with AI now – markets reach for a new consensus, and the narrative shifts faster than the real insights can keep up. With Covid, it forced us to accept real uncertainty – walking through the tunnel with a lantern and a rough compass, only seeing as far as the next few steps could take us, but not entirely sure of the exact endpoint.

As late as 2023, investors faced choices: stick to quality companies even as growth was clearly pulled forward, or was maturing, or look anew at what ‘trajectory and ‘quality’ actually meant. Our rallying cry internally was to use what we call ‘moat trajectory’ as our compass and to double-down on it. That means we back only those businesses that continue to improve, focusing on what they will become rather than what they statically are or were. So, it was not about abandoning our philosophy but rather a rigorous return to it, along with a mindset of openness toward real structural change.

How did you manage the team’s mindset, especially among junior or less experienced colleagues during this period of upheaval?

SA: I’m going to give you a nuanced answer, because it wasn’t easy all of the time. It was important for senior staff to help to maintain focus, ensuring the team didn’t chase every new headline or fall prey to short-termism; rather, we searched for truth collectively as a team.

Experience itself can be a liability; pattern recognition is helpful until history fails to repeat itself. So, we needed to maintain the right balance of ‘first principles’ thinking – ideally drawing new reasoning from the situation instead of just trusting ‘what worked last time’. And, ironically, younger team members were hesitant to question the established process, not wanting to break what has worked in the past.

I remember being focused on empowering their voices, making sure contrarian or novel conviction could be aired and considered. Only by combining the historical wisdom of veterans with the unanchored thinking of newcomers could we really adapt. It took the experience of Covid to fully appreciate the importance of this idea, but eventually our group achieved a healthier balance of debate and contribution.

Did hybrid or remote work challenge communication or creativity during the crisis?

SA: Absolutely. Our firm culture thrives on proximity and unstructured conversation – those sparks of human creativity that you get from bumping into each other. While we learned to use online tools, and found some benefits in increased intentionality around communication, the limitations were clear: idea flow, spontaneity, and nuanced debate just didn’t translate perfectly online.

So, it was a relief when we returned to the office as soon as was practical, knowing the value of cohesion and live discussion. Team trust and having an open culture, away from whispers and nitpicking, helped us all to get through those post-Covid years with our camaraderie intact.

What were the key lessons you’d draw from that period in terms of how it informed the way you look at markets today?

SA: The main lesson is that investing is a lifelong process of learning – learning about yourself, learning the right lessons, and then applying those lessons at the right time. Many analysts or PMs reflexively ‘over learn’ – meaning the current crisis sets a new rule for all future situations, sometimes compounding future mistakes. Instead, every new era needs a careful distinction – you need to think about which patterns remain sturdy, and which must evolve.

In our view there was a dislocation caused by Covid. It created a chasm between backward-looking and forward-looking definitions of quality and growth that didn’t exist in the times before it. Classic categories like luxury – where the true winners were always top-of-the-pyramid brands – shifted somewhat. Premium brands, emboldened by pricing power, actually left a price umbrella, allowing accessible luxury players to thrive.

So, the rules changed. Certain luxury brands that were ‘stuck in the middle’ – think Coach, for instance – went from being undesirable, because consumers were trading up and trading down from them, to actually being in a prime spot. Ther are many similar examples. The lesson is around having the humility to question ingrained heuristics. First principles thinking has been a useful skillset, while blindly applying historical patterns, at least in the past three years, has led you to making some mistakes.

How do you approach today’s structural unknowns – whether that’s AI, market concentration, policy surprises, or retail-driven euphoria?

SA: We strive for objectivity. Locking yourself into binary narratives – for instance, declaring AI a bubble, or not – limits your ability to see and use new information. You could argue the market structure itself is different today, with the rise of retail trading and thematic enthusiasm changing both volatility and narrative cycles, possibly as a secular shift.

The impact of AI on labour and business remains very hard to call. Meanwhile, assuming defensiveness comes from the same safe categories as before is also dangerous. The macro environment – populism, high debt, unpredictable leaders – creates more cross currents than ever.

Our answer is to embed a culture of adaptability, a playbook with built-in flexibility, and a commitment to rigorously re-underwriting your portfolio. It’s a challenge, but failing to adapt is a greater risk than failing to predict.

Does this additional complexity make you more or less optimistic about the future?

SA: We remain optimistic, but realistically so. Market participants often fall prey to locking themselves into bearish views, forgetting that markets tend to have self-correction mechanisms. I do think the forecasting horizon today is shorter than before. Having a five-to-seven-year strategic view is harder, so having the appropriate rigor toward maintenance research – and having the humility to pivot – is critical. Change is not necessarily a negative if you’re built for it.

What advice do you give to those relatively new to investing?

SA: Communication and storytelling is an underappreciated skill. Many financial analysts underestimate the importance of making a clear, persuasive argument. Writing well isn’t just about external communication – it proves your thinking is sound. Steve Jobs famously rehearsed product launches with obsessive iteration on the story; analysts should practice the same with their investment cases.

A useful concept here is the dilution effect. When you make five points, but only two are strong, your audience doesn’t average up – they average down. Less is more, so focus on the sharpest arguments, not the volume. Becoming a better storyteller and synthesiser naturally makes you a better thinker.

Otherwise, stay curious, humble, and adaptable. Keep seeking truth via facts. Learn from past patterns, but validate them rigorously before you rely on them. Most importantly, recognise that culture matters as much as analysis. The more you enable open debate and empower diverse contribution, the more robust and dynamic your decision-making will be across cycles.

Interviewed in November 2025