Learning For Analysts and Future Portfolio Managers With Alix Pasquet III

Learning for Analysts and Future
Portfolio Managers with Alix Pasquet III

Note: Transcript generated using Otter.AI. so there is a possiblity of
5% errors.
SUMMARY KEYWORDS
analysts, learn, book, business, investors, problem, great, investing,
mentor, investment, process, study, point, mistakes, called, network,
structure, read, create, important
SPEAKERS
Frederik Gieschen, Alix Pasquet III
Frederik Gieschen 00:01

All right, Alex, thanks for joining me, I'm super excited about this. Alex
is the Portfolio Manager at prime mkhaya. And we're going to talk
about something that I think is really under discussed. And Alex is sort
of the go to expert in it, which is learning and learning specifically in
investment context. So for analysts and analysts who want to make
the difficult transition to being portfolio managers, so let's jump right
into it.
Alix Pasquet III 00:31
Thanks, brother. Thanks for having me. I learned a lot from you and
your work. And I'm excited to share this. So you know, just to give a
bit of background, about who we are what we do, we're I run
Primakov Capital Management, it's a hedge fund. Our we're known as
a behavioral hedge fund. And what that basically means is we seek to
exploit the on economic behavior of market participants, specifically
group behavior. It doesn't mean that we ignore fundamental research,
but we always do the fundamental research through the lens of
behaviorism. And you're going to have an unusual background. My
background is in games, mostly backgammon and poker, then I was
hired by a family office on Santo Domingo family. It's a family that
owns a beer businesses all over the world. And my first rule for them
was to find smart money managers and invest in their funds. And I
quickly moved over to equities. And, actually, and found my calling,
really, because that's the part that I enjoyed the most. I mean, don't
get me wrong investing. And money managers, I learned a lot. But my
learning curve stopped. And it was really when I did equities that it
deepened what I'd learned from investing in managers. Putting you is
the goal of this presentation is to show our rookie analyst and future
portfolio managers how to use learning to improve their judgment,
pattern recognition and idea generation. One of the problems we're
gonna have to deal with is that analysts have different personalities,
risk tolerances, and also different learning styles. You know, some
need to be given the insights and they can come up with the
procedures, others need to be given the procedures and then derive
the insights from that. Others are really naturally commercial, and
they just want the procedures and, you know, let's go make some
money. But learning is an important part about being prepared. And
one thing to remember, one of the sad parts about about our
business is analysts and PMS. As they get older, they actually stop
learning. Checking, you can see my screen
yep, I can, I can see the screen. And so just to be clear, right, like when
when you're talking about learning for analysts, right, this is
irrespective of whether you're specifically at a hedge fund or mutual
fund like this is for anybody who's I guess, doing investing as a as a
living right? Or how do
you whether you're a fund the funds analyst, we or, you know, a
manager analyst, I have a background in debt. So I have a particular
liking for analyst and analyze managers and then moved over to
equities, their judgment tends to be excellent, in my opinion. It could
be an analyst for a for a business, for family office for mutual fund for
hedge fund, really analysis. In fact, I derive a lot of our analytical
techniques from analysts from intelligence, for example, and I'll cover
that good.
Yeah. All right. Let's, let's kick it off. Let's start.
So first, you know, I have to say thank you to my learning partners, of
which, Frederick, you are one. In I've learned so much from my
mentors and friends, and they continue to teach me and give me
feedback. You know, and really, I am nothing without them. You know,
first my mother, of course, the queen of mentors. My first boss in the
investment business boards was ima Alejandro Santo Domingo and
his father, who Yamato Santo Domingo and their partner Robert
Hanshaw, who were the first at quadrant capital to give me
responsibilities for capital. The Burke family my business partners
today, who are the founders of UnitedHealth. My business partners
and prime mkhaya, particularly Ryan Burke, my mentor Michael
Mobizen, my mentor and coach Wyatt wood small. Peter Kaufman,
who's a friend of mine as The founder of plein air, Josh Wolf, then
McMurtry, Dennis Hong Eric chagnon sternly levy Jonathan our back
alley, Parker K Diedrich cedar home Michael billings, Cheyenne
Mozaffar. Adam Birnbaum Chris Beck, Ben Gordon Jason McDougal
Michael Puccini, Steve Ruda and Johnny Schiffman. You know, these
are all people that all amaze me, and really may or may extend my
gratitude to them for having taught me so much. There's many
others. I can't mention, by the way, for privacy reasons. By the way,
this talk was inspired really by two talks that I saw Bill Gurlie, running
down a dream of how to succeed and thrive in a career you love. And
then my friend yen who yells, mastery, learning how to learn.
It also shows how learning is not. You don't do it on your own. Right.
A lot of it is social as a social activity.
It's a team sport. Yeah, it really is. So the structure of the presentation,
you know, first, I'm going to talk about problems analysts face. The
problems is not a comprehensive list, it's what I think are the most
important problems, but I'm sure there are others. But the reason why
I do that is, there's so much information out there to learn that you
have to use filters to learn it. And the problems you have to solve for
serve as filters. There are other filters as well, smart people, your
goals. And even the investments you make can all filter out the
information into knowledge and into understanding wisdom. And it's
important to mention these problems. Also, I may not have a solution
to the problems or have come up with a novel solution for them. But
somebody out there that is now aware of the problem might come up
with a solution for them, and then mention it to us and give us the
feedback. The second thing I will cover is the mindsets that you need
the ways the mindsets, basically meaning the ways of thinking and the
perspectives and the principles from which to see what you learn
through. And then next, the conditions and procedures and action
steps to take to to to begin learning, learning specifically for
investing. Why do we have to learn? The environment is changing at a
very rapid clip, strategies that work strategies and tactics that work in
one environment often won't work in the next environment. And we
have to learn new ones. By the way, the best book on the
environment changing is jasha Cooper Ramos book, The Age of the
unthinkable, which is probably a book that doubled the effectiveness
of my judgment. And any investment business we are paid to learn. I
think people forget that. And also in the future, learning and teaching
are the currency. But also, I seen a lot of analysts leave our business
and a lot of analysts burnout. And part of the reason I think is is a lack
of adaptation. And also they stop learning. Paul Tudor Jones is a great
quote says adapt, evolve, compete or die. And I have seen a lot of
analysts and a lot of money managers lose money and reputation
because they've stopped learning. And again, it's what makes an
analysts great in my mind. You know, the the I was talking to Dennis
Hong, and I asked him what makes a great analyst. He says, Look, you
know, a lot of analysts have saw our solid at unpacking business
models and figuring out whether something is a good business or
not. But many could work on developing a framework for what makes
a business a good stock. You know, and you get says, look, look
question a particular business, I probably shouldn't name it is a great
business. It's got ecosystem control. It's got customer lock in, but the
stock hasn't been good. And partly because management doesn't
care about optimizing towards a long term model. And a good
analyst should be able to tell the difference, and that takes learning.
And it completes a toolkit, you know, so a lot of analysts have good
analytical work, they're good at appraising the valuation. But is it a
good trade? Is it a good investment? That's the nuance that they have
to learn. So the problems analysts will face and again this is the filter
the feedback loop for learning and investing is long and can be
deceptive. It's A big difference between sports chess back end and
poker, and investing and investing, you could buy something the
stock price agrees with you, but you end up being wrong, you could
buy something the stock price disagrees with you, but you could end
up being right. And and there are certain schools are investing that an
envy, like quantitative investing where the feedback is almost
immediate. But again, this is really for fundamental and behavioral
investing.
Right. So it's really a treacherous environment. For anybody who's
making multi year type investments, right, the feedback loop is so
long that it's hard.
And by the way, always mind the environment. A lot of specifically
value investors, they look at the business from a bottoms up
perspective, and literally stop there and not look at what's happening
at the industry or macro level. And I'm not saying that you should be
a macro investor, but you should be wary of macro forces and how
they impact your business. Another problem is analysts don't see
enough reps in the early years of their careers. This is a modern
phenomenon, by the way, especially as the business has gotten more
institutionalized. Now, most funds take away a key part of reps for an
analyst, which is their personal accounts. If you're an analyst working
for fundamental hedge funds, or institutional hedge funds, you're not
allowed to have a PA. And then the fun
part. And then you just end up working on a very few when you say
reps, you mean investments that they work on, like not see enough
situations, they don't see
enough situations. The funds usually also have them focus on few
names that they know in detail deeply. But it doesn't really go into
their pattern recognition. And ironically, a lot of these funds. And I do
think this is funny on many levels, they allowed them to invest in
private companies. And as a result of that a bunch of my friends have
developed these mini private equity empires inside these, these
hedge funds. And that ends up distracting their time and focus more
than if they would have a PA. And by the way, I believe in investing
and privates, you know, you you you get information you see how the
sausage is made. You see how it's not pretty. But the problem is,
privates don't train you to exploit or handle liquidity. And again, as
my friend, garish bucklew says, you know, chefs learn when they cook.
And it's important to to practice. Analysts do not understand that
there's a difference between analytical thinking and portfolio
management thinking. You see this when they first learn to interact
with the portfolio managers. And you, tragically, you see that look on
their face, which is a deer in the headlights the first few months that
they actually become PMS. And they realize, wait a second, there's a
whole different toolkit that we have to have access to here. By the
way, Bill Miller likes to give the example that the difference between
analytical thinking and pm thinking is you give an analyst a problem,
he deconstruct it, and and figures out what makes problem problems,
Tick Tick, but you give a problem to a pm and his first question is how
do I make money from this? You know, and that's really what it boils
down to. Analysts in their career careers will learn portfolio
management from 1pm, perhaps to basically they will learn how to
cook from one chef rather than multiple ones. Analysts tend to have
gone to good schools or in good grades got competitive jobs.
