I’ve been blessed to spend time with many of the world’s great investors.
20 years ago, I made a point to hunt down the best. Many are now popular on Fintwit - Nick Sleep, Li Lu, Chuck Akre. Others should be - Chris Hohn, Larry Robbins, and more.
For🎄: 12 lessons I learned🧵👇
20 years ago, I made a point to hunt down the best. Many are now popular on Fintwit - Nick Sleep, Li Lu, Chuck Akre. Others should be - Chris Hohn, Larry Robbins, and more.
For🎄: 12 lessons I learned🧵👇
1. Know Thyself
Mr. Market wants to break you.
The greats’ portfolios reflect their emotional flaws.
If you:
• Lose sleep trailing by 30 points: avoid L/S
• Can’t handle 50% drawdowns: avoid active L/O
• Succumb to self-doubt under duress: go passive
Play to your strengths.
Mr. Market wants to break you.
The greats’ portfolios reflect their emotional flaws.
If you:
• Lose sleep trailing by 30 points: avoid L/S
• Can’t handle 50% drawdowns: avoid active L/O
• Succumb to self-doubt under duress: go passive
Play to your strengths.
2. Philosophize
What do you stand for?
• Chris Hohn hunts monopolies
• Chuck Akre seeks companies he never has to sell
• Julian sought to own the world’s 50 best companies and short the 50 worst
To crush it, winners narrow their focus, becoming expert at something repeatable.
What do you stand for?
• Chris Hohn hunts monopolies
• Chuck Akre seeks companies he never has to sell
• Julian sought to own the world’s 50 best companies and short the 50 worst
To crush it, winners narrow their focus, becoming expert at something repeatable.
3. I Will Survive
To win tomorrow, first survive today - given enough time, low probability risks become likely.
Buffett’s first rule? Don’t lose money.
Rule #2: see Rule 1.
Drawdowns happen, but don’t be a 6ft tall man who drowns crossing a river that’s 5ft deep…on average.
To win tomorrow, first survive today - given enough time, low probability risks become likely.
Buffett’s first rule? Don’t lose money.
Rule #2: see Rule 1.
Drawdowns happen, but don’t be a 6ft tall man who drowns crossing a river that’s 5ft deep…on average.
4. The Scientific Method
Science is the process of hypothesis falsification. Likewise investing.
For Chris H, your stated rationale is mere ante. Your aim is to find weaknesses - work to falsify and scope the downside.
To advance, poke nonstop. When downside is small, go big.
Science is the process of hypothesis falsification. Likewise investing.
For Chris H, your stated rationale is mere ante. Your aim is to find weaknesses - work to falsify and scope the downside.
To advance, poke nonstop. When downside is small, go big.
5. Play to Win
Greats put real $ behind their best ideas…but not stupidly.
Epic track records use balance sheet (L 125/S 75) or concentrate their longs: 20-30% positions are rare, but happen (or 40%…Nomad!).
Greats only go big when they know the biz as if they’re the operator
Greats put real $ behind their best ideas…but not stupidly.
Epic track records use balance sheet (L 125/S 75) or concentrate their longs: 20-30% positions are rare, but happen (or 40%…Nomad!).
Greats only go big when they know the biz as if they’re the operator
6. Shorting is Hard as Shit
Tiger Cubs (& those like them) are the best shorters in the world. Part-time shorters WILL NOT beat them…and most Cubs lose money on shorts. “Losing” can be okay: L-S spread is valuable. But this requires skilled PM’ing.
Shorting isn’t for dabblers.
Tiger Cubs (& those like them) are the best shorters in the world. Part-time shorters WILL NOT beat them…and most Cubs lose money on shorts. “Losing” can be okay: L-S spread is valuable. But this requires skilled PM’ing.
Shorting isn’t for dabblers.
7. Own, Don’t Rent
The best aren’t trying to buy a 10 P/E stock to flip at 15x - they want to find companies that do the work for them. Yes, the on-ramp price matters. But the *real* game is to find a road you can ride endlessly.
Greats are buying unit economics, moat, & runway.
The best aren’t trying to buy a 10 P/E stock to flip at 15x - they want to find companies that do the work for them. Yes, the on-ramp price matters. But the *real* game is to find a road you can ride endlessly.
Greats are buying unit economics, moat, & runway.
8. Obsessive Curiosity
Buffett says “Intensity is the Price of Excellence.” The best can’t turn it off: a burden & gift. So they repurpose it as insatiable curiosity aimed at the puzzle. Ex:
• What may change?
• What 3 things matter most?
• Who can help me get smart?
Persist!
Buffett says “Intensity is the Price of Excellence.” The best can’t turn it off: a burden & gift. So they repurpose it as insatiable curiosity aimed at the puzzle. Ex:
• What may change?
