From the Sequoia Mutual Fund Shareholders meeting Q&A:

Q. How do you think about securing an informational advantage with a company as large and well- known as Google?

A. Informational advantage can mean a lot of different things. Fifteen or 20 years ago, we were relatively unique in our commitment to “scuttlebutt” research. And I do think there were cases where we just knew more about a business than other people did. There were other people that did the kind of work we did – that sort of “feet on the street” research – but not anywhere near as many as there are now. And as you guys know, there are lots of independent services that have grown up over the last decade that will allow you to outsource that function. With something like Google, and I would say most of the companies in the portfolio, we don’t necessarily know any more than the next guy.

But that doesn’t mean there’s not an advantage in doing your own work and doing incredibly intensive primary research. There is an advantage to gathering your own information and making decisions based on facts that you have gathered yourself. Investing is more of an emotional than intellectual exercise, and it becomes very hard to stay on an even keel and to make rational, unbiased judgements if you’re making them based on someone else’s information.

So if my buddy at hedge fund XYZ tells me that such and such company is a great investment, or if you go to any of these conferences where someone really smart comes up and makes a bold case on whatever company, it may seem compelling at first. So you think, “Maybe I’ll go out and buy it.” Then the stock goes down 40% and you get nervous. How much time did that really smart guy who made the original pitch spend thinking about this issue that is pressuring the stock? You don’t know, because you didn’t do your own work.

When you’re lost in the fog, you tend to make bad decisions because you’re scared. That’s why to me, you don’t necessarily have to know more than the next guy to have an informational advantage. But you are most certainly at an informational disadvantage if you haven’t made the effort to gather enough information to make an informed decision.

Source: Non-Shareholder minutes from call