Basically, they are unaccustomed to being wrong. And even the best
analysts will be wrong 40 to 45% of the times and many analysts can't
handle the emotions of being wrong in the early years. Either. The key
here is to recognize for losers to learn to recognize your losers early
before they become too costly. And slugging percentage is more
important than batting average.
Analysts tend to be desk jockeys. They failed to conduct field
research. And again, a desk is a very dangerous place from which to
view the world. You know, as New Yorkers, we tend to look at the
world just like that New Yorker cover where beyond the Hudson River
and the Midwest and the Pacific Ocean, you know, we don't have a
underground knowledge of culture, structure and and have seen
between the locations where customers interact with a business and
the product. By the way, as as a behaviorist, this is one of the main
things that we exploit, which is this perception issue. It's one of our
best behavioral dynamics, or when we exploit the way New Yorkers
see investments, and versus the way the local geography sees them.
So field research, actually traveling to the place where the business
and the customers interact is paramount. But you know, most analysts
also lack creativity and feel the research is where this creativity
shouldn't be applied. There's another problem here too, which is
intelligence. You know, brute intelligence can make you lose a lot of
money in our business. And it's, it's, it's a handicap because it leads
you to believe you know, everything you have figured it all out. And,
you know, instead, some of the soft intangibles like integrity, grit,
adaptability, flexibility, humility, and character for more valuable den
mcmurtrey Are our friend he loves this book called The intelligence
trap, which is a a must read. And forget, intelligent people are
human chimpanzees just like we are. And they are prone to blind
spots and cognitive biases, just like we all are. And in fact, I would say
that those biases are amplified because of their intelligence. And
again, remember to be creative. You know, one of my favorite
investors, he says, you know, the analysts job is to be creative,
everything else I can outsource to India.
Failure to determine what's priced in and expectations and I quote,
my mentor, my mentor here, perhaps the single greatest irony
investment business is a failure to distinguish between the knowledge
of company's fundamentals, and the expectations implied by the
market price. How do you determine what's priced then we'll cover
that the analysts tend not to understand the game theory
psychological investments set up for behavioral side of investing. One
of the problems of behavioral finance is that behavioral finance deals
with largely individual behavior. And the problem with markets is that
it's it's group behavior, and behavioral finance academics when they
derive the test, to come up with these biases really isolated to
individuals. The problem with that is is fallacy of composition. One, if
you take 10 People that are prone to cognitive biases, their group
behavior may actually be quite rational. The analysts are not
operators and could not operate themselves out of a paper bag. And
by the way, I would include myself in that department. I think I'm a
terrible operator, but I've been learning. They underestimate the
importance of operational skills, execution and management. You
know, my buddy Jason McDougal, he says, you know, a great
investor can think like an operator. And think of that Buffett
quote, I'm a good businessman, because I'm an investor and I'm
a good investor because I'm businessman, by the way, I always
think that people overcooked buffet, but then I find myself doing
the same thing. Yeah, and there's so much to learn from the old
man. It's truly magical, actually. Yeah, yeah, Alice underestimate the
importance of marketing, advertising, distribution and sales, whether
for themselves and how to sell themselves, especially when they start
marketing a fund, or the funds they work for or the businesses they
invest in. Feel free to stop me your questions by the way. q1 is the
analysts time management itself management horrendous.
Analysts also tend to self sabotage they burn out over time. And I
think a simple way of thinking here is that the analysts apply value
principles to investing, but not their businesses or their personal lives.
For example, the first big bonus they get usually goes to improving
their lifestyles when what they should do is purchase themselves a
personal margin of safety, which is something they can fall back upon,
but also a sort of a structure that can help them improve their
judgment. When all hell is breaking loose. You will make better
decisions knowing that you have a fallback position than not worrying
about next month's rent or your over expensive lifestyle. The analysts
don't understand that they need to tailor their style structure
processes and resources according to their own personalities and
temperament. They try to replicate what others have done not
realizing that these people have totally different personalities and
have gone to totally different environments and environment
economic conditions. By the way, just one simple difference in process.
You know, we look at, if I, for example, most of the investors
that I respect are big introverts, they read first and then go and
do the experiential, they try the product, speak to customers, test
their thesis with suppliers and competitors, and, and basically the
field research. But I find that myself as an extrovert, it's better that I
do the experiential first, and then do the reading, which sounds at a
thema, to to most introverted analysts. But again, this is a difference
in personality. And I recommend people try ideas working on them
differently.
So in other words, you recommend that somebody who has an
established research process occasionally kind of tried this, sequence
it differently or engage with the product or other people correctly or
to kind of test the waters? Like, how else could I learn about this?
How else could I
go right across, you want to have a process, that's a baseline process,
and then tinker with it up or down, to see if the results change.
Change the sequence. One addition to my process, for example, has
been YouTube, watching a ton of videos on a company, it's incredible,
what's out there. You know, I've been tinkering with that. We've been
tinkering with different tracking tools, where, you know, because of
the our culture of frugality, we don't allow ourselves to spend money
on expensive tracking tools. So we devise cheat tracking tools to be
able to track a business. And that's actually been super helpful for our
process. And in fact, we've developed some very effective timing
techniques using these these tracking tools, because they add to the
mosaic of the analytical information or behavioral work that we do. So
this is an important one. And it's a touchy subject. But the analysts do
not understand or know how to navigate the political agency or
power dynamics that happen inside investment firms, especially
hedge funds. You know, the there's different scenarios here. And it's
difficult to talk about each specific, political dynamic, because political
dynamics are driven by the structure of the firm. So the ownership
structure, the legal structure, the team structure, they're, they're
driven by the top and the top leadership, how they behave. They're
different by who they hire, and how these analysts interact with each
other. And they're also driven by the incentive structure. So you have
a a, a layering of conditions and structures that leads to each different
political outcome. But we'll try to go through specific scenarios to
discuss this. So another thing to add is here is that individuals in our
business, don't understand what it means to be on a team and how
one can improve the performance of their teammates through their
energy communication and actions. You know, in the end, the team's
overall performance has a greater influence on the performance of
the fund than any one individual. And even the junior analyst with the
right ingredients can materially improve investment team dynamics.
And this requires a lot of emotional intelligence, understanding
experience and operating on teams, and people who have excelled at
team sports understand this more, but most bankers and P analysts
have had mostly solo roles prior to entering the business. This is a
point that my friend Cheyenne, Rosa far has made to me a bunch of
times. And he couldn't be more right. In love last year, analysts don't
know how to properly transition from an analyst or portfolio manager.
And I think this is the most difficult transition. And I'll share a process
that will definitely start the the process in his failure points analysis,
but I'll mention it as we go. We're about to transition into mindset. So
I just want to check if you had any questions.
No, I think it's it's interesting, right? Because these are there's a lot of
issues here that I don't know that a lot of analysts that everybody
actually thinks these through or is aware of them, right? Something
like people want to become a PM. Right? There is no established
process. So you kind of you don't know what you don't know, right?
It's an issue of who is going to Who's going to teach you if your firm
does not have a process for that? Correct. So I feel like this is a very,
you have to learn it. But it's not obvious how you do that other than
studying, you know, great investors or people in your industry. And
then you run into the issue that you outlined, you have to kind of
tailor to your own personality. So I think it's something that
everybody runs into them.
And by the way, you know, the, there's a lot I don't mention here, and
other people hadn't mentioned it elsewhere. But you know, it's a must
to have read Market Wizards series, the books of Steve Jobs, many
biographies of great investors, you need those as reference materials
in your mind. And eventually, I think you'll find a style that is more can
measure it to your personality, I think I found mine. Mine has to do
with a combination of my my extroverted personality, combined with
with mentoring and teaching younger people. But it's important to be
able to find, and to study these things, and it's a lot of work. There's
no question, it's a lot of work. But like you said, there's no book on
doing it. There's actually no good book and portfolio management,
which is incredible to me. And not only that, it's somebody mentioned
in the podcast that there's no analytical team that analyzes what are
the best portfolio management techniques or, or, or what is even the
right portfolio structure to run out. And by the way, the other
problem is the market structure has changed. Pre await markets are
totally different than post await markets. The pipes of liquidity have
changed pre oh eight, we had market makers, we had prop desks that
were more prevalent. ETS were smaller index funds were smaller
hedge funds were smaller posto eights, we have no prop desks. You
know, we have no market makers. Quant funds are massive index
funds are massive hedge funds are massive. The pipes of liquidity
have changed. So things that work for you await may not work post
away. By the way, one of the things to remember is that as market
participants, were inclined to study the past. But past bear markets
may not be appropriate to study here because we've never seen a
bear market with our current market structure. So on mindsets, and
view mindsets as a lens for which to see the knowledge through a
way of thinking, and how to filter out the right kind of information
into knowledge on. And perhaps the first mindset is don't do this job
for the money. This is a very painful business. You know, you're
constantly faced with your mistakes, the sort of pain that you take on
a daily, weekly, even yearly basis, you better love the business, if
you're going to last at it. And if you're going to do this for the money,
yeah, you might get lucky and start in 2011 and go through 2021 and
you made a lot of money. But odds are the first time that the market
teaches you a lesson, you're going to quit and not have to resolve
and my friend Lavon. belying says if you're doing this job for the
money quit. And also one of the things that analysts encounter is
especially passionate analysts is working with analysts that are not as
passionate as they are. And and it's the turnover inside funds that hire
guys like that is actually very high. And don't get me wrong. A certain
level of analytical turnover is important for a hedge fund. But most of
the time they speeds up is because you've hired guys that have
brainpower. They should literally be doctors and nuclear physicist, but
they're out there chasing stocks. I love what I do. But I have no notion
that it's I'm helping out the world here. You know, the we're having
fun with what we do. And hopefully we'll make some money one day
that we can help the world with. But this is not a business where
you're adding value to the world. And if you have the intelligence and
you don't love this business, go do something else. The first mindset
is human fallibility and imperfect understanding are features of the
human conditions are not books. Mistakes are what we do. And you
have to be okay with that. Investing is a business about making
mistakes. And guess what It's an advantage to learn from your
mistakes under the right conditions, and I don't recommend
everybody learn from their own mistakes. It's an even bigger
advantage to learn from the mistakes of others. And what you really
should be doing is learning from your successes and learning from
the failures of others. By the way, another problem with this is that an
action in the past environment that could have be a mistake could be
a total success in a different environment. So be careful, you want to
learn from your mistakes, you want to be careful from learning too
much for your mistakes.You know, no lesson is better than wrong
lesson. You want to have a mistake evaluation process. And the key
suggestion I would make there is to involve others, is to get feedback
from others that will keep you intellectually honest. Because in the
hedge fund business, we have a tendency of doing this thing called
revisionist history, which frankly exists to protect our confidence. But
sadly, it's not it doesn't improve our investment performance. By the
way, there's a way to learn from mistakes that you haven't made yet.
