Valve’s new employee handbook is a fantastic read. Most companies should aspire to have a document like this which is specific to their own context.

Source: cdn.cloudflare.steamstatic.com/apps/valve/Val…

Some ideas that resonated include…
1/ Give people the freedom to innovate: hierarchy helps predictability & control, but when you seek to “recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value.”
2/ The customer is first: “Every company will tell you that “the customer is boss,” but here that statement has weight. There’s no red tape stopping you from figuring out for yourself what our customers want, and then giving it to them.”
3/ Let your talent decide what to work on: “We believe in each other to make these decisions, and this faith has proven to be well-founded over and over again... But rather than simply trusting each other to just be smart, we also constantly test our own decisions.”
4/ Take action in a way which can be measured and analyzed to test accepted wisdom: “Accepted truisms about sales, marketing, regionality, seasonality, the Internet, purchasing behavior, game design, economics, and recruiting, etc., have proven wrong surprisingly often.”
5/ Hiring is the most important thing: “…hiring is the single most important thing you will ever do at Valve… hiring well is the most important thing in the universe. Nothing else comes close. It’s more important than breathing.”
6/ Failure as learning: “Nobody has ever been fired at Valve for making a mistake... Providing the freedom to fail is an important trait of the company - we couldn’t expect so much of individuals if we also penalized people for errors...”

Ps there are still bad ways to fail
7/ Everyone needs to be customer-centric: “Everyone is responsible for the customer relationship... We are all stewards of our long-term relationship with our customers… because we always have their best interests at heart, there’s faith that we’re going to make things better…”
8/ As part of the review process, people are ranked based on:

- Skill level / technical ability
- Productivity / output
- Group contribution
- Product contribution
9/ The ‘T-shaped’ person: “We value ‘T-shaped’ people. That is, people who are both generalists (highly skilled at a broad set of valuable things - the top of the T) and also experts (among the best in their field within a narrow discipline - the vertical leg of the T.”
10/ Three questions to ask oneself in the hiring process:

- Would I want this person to be my boss?
- Would I learn a significant amount from him or her?
- What if this person went to work for our competition?

“Across the board, we value highly collaborative people.”

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More from @AReviewOrTwo1

2 Sep
Douglas H. Bellemore’s six characteristics for success as aggressive investors…

Source: The Strategic Investor, 1963
Patience

“The aggressive investor should not expect quick results… Success depends, in large measure, on the ability to select undervalued situations not presently recognised by the majority of investors and to wait for expected developments to provide capital gains…”
Courage

“The investor must have solid convictions and the courage and confidence emanating from them - that is, courage, at times, to ignore those who disagree…Decision-making ability…is vital to success in investing…[this] assumes judgments are right more often than wrong.”
Read 9 tweets
9 Apr
The foundations of the philosophy of Scout Capital were the investment values of:

1. Quality
2. Misunderstanding
3. Self-knowledge
Key aspects of quality:

- Unit economics
- Returns on capital
- Appropriate leverage
- FCF conversion
- Market share
- Margin resiliency
- Moat
- L-T growth potential
- Management

Why a quality focus? Reduces the frequency of blow ups & these types of biz often have tailwinds.
Misunderstanding:

“However appealing the business, if it’s widely recognized as such by others, that will be reflected in the share price. That’s why misunderstanding has to play a role.”
Read 6 tweets
5 Mar
These are fantastic threads / perspectives for analysts to read - thank you.
Some thoughts for analysts to reflect on
Read 5 tweets
28 Jul 20
It is important to learn the right lessons from both mistakes [commission & ommission] & things that go well. I often find people focus their learning on mistakes & less on the latter or learn the wrong lessons or see patterns that don’t exist

Some thoughts on trying to learn...
1/ Missing out on something with a high optical valuation... the lesson is usually not ‘be willing to pay any price’ or ‘quality at any cost’ it is ‘why were your numbers / expectations too low’, ‘what did you miss about the business’
2/ When you lose money because something bad happens to the fundamentals, try to break things down:
- Was there a mistake of analysis before buying?
- Did you miss a change after you bought?
- Was it a portfolio mgmt error in not cutting & putting capital elsewhere?
- Bad luck?
Read 10 tweets
18 Jun 20
15 things that I think about when trying not to sell a good L-T idea:

1. Be prepared to give up P&L in the S-T, L-T winners are often volatile

2. Monitor consistency between narrative & fundamentals. Imagine the destination & the key drivers. Use patterns to help navigate
3. Understand why something is persistently mispriced (confidence in a mispricing means you are less likely to sell)

4. Have a well balanced portfolio of great cos, never let a position become so big it owns you / can take you out of the game
5. Form independent views and rigorously test your thinking by yourself, a lot of people will have opinions about the future without knowing much about a situation, you need a strong filter... sometimes not listening is a good thing...
Read 11 tweets
20 May 20
Uniqueness, hard to replicate / imitate is such an important concept...
Helmer: There must be some aspect of the Power conditions which prevents existing & potential competitors, both direct & functional, from engaging in the sort of value-destroying arbitrage Intel experienced with its memory business. This is the duration aspect of Power [7 Powers]
Kay: Successful strategy is rarely copycat strategy. It is based on doing well what rivals cannot do or cannot do readily, not what they can do or are already doing. [Foundations of Corporate Success]
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