• What 3 things matter most?
• Who can help me get smart?
Persist!
9. People are the Enemy of Performance
While assets CAN be the enemy of performance, I’ve seen great investors scale AUM and perform, even as others hit speed bumps. Why? Personnel growth is highly correlated to AUM growth.
On average, great investors are diluted by team growth.
While assets CAN be the enemy of performance, I’ve seen great investors scale AUM and perform, even as others hit speed bumps. Why? Personnel growth is highly correlated to AUM growth.
On average, great investors are diluted by team growth.
10. Judgment is the Superpower
Give the 10 greatest PMs in the world the same information & you get 10 different portfolios - judgment is what matters.
You will find confirming info, disconfirming info, and everything in between. Calibrating that into YOUR portfolio is the game.
Give the 10 greatest PMs in the world the same information & you get 10 different portfolios - judgment is what matters.
You will find confirming info, disconfirming info, and everything in between. Calibrating that into YOUR portfolio is the game.
11. Incentives Matter
• Chuck ran mutual fund AUM
• Nick & Zak wanted to make less to perform more
• Buffett took 0 & 25% > 6% before switching to 0% plus his own $
Either incentives incent or they don’t: set yours up the same way you wish company management teams were paid.
• Chuck ran mutual fund AUM
• Nick & Zak wanted to make less to perform more
• Buffett took 0 & 25% > 6% before switching to 0% plus his own $
Either incentives incent or they don’t: set yours up the same way you wish company management teams were paid.
12. Asset-Liability Tension
All partnerships involve compromise - make yours conscious.
If you want to invest for the long-run, but your LPs can end your game in the short-run, you will compromise. Fine, but…
…operate with a cost structure that can survive 7 years of famine.
All partnerships involve compromise - make yours conscious.
If you want to invest for the long-run, but your LPs can end your game in the short-run, you will compromise. Fine, but…
…operate with a cost structure that can survive 7 years of famine.
13. Christmas Bonus: Find Great Mentors
• Larry had Leon
• Warren had Ben
• 🐅 Cubs had Julian
• Nick & Zak had Jeremy
Others relied on remote mentors/friends: Chris & Bill developed their philosophies thinking, experimenting & studying Warren & Charlie.
Great seeks Great.
• Larry had Leon
• Warren had Ben
• 🐅 Cubs had Julian
• Nick & Zak had Jeremy
Others relied on remote mentors/friends: Chris & Bill developed their philosophies thinking, experimenting & studying Warren & Charlie.
Great seeks Great.
Recap:
1 Know Thyself
2 Philosophize
3 I Will Survive
4 Scientific Method
5 Play to Win
6 Shorting is Hard as Shit
7 Own, Don’t Rent
8 Obsessive Curiosity
9 People are the Enemy of Performance
10 Judgment
11 Incentives Matter
12 Asset-Liability Tension
13 Find Great Mentors
🥳
1 Know Thyself
2 Philosophize
3 I Will Survive
4 Scientific Method
5 Play to Win
6 Shorting is Hard as Shit
7 Own, Don’t Rent
8 Obsessive Curiosity
9 People are the Enemy of Performance
10 Judgment
11 Incentives Matter
12 Asset-Liability Tension
13 Find Great Mentors
🥳
The dawn of the new year is a natural time for reflection - I hope you found a valuable nugget👆. Please share your own insights.
I left many others on the cutting room floor (examples below👇)
I wish you a wonderful 2022: full of growth, wonder, and joy.
Blessings + Peace
❤️
I left many others on the cutting room floor (examples below👇)
I wish you a wonderful 2022: full of growth, wonder, and joy.
Blessings + Peace
❤️
The cutting room floor:
• ❤️ it
• Start
• Allocation
• Vol is the Price
• Broad Horizons
• Run to the Roar
• Room to Breathe
• Become Invincible
• Always Be Learning
• Find & Back Winners
• Go Where They Ain’t
• Business Model > Price
• YOUR $ Where Your Mouth Is
✌️
• ❤️ it
• Start
• Allocation
• Vol is the Price
• Broad Horizons
• Run to the Roar
• Room to Breathe
• Become Invincible
• Always Be Learning
• Find & Back Winners
• Go Where They Ain’t
• Business Model > Price
• YOUR $ Where Your Mouth Is
✌️
Addendum:
The cutting room floor is more about "how" Greats invest, whereas I biased the core thread towards:
- Psychology
- Managing a fund (PM'ing)
- Running a fund business
If people like the above, I may share more observations about "how" Greats invest.
The cutting room floor is more about "how" Greats invest, whereas I biased the core thread towards:
- Psychology
- Managing a fund (PM'ing)
- Running a fund business
If people like the above, I may share more observations about "how" Greats invest.
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