And that's actually something that you should journal about, sort of
prospective mistake making and and the pre mortem process can
help you with that.
By the way, I was once in a room. We were a friend of mine and I were
hosting Robert Greene, the writer of mastery. And we had invited a
bunch of pm friends and Stan Druckenmiller was there, Ian
Mackinnon and John Griffin. A bunch of other guys. The Yin Yang was
there too. And we had had Josh Waitzkin interview. Stan druk. Pardon.
We had had Josh Waitzkin interview Robert Greene. At one point, the
conversation veered between Stan Druckenmiller and a bunch of the
other guys and Waitzkin asked Druckenmiller, do you ever learn from
other people's mistakes? And Druckenmiller goes hell? No, I capitalize
on other people's mistakes. And, and again, the reason why I say this
is remember that the mistakes of others is also something that you
can go on offense. At very often in the investment business, you have
to realize what is the mistake that the other side is making? And how
can we exploit that. And by the way, also apply that to your thinking,
because invariably, you will be the reason why somebody makes
money because of the mistakes that you've made. And listen, because
of the Judeo Christian traditions, we have a tendency of once we
make a mistake, to take out a whip. And, you know, with us whip
ourselves Opus Dei style, don't do that. You know, do it for a day
maybe. But then go home and get held by your wife and your
girlfriend and learn fast from it and move on. You know, getting
scarred by mistakes, can can create a lot more damage than then that
then good.One thing to remember, by the way, is great investors all
go through periods of mistakes. A lot of people don't know this, but
George Soros went bankrupt three times before he succeeded at
Quantum and then his next fund. So, you know, also think about
Soros. It's important to read what Karl Popper has written about
mistakes and the philosophy that we should have about mistakes.
And here, by the way, this also applies to other fields, there was a
study done on minimally invasive cardiac surgery. And what the
researcher found out is that surgeons learn more from their own
successes and from their own failures, why they learn more from the
failures of others than they do from the successes of others. And this
was over 6500 procedures. Also, my neighbor is a doctor and I spoke
to him about this study, and he actually made a very important
comment that surgeons hadn't made a fatal mistake over the
operating table, were more likely to leave surgery because their
confidence was shaken. Whereas a successful surgeon that had seen a
surgeon have make a fatal mistake. learn better from that. So so it's
important to retain this as a mindset of learning from your own
successes, and the failures of others. Don't get me wrong, you can still
learn from the successes of others, but temperates filter it out.
Right? So it's actually really important but you don't want to over it.
indexed to the successes you see in others, especially since you don't
have all the contexts. But it might be easier to learn from somebody
else's mistake, especially since you're talking about the tension of
your own mistakes, you get very emotionally involved. And yes, you
learn, but they can also kind of grit hanging around.

But it's also an evolutionary mechanism that we have, which is that
our empathy allows us to learn from mistakes of others, because that
then strengthens the tribe, right? The network. So, mindset, data
hierarchy, we use this a lot. And quite simply, it boils down to this, the
world is full of data. One ounce of that data is information. One ounce
of that information is knowledge. One ounce of that knowledge,
understanding, one ounce of that understanding is wisdom. What
gets you from data to knowledge, are your goals. If your goal is to be
a doctor, it's a different than knowledge than if your goal is to be an
investor. But what gets you from information to knowledge, are
procedures. Knowledge is something that says, hey, if you do this, this
and that you're going to accomplish X. But the problem is what gets
you from knowledge to understanding you need to have tested those
procedures out, you need the experience. But what gets you from
understanding to wisdom is actually what I call meta experience,
where you've not only thought about the results internally, and
filtered out what's important, but you've tested it with your network,
you've taught it to somebody else. And you've been able to create
things that kind of get you to wisdom, much faster. You know, and it's
important to remember here, Mark Twain's cat, right, so Mark Twain
had a cat who sat on a hot stove once, and he never sat on the stove.
Again, whether it was hot or cold. You know, this is a iterative process,
you know, and like I said, wisdom is not something that you get to
it's, it's a journey. It's a constant retesting of what you know, and you
got to have that mindset. You know, and again, it's another quote that
says this is that you never step in the same river twice. Because you're
not the same. It's not the same river and you're not the same man,
right? Learning is behavioral change. Your behavior hasn't changed,
you haven't learned. Learning is not sitting on a desk, and cramming
your brain with knowledge that you're going to recite one day to
show that, you know, something, learning is something that you've
taken and applied it and imbued it and your actions to accomplish a
goal. You know, Jim O'Shaughnessy, has a great saying says, you
know, don't look for the meaning look for the uses. You know, what
you've learned is to apply it, not because you're digging into the
meaning.
The standard paces for chumps, there's no reason why it needs to
takes 10,000 hours, you can do it in much, much less period of time,
it's much useful to learn something and test it and get immediate
feedback and a low cost way than it is to be thinking about it for a
long time and cramming your brain with more information. It's a very
important principle for us. It's actually not only a principle and a
mindset, but it's also a pattern of companies.
First, you find the best, you imitate them. You assimilate with
means, which means you understand why the mutation is
working. And then you innovate and make it better from there.So
think about Apple, Apple went to Xerox PARC, look at the mouse and
computer interface. Steve Jobs was like, this is really cool. How do we
make it better, makes it better comes out with a Mac. Then Microsoft
looks at Apple imitates their UI and mouse they understand how to
make it better and add distribution and scale by partnering with every
single computer maker. You find this pattern constant, that Mark
Zuckerberg steals the idea from the Winklevoss kids. The glass twins
Excuse me. He understands makes it better. Snapchat comes along,
takes a dent to Facebook Zup Zuckerberg steals the best of Snapchat
makes it better and now he's off starting to do that with Tik Tok.
Again, this is a I can go into another one. Apple a very important one,
Sam Well, Walton would go notebook in hand to other retailers take
notes of what they were doing, imitate them, and then made it better.
Yeah, no, I think it's a pattern. Yeah, absolutely is a pattern where you
see people constantly study, both the people who came before them
in the same industry, and then also the best of their peers trying to
figure out like, correct,
by the way, the mediocre investors or operators, they tried to
innovate. They understand that it doesn't work, then they figure they
have to eat, and they imitate. Right? So so it's important to remember
because there's a sort of a originality problem, where people want to
come up with the idea that their original, that that, that in my mind,
originality is a waste of time, I'd rather effectiveness and
accomplishing goals.
So start with what the best are doing. Intellectual Capital, leverage,
you cannot learn without having it. And more importantly, in the
investment business, you need smart people. There's a study that was
done on portfolio managers, and the researcher found out that the
majority of a PMS, great ideas actually came from his network, close
to 80%. And it's simple as to why you need smart people to be
filtering out what's out there. And sometimes an idea that is
innocuously given to somebody else, sometimes people don't realize
the ideas they have, whereas somebody else may realize, wait a
second, I have the context and the personal experience to see what a
good idea this is. Another way think about leverages a leverages is for
things, it's community. So your, your peers, your mentors, your
mentees, it's capital, let's say your lever to other people's capital, like
we are in the hedge fund business or the investment business. It's
content that you've created. And it's also code. If you think of Twitter,
Twitter's all four of these things. Its code, its community, its capital, its
content. And and there's a lot of guys that have a Twitter following.
That it's a real, it's real leverage for them. I'll give you an example.
And then mercury and I were looking at a stock. And I asked Dan, hey,
instead of us going and read in finding out every single thing that we
need to know about the stock. The stock was snowflake, why don't
you tweet about it to your followers and see what comes back. And it
was incredible the information that came back and it saved us weeks.
So how to create intellectual capital leverage, how to exploit it is very
important to think about. And you know, there are other forms of
leverage as well. There's bargaining leverage. If you're a business, you
know what sort of bargaining leverage you have with your customers
and suppliers. There's operational leverage, there's recourse leverage.
And it's important to remember, you cannot accomplish great
returns without leverage [not financial] and concentration. And
leverage doesn't mean that you borrow money, but it could mean it
means also intellectual capital leverage.
I love this from Patrick O'Shaughnessy. He says, instead of pursuing

goals, I'm going to build my life. So that I do these four things I
learned. I build something with what I've learned. I share it with
others, preferably in a repeatable fashion. And then I go back to
learn. And so if you've taken a book, and you've learned that, and
you've taken notes from the book, that are thoughtful, and put it on a
blog post, that other people can then interact with it. And shared with
10s of 1000s of people in a repeatable manner. It's much more useful
than pursuing a goal because the feedback that can come from that
there are pieces of content that I've shared, that have led to an
investor investing with me, that have led to a great investment idea to
come back. And this is a very important mindset to have.
You want to stay within your circle of competence, but you never
want to fail to expand it. And this is the mistake that value
investors make is that they think they have to stay within a circle
of competence. but not realizing that it needs to expand over
time.
There needs to be R&D done. You need to learn new new tools, new
strategies, new people, new environments. You want to learn in order
to teach. As my mentor says, in a classroom, the teacher is the one
doing the best learning. And when you learn, in order to teach you
learn something at the meta level, because you have to know known
see from your perspective or from the perspective of others.
Feedback not wheedies Is the breakfast of champions. You know, your
point to remember here the feedback loop investing can be very long,
so you have to to figure out ways to counter that. Reed Hoffman has
a great quote, he says, share your work early, share it often. But guess
what? in the investment business, we're usually afraid of sharing our
work because it's proprietary.
Yeah. So So I guess this is sort of finding a way because if you're
within an organization, right, the amount of work, you can share you
or even how you can interact and Twitter where I agree, there's a lot
of benefits to that. But often there will be institutional constraints,
right grams of what you can share publicly. So you have to kind of
figure out a way to to navigate that or share it in a smaller circle. But
your point is you want feedback from people. Like you want to
actively build a build a mechanism for that, whether it's in public, or
maybe in private groups, depending on what you're allowed to do.
Very important. And by the way, that's also the responsibility of the
PM. I've seen PMs wrecked their business by not allowing their guys
to share stuff. Whereas I've seen PMs really improve it by figuring out
who could be shared the information could be shared with. So for
example, Steve Mendell has an advisory board. And the advisory
board gives him an outside perspective into his business that he can
get feedback from. That's a very important condition that you can
create and set. But again, first part you want to get feedback on is
yourself, you know, know thyself, right? It's a competitive advantage
to know yourself well, your patterns, your weaknesses, your strengths,
how you interact in a team, how you self sabotage. And guess what,
it's unclear that we have the self awareness to know these things. You
know, the my friends know me as a very self aware person, but it's,
I've learned a lot about my most about myself from other people. And
think about ways of putting yourself in positive feedback loops.
The intuition problem. So I once was at a lunch with Josh Waitzkin,

Tim Ferriss, and Michael MOBAs. And in the lunch, we got into an
argument, and the argument was, should you trust your intuition? A
key part of your learning. And Josh Waitzkin, was saying, hey, once
you have the experience of domain understanding, investing, you
should trust your intuition. And Michael Mobizen, was saying, hey,
investing is an open environment, you have to be careful trusting your
intuition. Because investing operates an environment that is complex,
evolving and prone to nonlinear change, and things that are your
intuition, which have a lot to do with pattern recognition may no
longer apply. And the refinement that I brought to the table is, I agree
with both of them. But you have to add a very important dynamic,
which is that people that have good intuition are willing to change
our minds. They don't anchor and they're highly networked. They're
jacked in. And when you have the perspective of the network, and
wisdom is multiple perspectives, your intuition, judgment will be more
sound. Also, things that are happening in the environment are
bubbling up to you because you have this network that is filtering out
the stuff if your network is good, right. So you're it allows you to
observe things that are happening, rather than say, I think this is
happening, but you haven't really seen the facts or an observation
that justifies your intuition. So it's another way of saying that you
need networking in our business, and more importantly, ways to stay
in touch with your network.
The critical importance of pre existing knowledge and what you don't
know that gets you in trouble. It's what you know, for sure, that just
ain't so very often as a pm and as an analyst, you got to figure out
hey, what are my pre existing beliefs mindsets? and understanding
that could actually get me in trouble here. And the introspection
required to come up with these is actually staggering. And you need
the help of outside people. So we're about to move into conditions,
procedures and action steps. I want to make sure that you don't have
any questions before we move into the next part, which is the how to
solve some of the problems that that I mentioned in the beginning
and create conditions for learning.
Yeah, I mean, I think one thing that came to my mind, I think you're
sort of emphasizing, like the social networking aspect and having
different perspectives, but my perception is that networks can come
in very different shapes. And, and so I think there's a little bit of a can
be an echo chamber or hurting effect, right, where you're learning
and then you go to your network. But if your network is all people
who happen to either bind to the same kind of intellectual fashion, or
traffic in the same way, like then in certain environments, they'll all
read the same books, listen to the same podcasts and think, very
similarly. And so in that case, even though you think you're going to
your network, I don't know, you know, how do you think about
getting those multiple perspectives, because otherwise, you might
just you might get something back, but it's everybody is sort of, in a
herd kind of on that same intellectual train.
So part of the we've solved that is network diversity. And, more
importantly, and Bill Miller taught me this, actually, he told me very
early on, he says, You want to belong to multiple networks. And think
of your network. If you only know a bunch of guys in New York, you
have a problem, you know, but network diversity can start with
geographic location of the people. But more importantly, it's also age.
You know, one of the things that that that I like to do is spend time
with younger people, as much as I spend time with peers or older
people. And the other thing also is constantly meeting new people.
But you know, with technology, it also allows you to also test your
echo chamber. You know, Twitter allows you to filter out and be
connected to totally different networks than you would ever be.
There's a few networks that we've been playing with recently. And I'm
amazed by what we're learning to these people. And I don't even
know they existed up until a week ago. So so the echo chamber
problem that you isolated is that it's a big problem.
The other thing we're going to cover that is the shape of your
network. Networks can either be centralized, decentralized or
distributed. And you have to test your network to kind of figure out
which network structure you're actually operating under. And again,
one of the problems by the way, is I'm most books on networking are
actually terrible. And, and you don't learn much from them, but I will
cover some aspects of networking. Any other questions?
No, I think it's, it's good now to kind of bridge. All right, let's grant
sense with action.
Right? So So I want to give you a perspective. And the perspective is
to think about conditions, and what I mean by conditions. So there's
two great human technologies, goal setting, and problem solving.
And only 20 people or goal 20% of people are goal setters. 80% of
people are problem solvers. Some people like to go and solve
problems, like to solve goals, there's a refined way to think about this,
which is, hey, here's the goal I want to set and let me go about
accomplishing accomplishing it. But let me think about the problems
and how to solve them to help me accomplish my goals with
combining them. There's a third way of doing it that was taught to me
by my mentor, and it's called inevitability thinking. And what that
means is, you asked a question, hey, what conditions can I set in my
environment, or exploit that will help me accomplish what I want to
accomplish on its own without me, frankly, having to depend on
action, or willpower, is just putting myself in these conditions, and it
happens on its own. And as an example, let's say you want to learn
public speaking. You can write a speech, presented to yourself in front
of a mirror, or you can join a public speaking group like Toastmasters
International, and half people actually really give you feedback and
listen to your speech. And your learning is going to be accelerated by
doing so by putting yourself in the right condition. One of the ways
that I've done this is, you know, up until 2008, I was never in good
physical shape. And one of the ways I wanted to get in shape is, is go
to the gym. But it's not something I particularly enjoyed in the
beginning. So I created conditions to force myself to go, I found a
very attractive female trainer. That was good into positive
reinforcement. I gave her enough money for 20 lessons. And I said,
Hey, if I don't show up for one of the lessons, you pocket the cash, I
lose the money, triggering my loss aversion. And guess what? The
loss aversion combined with a positive reinforcement, I'd be given the
best shape that I ever was. So you can either go and be action driven
depend on the action steps or depend on the condition that you
actually set.
So it's another way of saying elegance of a forest, right? To not
depend on your willpower to correct
but correct. And I'm blanking on the guy's name. But Patrick
O'Shaughnessy, just interviewed guy that says, talks about the
negative aspects of goal setting for certain things where you actually
want to focus on stepping stones. So another way to think about this
is how to create stepping stones that allow you to step into where
you want to go. And these conditions that you want to create, think of
them as non recourse leverage. So the code the community, the
capital, and the content that you can create that help you accomplish
your goals. So for example, the guys that have raised money because
of their Twitter followings, you know, they build a Twitter following
with smart content that attracted a bunch of investors. That's an
example of a condition that you create, that helps you accomplish
your objectives. Right. And by the way, those conditions interacting
with your action steps, the success that you're trying to accomplish
will emerge. But very often, you won't know specifically what the next
steps are, but the conditions will throw them off. And again, I think
there's a analysts tend to think in terms of optimizations rather than
leverage. So an optimization is when you improve something by 1%.
But leverage is when it's something that can improve you massively.
So you can build a morning ritual of waking up at 5am. dunking your
entire body and ice eating a smoothie that is filled with energy, and
great nutrition and then working for two hours, and meditating and
doing all that stuff. Or that's optimization. Or you can have the right
mentor, the right mentor will five bagger you, whereas the other
stuff will improve you by 1%.By the way, once you've created the
leverage, and you're exploiting the leverage, then an optimization can
give you a lot because 1% That's levered by leverage Can you can
really multiply that result. Right. So for example, if you have a mentor,
but then you're used to reflecting on what he teaches you and
meditating on it, you know, that can really improve the relationship
and the feedback and the results that you get. Stanley Druckenmiller
says and by the way, this is the first condition you want to create is
having mentors. And when he says if you're early on your career, and
they give you a choice between a great mentor or higher pay, tick the
mentor every time it's not even close. And don't even think about
leaving that mentor until your learning curve peaks. But just nothing
to me so invaluable as my in my business, but in many businesses as
great mentors, and a lot of kids are just too short sighted in terms of
going for the short term money instead of preparing themselves for
the longer term. Two problems here. One, how do you find a mentor?
You know what? Well, first, I would start with people in your field that
you have direct access to where somebody else can introduce you to
and you want to approach them. And you approach them using a
technique that I learned from a professor route Columbia University,
he says you approach them with three poles. first prong is this is what
I admire about you. The second prong is this is what I can do for you.
And the third prong is this is what you can do for me and always
make what you can do for them greater than what you can do what
they can do for you. Right. And if they don't respond, persist. One
thing to remember about Highly successful people is they got to
where they are through persistence. And what they really respect is
people that show persistence, and that showed that they want it. So
you have to show show that the second problem you're going to
encounter is how to be a good mentee. Right, because part of the
value they're going to add to you is not only teaching you things, but
also introducing you to other people. And they're only going to do
that if you're a good mentee. So follow their advice, and show that
you've put it into motion. If it worked, you tell them be grateful, if it
hasn't worked, also tell them and guess what they're going to want to
give you even more advice. And when they see that you respond, and
that you're somebody that is not wasting their time, then they'll
introduce you to other people. The third problem is the I call it the
upgrading your mentor problem. Once you've gotten to a certain
level, you start realizing that you need another mentor to get you to
the next level. And what a lot of people do in a way is totally ignore
the guy that helps you to get to the previous level, and the upgrade
to the next guy. That's a big problem. Well, if you keep doing that,
and succeeding, you won't have a problem. But the problem happens
when you fail at one level. And the guy that you left at the previous
level is not there to pick you up as you fall. So take your mentors
along with you on your path to success.
This is a very important part of having a mentor creating a network
and this is where we come in to centralize decentralized distributed
networks. All three are great, but I prefer distributed networks. And
the reason why is distributed networks is when something is
happening at another level of network, the probability of reaching
you is much, much higher. And it comes at less effort than a
centralized with decentralized network.
And in my mind, there's there's four components that you need to
create a distributed network. So those are filter aggregators,
connectors, triads and hubs. So filter aggregators, somebody like you,
Frederick, you filter a lot of information that's really good. And
aggregated all in one place that you we can go and read. So think of
filter aggregators like Michael Molson Peter Kaufman, Charlie
Munger, Warren Buffett, where they've taken distilled wisdom and
aggregate it all for you, where you don't have to go and read a
million books, you can literally read basis points of them. Connectors,
connectors are people in every industry that naturally know the right
people to know. And out of the goodness of the personalities will
naturally introduce you to them, find out who they are. Okay, build
relationships with them add value to them, because they're a key
component of your network. triads. So what a triad is, is the key part
of networking. And if you read tribal leadership, chapter 10. A triad is
two people in your network that don't know each other, you
introduce them, combining them with a common objective, and then
you let them go. A lot of value in luck comes from creating triads. And
then last hubs, which are specific locations where connectors, your
peers, talented people, and filter aggregators, the aggregate think in
terms of these things when you're creating a network. And again,
remember, you want to belong to multiple networks, to your
knowledge management system. So I've learned over time, the
importance of this.
And here are the components that I use, I use Trello, both for project
management and content management roam as a note taking
because these tools allow you to create links between pieces of
knowledge. And when you're searching for it, you don't have to spend
a lot of time because you can literally go into your brain for Hey, what
is this link to and when you go to that linkage press a button that
brings you to what you're looking for. But also what it does is it shows
you serendipity things that are connected to it that you may not have
thought of. And here are the components you know so otter AI for
transcription, Twitter, Instagram for following people Google Drive to
keep files so so forth. But more important, or your knowledge
management system should be for content creation. And sharing that
content and getting feedback on it. Journal. like sharing that journal
and getting feedback on it. And you need distribution lists for that
both private and public. But again, I'll share procedure because one of
the problems of creating a journal is most analysts created on paper,
which makes it hard to search and to they actually don't go and
review the journal. That's a problem. So here's the process, the
procedure that I recommend, email yourself on Gmail, download an
app called Boomerang. Boomerang actually allows you to send
yourself back to the email that you just wrote, and at points in the
future, and it drops it on your inbox. And I used a feature where it
drops it. There, the program chooses the time to drop it and also at
specific dates. And it's uncanny how often I'll be going through a
situation and my journal drops with a piece of wood with a mention
with a key lesson that I had forgotten about that happened months if
not years before that. So you need a way to solve for that and your
content management system and boomerang helps you with that.
You want a personal lab. My personal lab happens to be games,
backgammon and poker I remember the first time I was learning the
concepts of moats and economic castles. And there's actually
concepts in backgammon such as primes, which actually has to do
with the name of my fun prime mkhaya, that actually teaches you
Moats. But other people, they do it through golf, they do it through
tennis, they do it to American football, you need a personal lab, well,
whatever you're learning, you have a small, low cost way of testing it
out. A young friend of mine, she started a small content marketing
business as a side hustle, to be able to learn how to operate and grow
small business. And pretty her last revenue numbers are close to a
million a year. And this started out as a test eight years ago. And it's a
way of living Buffett's principle about a better businessman. Because
I'm an investor and a better investor because of this.
Frederik Gieschen 1:07:21
So really internalize some of the lessons you're learning by applying
them somewhere else and
Alix Pasquet III 1:07:26

at a low cost, low cost of failure way. You know, before you go in and
incinerate Europeans and investors money and small ways of doing
that, having a paper portfolio, running it with different size as an
analyst running it with different sizing gross and net exposures. You
know, I do a lot of bets with friends and and, and peers on stocks.
Giving yourself four hours to kill an idea. And doing that three, four
times a week on something that is separate from the stuff you're
working on. You know they're there. You should be creative at coming
up with ways of having a personal lab and testing things.
You want to develop the ability to crowdsource this is a key old

school and modern, in modern a skill that today technology allows
you to do that. So using Twitter, Facebook, Instagram, Google Trends,
I have a proprietary distribution list on WhatsApp, for example of
some of the smartest investors and every often, every so often I asked
him questions and asked for feedback. And you will develop the
relationships with individuals that have crowdsourcing capabilities.
There are other tools that can give you that Google Ads ads that allow
you to test surveys SEMrush groups of of people on Twitter, I happen
to love these blurbs, which means black nerds which are African
Americans on Twitter that label themselves nerds that are on the
forefront of consumer and content creation. Literally what's going to
be popular a year from now these guys are into today. Football so
what football is a soccer at the fraction of the size of football team.
And excuse me a football pitch and where the the number of players
is smaller, but you would think that it it lowers the number of
strategic interactions by half. Excuse me, it increases number of
strategic interactions by double but actually increase the number of
strategic interactions by eight sometimes 16 times And what that
does is you're learning at a very, very fast clip.
And one of the patterns that we've seen is Great Investors often have
gone through a footsore period in their careers. So Dan Loeb, for
example, in the early 90s, he worked at Jeffrey's right at the moment
where the Resolution Trust Corporation was selling off the problem
assets of the savings and loan debacle. at discounted prices in a two
year period. He saw a deal every few days. And that increased the
number of reps that he saw. But also, he was interacting for example
he had with with great investors, he had a young David Einhorn and a
young David Tepper as customers. And the exposure and the reps
were amazing. And you can't really choose a footsore moment we
have to recognize when they happen. By the way two that are
happening right now are Spax the the the aftermath of the Spock
depart debacle, there's probably going to be a lot of opportunities
there. Biotech, you have a lot of biotech names whose market caps
are trading close to quote, cash value. And again, there are other
ways to replicate that. A friend of mine, he likes to train his analysts
using only options in leaps, but now allowed to buy it and equity, if
they have a fundamental view, they have to figure out a way to do it
using options and leaps. You can read all of the Vic reports that are
highly rated. I remember early on in my career, a friend of mine,
giving me all the memos out of Tiger management and reading those
doing failure points analysis, and we'll get to that. self management,
self sabotage, resilience, and being anti fragile.
So I recommend you read these books, they will give you practices on
how to make you more resilient. And specifically, the second book the
path of least resistance that taught me the principle that structure
drives behavior. And again, think of this example. If you take two
people, a very intelligent people, and a total moron, you drop both
those guys in the Russian tundra and the middle of winter, an
intelligent person, you put them in a shack, that can't really handle
the environment well and doesn't have that much food in it, the
moron you put them in a shack that can handle the environment well
and has enough food in it. Unless the intelligent person goes over
there and forcibly takes it from the moron, he's gonna die. Often, it's
about creating structures that you can fall back upon, that make you
more resilient, not being inner resilience, or having inner grit. There
are people that we think, hey, they have this level of motivation, level
of grit and level determination. It's incredible, what we don't see are
the support structures that they've created in the background, or
exploited or, frankly, they were lucky enough to actually have. So
some of the support structures that we've created for myself, my
partner and I is that we have, for example, I have five years of living
expenses, sitting in a different account. Outside of the market, outside
of my business, I have a lot of money on my personal money in the
fund, there's something happens to that I know I have a fallback
position. The clarity of my thinking improves dramatically when you
have these structural changes. And by the way, there is such a thing
as structural leverage. And you have to think about how to create that
powerful engagement by the way, actually, Graham Duncan first gave
me that book gives you the practices of how to use stress and
recovery strategically, and how to recover in our business is of
paramount importance.
And by the way, one example that I'll give here is having good and
bad days. In my opinion, good and bad days are very dangerous in
the investment business. I mean, don't get me wrong, I'd rather good
day rather than a bad day, but still and the reason why is a good day,
you leave the office with what I call positive chemicals. The problem is
those positive chemicals, they fester too much in your body actually
amplify your biases. A bad day, you leave the office with negative
chemicals. And again those chemicals if they fester can also amplify
your biases. So you need to have a process when you leave the office
of cleaning out Have your body from good or bad chemicals. And the
best way to do that is actually physical exercise, where you do an
activity that raises your heart rate to 80% of your max for 20
minutes.And that's been shown to reduce in the the negative effects
of the chemicals, but also to clean up and reset your emotional
system. Also, being resilient is a precondition to being anti fragile, to
benefit from volatility and change stemming from the environment.
And I really recommend reading on the seams book anti fragile for
that. Yeah, by the way, once you can afford it, and it's not for
everybody. And you need to figure out ways of getting that before
you can afford it as well as you want to hire coaches, nutritionists,
therapists, even to be able to help guide your learning, and adapting
and the investment because you need a support structure. Any
questions?
No, but I think these are, these are really important books. And so it's
a good way to get started. I haven't read the path of least resistance. I
think the powerful engagement is one of those. Right? It also teaches
you like the concept of distance, which I've talked about what damnit,
Marjorie and like, to your point about recovery, right? The dog of
Wolf gets into that too, like the the the ability to have something a
clear like, structure, right, that helps you deal with the stress.
Correct? Yeah. The correct. Yes. So here's a technique inspectional
reading, because it a lot of people like speed reading. And the issue
with speed reading is retention. And when inspectional reading is a
simple technique, you take a book. And before we and by the way,
you can't do that with fiction. But this is for nonfiction. And what you
do is, you start you pick up the book, you read table of contents, you
get a structure of where things are chapter by chapter, then you go to
the back, and you read the index, and you note the parts of the index
that you know or interested in. Then you go to the front and you read
the introduction, then you go to the back, and you read the last
chapter, then you go and read the first and last page of every chapter.
And then you go through the diagrams. And the pictures. Actually, let
me step back. If there are pictures, sometimes you want to start with
those because that creates images. We never forget images, which
excuse me, we have a very high memory for images rather than facts.
And those images will then allow us to hope the facts that we learned
where you can take the facts and literally put them and project them
onto an image. And then you go back to the index. And you note the
page of the things that interests you and actively look for them. In the
book page by page. And an hour, you can get to 20% of the book
that gives you 80% of the insights from it.And the last thing that it
does is it also if you read the book after that creates a structure of
your in your mind of knowing where things are and improves your
retention. I have a goal to read one book instructionally per week. I
don't do it. Sorry, I have a goal to read one book, especially per day. I
don't always get to there. But generally two, three books. And it's
deepen my knowledge and some books by the way, after you've read
them instinctually you realize that you don't really need to read them.
Because some books should be essays. And some essays
should be outlines. Yeah, there's another little hack, which nowadays,
you can often when there's a new book, you can just first listen to a
podcast or see the author's talk on YouTube and get a condensed
version of the insights. And then you can decide because I think
what's great about inspectional reading is right, you kind of you filter
from like most important or highest level points to the smallest. Then
along the way you can decide how much more time you want to
invest, which is really the time what you invest in a book is not the
money you spend on it, but but the times I think you make me you
make to your point about like time management and your resources. I
think this is a really helpful technique for that
correct failure points analysis. So this is the main tool I used before I
started my fund. And what I did there is I made a list of smartest
analysts PMS allocators, brokers, and the brokers are actually very
helpful. And I went set up meetings with them. And I said, Hey, I'm
about to start a hedge fund. How can I fail in starting a hedge fund?
And then the initial things that they said, I wrote them down. And
then I went through each category. How can I fail at idea generation?
How can I fail at Portfolio Management? How can I fail at risk
management? How can I fail at hiring? How can I fail it at leading an
investment team, so on so forth? The amazing thing was how much I
learned from each individual conversation. The full leverage was how
much I learned from the aggregate conversation, because I found
patterns that even some of the people I spoke with did not know
about. And to answer your question on the the the echo chamber,
you kind of need to do that with different people in your network,
and get it from different perspectives. And also, it needs to be a
constant process whenever you meet somebody new to take to ask
them the question that way, it kind of illuminates the past context and
the work that you've done. But this is a process that I do every couple
of yours.
Yeah. This is actually really interesting, because I spoke to Josh Wolf,
and he said, he likes to study failures, specifically. And I think actually,
this this slide alone could be a whole separate talk that you could give
the idea of like, How can I fail at setting up a fund or setting up a
research process and then aggregating what, you know, the, its
people think they can imagine and conjure this up within themselves.
But your point is, like, there's a lot of things you have not thought
about that you should think about that
you will never actually it's how we found the silent killer, high
personal overhead, high personal read, yeah, a lot of the hedge funds,
the managers as they do better increase their personal overhead. And
that personal overhead ends up being this monkey on their shoulder
that they have to view every single thing through, and it impacts their
judgment, their risk taking ability, and so on. And, and we call the
silent killer, because we've seen it kill a bunch of hedge funds, but the
manager never talks about it. Never talks about that, that was the
reason actually that they can take risks anymore. And it goes,
stepping back. Great Investors often have a very frugal nature. And
they're often made fun of for their, their for being cheap. But I think
that's actually a precondition to having good judgment. I mean, there
are reasons why why Buffett lived in Omaha, the cost of living there.
And, and, and early on when he was starting was that was a very
important precondition. And also, you don't have to compete with the
Joneses, which is a big problem in New York City. So we found, you
know, at least a dozen of these invisible patterns that are impacting
portfolio managers through through doing a failure points analysis.
And by the way, there are other people that have done something
similar. And stoicism, Prema prema, de Tato. Malorum is actually a
practice Tim Ferriss, he has a great exercise called fear setting, which
is useful to do. And it's not a pre mortem, it's a pre mortem that you
do with your network, where you get the perspective of your network.
Or learn how to communicate, public speaking, writing one on one

communicating. And remember, it's those that communicate well that
get given positions of responsibility. Peter Coffin, and the book that I
suggest to read here, Bird by Bird, by Anne Lamott, I have a
intellectual crush on MMR. And this is actually not just a book about
writing, it's a book about really a book about life. And by the way, I
am a believer that there's a strong connection between good writers
and good investors. Some people disagree with me, but it's
something that we look for we look for signs of good writing, clear
thinking, correct. generating insights.
The best insights are qualitative. And I'll let the the audience read the
quotes but it's basically you know, two Look for these insights. And
the problem with insights is that they're rare. By the way, in your
knowledge management system, you should be writing down insights
that you've learned over time. And whether you've learned it from
somebody else, or insight from yourself, and then what happens is
when you learn an insight, also, keep a list of goals and problems that
you're trying to solve for. And constantly check to see if the insight
can help you solve for that. And don't depend on the magic of your
brain to come up with an answer. Sometimes you need to manually
go through each thing, as a setup first, by the way, part of generating
insight is a struggle that you need to go through before you generate
it, and then letting it go. Doing what's called Change the channel,
meaning you are doing something intellectual, and you change the
channel to doing something emotional or physical, and letting your
subconscious go and work on on the idea. And invariably, sometimes
hours sometimes months later, your an insight is going to drop. And
the best book on this is his book, The breakout principle. By the way,
a waste of genuine insights, novel experiences, constantly trying
something new, whether it's investing, or a new hobby, learning a
new skill, sometimes that can go in color. And retroactively color, the
contact the previous context you had in your mind about an idea,
masterminds. Get a bunch of very smart people together, and test
your ideas against them, see if you get feedback on it. And then the
third way, which is the way that we really believe in for generating
insights is in the field. It's when you're visiting companies, customers,
suppliers competitors, that an insight will drop that will help you
make returns. [Anil's comment: Earlier I used to organize everything in
evernote. My Evernote has become quite bulky and under one tag there
will be more than 30-40 notes. So I have started maininting my
Insights/key takeways in another app called Notion.]
You want to study great investors, CEOs and leaders. But again, be
careful of HERO worship. You know, I think we often imagine these
individuals have qualities or abilities that are better than anyone elses.
And some do. But mostly they're schmucks like us. Okay, they have
the same weaknesses, patterns, they self sabotage. And don't think
that they play perfectly. Very often, they also may have gotten lucky
and have gone through a certain environment.Other times, they
have support structures that we don't see, you know, so and you got
to remember also that you're never going to be able to replicate what
they've done.Mostly because they are not going and we are not going
to go through the same environment that they went through. Also
5% of what these guys have done as usually given them 95% of
the results. So how should you study a hero? You want to study their
initial conditions? What was the early context, circumstance and
environment that shaped them? And one thing that is often ignored
by Buffett and Munger fans, for example, is that they grew up in the
depression and the aftermath of the Depression. And that really
impacted the way they saw things after that. No wonder they were
infatuated value investing early on. Who were their connectors, who
were their filter aggregators, what hubs that they spend time at? Who
was the right arm? Who was their left arms? And aren't any of these
locations or individuals were studying? What books were they
influenced by? Buy these books and read them? For example, Elon
Musk loves the books of Ian Beck's the science fiction writer? Why?
What tailwinds economic conditions and environments they
benefit from, what structures and conditions that these guys
create leverage or exploit, or their strategies, techniques and
processes. More importantly, what was their secret advantage?
Sometimes they have an advantage that they never talk about, and
figuring out what that is, can lead to insights. So some of the guys on
this picture that I admire, Dan Loeb, David Tepper, John Griffin, one of
my favorite owner, operator, investors, James Goldsmith in the
middle, and then the big tiger who just passed. June Robertson, a
friend of mine sent me that picture, it's one of my favorite pictures of
joint.
Yeah, it's a terrific picture of Tiger. I've never seen that one before. So
this is I mean, I think this also could be its own its own talk. But I think
it's you make the point that it's really important to study these people
in context and not just take a few quotes and like, Oh, he did X, Y, and
Z. And here's the method, right? There's books about how does
Buffett pinker stock or, you know, David Tepper does a certain trade.
And it's easy to get hung up on that, versus studying, sort of studying
the life and studying kind of the motivations that people, as you said,
Read, read the books that they recommend and kind of get a better
understanding of why they do, how they do what they do.
Correct. You know, the, in some people, a lot of these famous CEOs
like to say stuff like, here's my morning ritual. You know, and but wait,
what's the leverage that you've set up? Or have exploited? Let's talk
about that, and how to replicate that? It is actually it's common. I call
it camouflage. Yeah. It's a way for the predator to hide that he's a
predator. By the way, whenever you're studying, sorry, go ahead.
It's like if Buffett goes to McDonald's or to Dairy Queen, right. That's,
that's a quirky, that's interesting to see. But that's not going to help
you. Right, achieve the same success. So you're
correct. By the way, the one on Buffett, that is one of my pet peeves is
that he spends all day reading, study, and him in the beginning, and
how networked and jacked in this guy was, right, you can spend all
your days reading once you've created a network, and you've created
a system of inbound phone calls that people that want to call you
with ideas. But if you think as a young analyst and young person, that
you're going to spend all your days reading and replicate what the
big guys done. Good luck. What's their operational history, these
heroes that you're studying, you need to create a timeline of it and
having gone through it. And by the way, ask, were they good? Or was
was their competition really bad. And again, when you're studying
these guys, if you boil it down to four things, and this is how we do it,
because part of behaviorism is study to study behavior, and every
market participant. We studied them at four levels. We want to know
what other skills are their psychology, what's their positioning, and
what are their institutional quirks. And that way, when we look at an
investment, and we understand market participants across those four
dynamics, we can understand whether the players are creating the
opportunity that we're going to exploit.
Study philosophy to get an advantage. Great investors know that

there are three main competitive advantages in the investment
business, analytical, informational, behavioral, but there is such a
thing as a philosophical advantage. If you think of what value
investing is, is as much a philosophy as it is a way of making money.
And by the way, three investors that we really respect that their main
tool we think, has been philosophy, our Bill Miller, Peter Thiel, and
George Soros. They all mentioned philosophy as a part of their toolkit.
And philosophy allows you to gain perspective gives you mental
construct and frameworks from which you view the world and gives
you an interpretative context. And, and somebody was joking around
about Peter Thiel, and said, He is the world's richest applied
philosopher. And I liked that a lot. That saying, and by the way, these
philosophy books that I recommend are not these are the type of
philosophy I'm interested in, which is the difference between Eastern
thinking and Western thinking and isolating those differences. And
those three books cover that. There's also a lot of other wisdom in
those books. For example, inevitability thinking, as a way of thinking is
really covered by the first few chapters of Roger Eames Art of War,
which is a total different interpretation and translation of the classic
book on warfare. By the way, the old Chinese believed that
philosophy but they also thought that warfare was a great place to
test the philosophical concepts that mattered. So that's why I think
that this book on the art of wars is in fact, the best translation I've
read maybe a dozen of them.
You want to study cheaters and cheating. And again, here's a very
important disclaimer, kids. I am not condoning you to be a kidnapper
or a con artist or a pirate. I'm saying this in terms of studying
something that very few people study as a way to improve your
judgment and hopefully this doesn't happen to you. One of the ways I
became a good short seller is learning about con artists. A lot of great
shorts behave more like a medium and long con operation than they
do standard business. practises. So it's important to read about con
artists, the economics of kidnapping are fascinating. One of my
cousin's got kidnapped in Haiti. And, and the the negotiator that
helped them get out, use lessons from economics to be able to do so.
This book on piracy that we think is fascinating. Again, you know, the
by the way, there are other it's a, it's a no your enemy. way of seeing
things. There are other types of cheating by the way, steroid uses and
sports, cyber warfare, espionage, money laundering, snipers, it's very
important to to have these mental models in the background as a way
of of finessing your judgment.
I think you're making a really important point with that entire class,
because it's very easy to sort of come out of school and think that,
you know, business and financial markets are, for lack of a better
word, clean, everyone playing fairly and like what's being presented to
you as the truth, right. And there's all these regulations and
disclaimers. And then I think as you read these books, and you read
history, and you read articles, and you study scandals and blow ups,
you realize how much there's going on that's, that can really trip you
up as an investor, as a businessman, as a partner, if you're not paying
attention to what people actually do, which is often
correct or correct. When I study the small versus the big, learn how
small things have overtaken big things. Sometimes you see that in
business where small, medium sized company all of a sudden has
advantages that can overwhelm a larger business. And again, there
are other books on this. But here are the three that I like the classic
study of guerrilla warfare, which is war of the fleet. There's another
book called violent politics, which is a fascinating read David and
Goliath by Malcolm Gladwell, and little bits, by Peter sands, which is
how to do small things that eventually lead to big outcomes. And I
think that the in by the way, it's also a lot of the learning projects that
we've taken on, had been to study countries and businesses, and
individuals that started small, and that that made big things and you
want to have those mental models as your as your as reference points
in your mind.
Learn the psychological frameworks. The three that I've chosen here,
behavioral finance and Prospect Theory, for self management, and
maybe managing a small group of individuals, Personality Typing and
The Five Love Languages. Now, love language is something that was
chosen for for relationships, but there's actually leadership
applications. And one of them for example, is have a young
consultant, that if I tell him do XY and Z 80% chance he does it. But if I
take my hand and put him on his shoulder, and say, Hey, do XY and Z,
he'll break through walls to get it done. He just happens to be touch
Orient. And by the way, there are sports teams, there's research has
been done on basketball teams, that's true of basketball teams that
are more touch oriented actually win more. You know, so, so these
these psychological frameworks, they work but as usual, you have to
know the flaws to them. You know, by the way, it's hilarious to watch
smart people criticize Personality Typing, specifically Myers Briggs,
when a friend of mine calls it, for example, astrology for nerds. And,
and, again, what you have to remember is the highest performing
organizations in the world, whether it's sports, investing, or
intelligence actually use Myers Briggs, you just have to know the flaws
of Myers Briggs. And remember that all models are wrong, some are
useful. By the way, the one of the flaws of behavioral finance is about
individual behavior. I've mentioned this before, so it's good to
measure yourself and in most a small group of people for larger
groups, the principles break down. And markets are about group
behavior. And to find group behavior fallacies is difficult using
behavioral finance, you actually have to figure them out on your own.
I mentioned before the difference in personalities, you know that
what works for personality might not work for another, and to keep
testing these things out by the other psychological frameworks that
we think are important or Neuro Linguistic Programming parts which
is internal family systems the Kubler Ross grief cycle, and you Graham,
but there are others it's, it's good to be able to know how to apply
them and to devise processes around them.
Here are the books that I think are important to read on exploiting
group behavior, you have to use what's called non Aristotelian
philosophies. So philosophies that are outside of the ways of thinking
of the West, which was devised by Aristotle. So systems thinking,
complexity, chaos theory, cybernetics are all things that help you to
be able to understand systems and networks and groups. Cooper
rainbows in here with the edge of the unthinkable but also his
phenomenal book, The Seventh Sense, Russell, a cough Russell, a
cough is the guide that a lot of people like to quote, but never give
attribution to. Very important to read his work. And there are others. I
added the intelligence trap here, which is a book that McMurtry
recommended, which I think is excellent a
lot of reading, where would you say if somebody starts with these,
like, where would you guide somebody who's new to, let's say, your
intellectual curriculum? Where should they kick off?
I would start with thinking and systems by Donella Meadows, which is
this book here, you see my mouse? Yes, yeah. And then go on. But
really, in fact, probably what I would do is read each of these and
sectionally over a period of weeks, and then start with one and then
just knock them off. There's no such thing as being good in the
investment business without reading a massive amount of stuff. So I
know it's a lot of, it's a lot of information. And by the way, this this
video should really be a reference document as much as it is a
consume in one spot. It is what it is,
What's priced in. So I get into the investment business from I was
basically playing games for a living, and backgammon in poker, you
can quickly look at a situation determine what the odds that are
priced in are. Whereas a stock, it's actually very difficult to actually do.
Luckily, a friend of mine introduced me to the work of Michael
Mobizen. And I cold called Michael spoke to him. And he actually told
me that he taught a class at Columbia Business School, and he has
not gotten rid of me since. And the entire process that he gives, which
is done for free on a website called expectations investing.com Or
even provides you the Excel spreadsheet where you can actually do
this is their go find it. But guess what, the majority of firms actually
don't like the process, which is incredible, too. And it's a big
competitive advantage to be able to use. But there's,
it goes in the opposite of what people typically do. Right? So it's very
hard to integrate. If you have a big staff, you have an established
process. It's it runs counter to what you're already doing. So I think
institutionally people would have a hard time adopting that because
every CorreX done their entire career in a different ways.
And thank God they do. Okay, because it's better for my pocket and
that of my friends and and mentees. So, the process is to take
assumptions from the analytical community, plug it into a DCF when
it comes to growth, margin and reinvestment rates, and see how
many years of cash flow the company has to generate, to justify those
assumptions. It's a very simple process. Once you get to know them,
know the process, it can take you Max 10 - 15 minutes to do. But it's
also part of your procedures that you should do all the time and
repeat it.
Also. Remember that I said you should have a process of four hours
to kill an idea. One of the things the components of that process
should be to do a PE, the price implied expectations. There are other
ways of doing this. Okay. One of them is options, price implied
expectations, there's a way to use option prices for the short and
midterm, where you take the price of an out of money, excuse me,
you take the price of an in the money option, a put option in the
money call option, take the amount divided by the price, and actually
gives you the percentage that the market expects to move up or
down. And that percentage is the the, the amount of times that it's
correct is very, very high. So if you have a thesis, and the price target
deviates from that, it can actually give you an indication of what's
priced in other ways of doing this is narrative analysis, where you take
the narrative of Twitter or media headlines, and you timeline it and
actually see what people are thinking or feeling about something.
Another way of doing this is taking a research compilation, where you
take all the research written about a stock and go through the
headline and the first pages and see hey, what are the points that
people keep making? Or the points that people not making? Another
way of doing that is bull bear debates, which is you, you call up a bear
on a stock and you argue the bull side they argue the bear side, see
what the points that they make? Where are they holding on too tight?
This is where behavioral finance can be useful. Where are they loss
averse? Where are they anchoring to a point? Where are they being
emotional, that can be a point of tension that you then go in and
exploit. You can do what's called leading versus lagging indicator
analysis, you speak different market participants on an idea and see
which one you expect is a leading indicator or a lagging indicator.
By the way, we also use very simple valuation frameworks. Take for
example, a company whose market cap is 30 billion. Well, at a 5%
discount rate, the business would have to earn 1.5 billion and free
cash flow to justify the market cap, assuming no growth. But these
assumptions can then be further built on let me assume that this
business does a 20% free cash flow margin. Well, that implies that the
business can do 7.5 billion in sales. If the business charges $500 a
year, it's a subscription business. That's 7.5 billion divided by 500,
which is around 15 million subscribers. Right? By the way, this is
actually an exercise that we did very simply both times that peloton
was at 30 billion on its way to to going up but also when peloton was
at 30 billion right before it went down. The implied subscribers that
the market cap was implying was very high. So you can basically say
wait a second, the business has to grow and buy at the time peloton I
think had Max 3 million subscribers it has to go from 3 million
subscribers to to north of 50 million, by the way, the assumptions that
we use were very aggressive, a 5% discount rate, a 20% free cash flow
margin. Right. So there are ways to figuring out what's priced in. And
it's in a very simple way. And you have to build those into your
intuition.
Yeah, I think the framework is the most valuable almost at, at
extremes either extreme when the stock is very, you know, when
valuation looks very low or when you know you're not 2021 type
environment where you're gonna have to understand like, what all the
things that have to go right and happen for this valuation to be
justified. And you can kind of see how far something's out of over its
skis. It's kind of a way to like sense check. Correct? The market is
doing?
Correct. But also, sometimes we go through environments where
valuation matters. And other times we go through environments
where valuations don't matter, and actually asking that question is is
important. 2021 towards the later end, when interest rates start to
climb, valuations start to matter. And by the way, that rookie analysts,
sometimes they haven't taken cash flows and played around with how
interest rates can actually impact them up or down. It's a very useful
mental model to have in your mind. And I know it sounds simple, but
very, some people forget it sometimes.
You want to become a specialist and and customer focus
businesses and what makes a great product. And in the end, what
makes a great product is if it's emotional, now we like products that
have an emotional relationship with our customer. We like the
emotions to be based on seven emotions, vanity, lust, greed, fear,
relief, addiction, nostalgia, some of my friends, like other emotions,
but those are the ones we like. For example, on Spotify is a very
nostalgia driven product. The Apple iPhone is all seven of those
emotions. Right? Instagram, very vanity, lust. It's very addictive Tiktok
literally all set. You know, it's helpful to design to study design here.
You also want to learn advertising, marketing, sales distribution. You
know, my buddy Robert Rifkin, the CEO of Compass, he likes to say
you're always marketing. If you're talking to a customer, you're
marketing, if you're talking to an employee, your marketing, because
you have to get him to believe in the mission so that he goes and
accomplishes it for you. If you're talking to a supplier, you're
marketing, it's very important to have the marketing frameworks and
mindsets. And the books that I recommend there are are decent,
there are other great books, but these are the ones that I like.
You know, process that minimize your biases. The order the long view
gives you the process of coming up with scenarios. And then tracking
those scenarios using signposts over time. Psychology of intelligence
analysis gives you some processes that minimize your biases as you're
thinking. So for example, ACH analysis of competing hypothesis,
which is a way of taking scenarios, and then taking each hypothesis.
Sorry, excuse me taking scenarios and taking each event and see
which scenarios does it confirm? Right? It walks you through how to
do all of that. Now structured analytical techniques. The third book is
taking psychology intelligence analysis, but refining it to solve for the
errors of solo analysis. And part of structured analytical techniques,
which I think the title is off, because it should be networked analytical
techniques is to take your work and constantly getting feedback from
it from your network. And it shows you how to do that. And these are,
this is a very important book. And both those books the last two are
what sophisticate intelligence services actually used for analysis. And
they're useful to take these tools and apply it to investing.
Dealing with power dynamics inside investment firms. Now, again, the
ownership structure, the legal structure interacts with the team
structure, whether you're a generalist or a sector, specialist, team
structure, these all have different cultures, different power dynamics,
different centers, and then they interact again with the the leadership
and others. But here are some common scenarios that you're going to
deal with because it's going to be more important. The first is turf
warfare. An analyst is giving a certain coverage, but you have an idea
that actually interferes with his turf. What do you do? The advice that I
give is, it's not about turf warfare. It's about protecting and enhancing
the money of your partners. So if you think that going onto his turf
actually helps you do that, by all means, go and do it. Second one,
raining on on on another animals, this parade, he's pitching a name
and the Investment Committee. And clearly he's missed something.
But the firm has a Paul has a unsaid policy of hey, you don't kind of
rain on his parade while he's pitching it, but you're talking to them
afterwards, when it doesn't really add any value. Again, there, I'd
advise you to read The Five Dysfunctions of a Team which actually
says to be vulnerable, and to actually say, Hey, I think what you said is
actually incorrect. And here's why. And how they do have it happened
in a collegial setting where everybody can learn from from those
interactions. And again, it's important to remember that confrontation
leads to truth. Right, and that you can get a lot from these sorts of
interactions. I remember being in an investment committee meeting,
where, where I raised my hand to actually mentioned an error than an
analyst had made and that led to us making one of the best
investments that the firm that I worked for made, right. The two
books that I suggest also you read here, survival, savvy and control
and leadership guide to leadership. There are other scenarios that are
very, very common. Then, but But again, remember that the the
politics, the institutional imperatives have nothing to do with making
money on the contrary, they can actually stop firms from making
money. So being overt about them and and bring them out into the
open can help a lot and solve a lot of issues. incentive structures is
another scenarios. By the way, if you take a smart analyst, and you
give them an incentive structure, his fiduciary duty to his family is to
figure out how to hack that structure as fast as possible. So as a PM,
you have to figure out a way that if he does try to hack it, it still
benefits the investors, the firm and the PM. And that's actually fairly a
nuanced and hard to do. Another very common scenario is hacking
your Pm. Right PMS have ways of thinking and behaving and smart
analysts figure out how to pick ideas that fit that, that PM, one
famous story is a PM, that one of the analysts figured out that every
single time he pitched them an idea, one of the first thing that pm
would do is look at the holders. If that pm saw Steve Mendell as a
holder, Steve manda of Lone Pine, that idea was going into the book.
And the entire analytical team was like, how does this guy have 40%
of the long equity and the book? Well, the analysts have figured out a
way to hack the PM. Right? And by the way, that's a very simple
scenario. But it's extremely common. And there was a time when
every single hedge fund had a guy like that. Right? Every Pm is
hackable. And by the way, as a PM, you have to let your people hack
you sometimes you also have to know when to go and punish the
ones that try to do so. It's a very nuanced thing. And again, that's a
point and concerns leadership's guide.
Don't disregard fiction. Okay. Yes, you have to read history. Yes, you
have to read business books. You have to YES to read biographies. But
I think a lot of analysts forget about fiction. We're as as human
chimpanzees, I think we're story driven. And we remember the lessons
of stories often better, because story is emotional. And it's been
imprinted on your emotion and you remember it better. And too
many young and old analysts ignore fiction that and that's a mistake.
And a great fiction books allows you to build better relationships with
people. If you've read the books that they've read. One of my closest
friends Jonathan our back, him and I bonded over the book noble
house. And and and this is after years of us. Or at least of him staying
away from me even though we were introduced by a by a very good
common friend, I but once we figured out our love of the book, noble
house, that was the start of our relationship.
And last learning projects. Now learning projects, when you take time
and resources and apply it to feel the JSON to investing that will be
give you helpful mental models that could be applied to investing. So
fields such as military, intelligence sports, right now, one of my things
is to learn from movie producers and movie directors fascinating. And
again, learning projects can last for months, and are best when you
include others. Once you've learned something. It's very important to
then take questions and call the people in those fields. One of my
investors came because I was doing a learning project ended up
calling me cold calling him asking questions, and we stayed in touch.
And eventually, he asked me about my fun and then invested. So So
you have to be strategic about your learnings. And I don't say they
should be hours, you know, I think I spent six, seven hours a week,
which is about, you know, maybe 10% of my time on on on these
sorts of learning projects currently. And like I said, currently, I'm doing
movie directing, and producing and also writing.
So that's the conclusion. I think it's important to remember that
learning is behavioral change. If you learn anything from me today,
take something and then go and behave and have your way of
behaving changing somehow for the better and testing it out. The
second thing is it's not a destination, okay? It's a process This is a
journey. There's no such thing as not learning. You're learning all the
time. And then last, remember, our business is fun. Okay, a really eat,
we're given an opportunity to compete with our minds speaking to
some of the smartest people in the world, and to learn from them.
And it's fun. I know. So that's the presentation. And make sure to look
me up and And anywhere that you can find me on LinkedIn or other
places to ask me questions. Want to make sure that you do you have
questions for me, Frederick?
Yeah, no, I think this was I think this was terrific. And I totally agree
that with your bias towards action, and actually changing behavior,
not just learning for its own sake, although of course, you want to
learn and you want to study, but then ideally, you, you implement it.
And I think, right, Charlie Munger has this great quote of the most
successful business people he knows or what he calls the learning
machines. And then if you look at Munger, specifically, as a person, he
might be somebody who sits in a chair and just like, reads one book
after another, and reads learns primarily through reading, but that
doesn't mean it has that that's the right approach for everyone. Right?
And I think what you're emphasizing is a lot of this. Okay, so a lot of
noise. How do you learn socially? How do you build networks? How
do you make it fun? Versus just saying, like, oh, I have to learn all this
stuff? Like, no, it should be a fun and creative process. I think those
were very valuable takeaways for me. What I did want to ask you
about is the beginning of the presentation, right? You kind of
outlining the challenges for the analyst. And now the analyst is saying,
like, Okay, I've got all these things I want to learn, and I'm aware of
these things. But I might be the only person in an organization who's
just kind of seeing this and who gets some ideas out of it. How do
you think about people implementing this when they're in a hierarchy,
right, and they have to pm who may or may not subscribe to the
same ideas? Like, how do you have these conversations, in terms of,
you know, practice and doing more reps and like implementing some
of these these ideas? Like, you just post your Pm? Or how do you go?
So you, you know, approaching your Pm, and by the way, first you,
you should select a PM, that's into learning. You know, when you're
interviewing a PM, you know, it's going to be very apparent early on,
if he's a learner, or if he's not learner, you know, there's going to be
book recommendations, there's going to be suggestions there's
going to be teaching, you know, there's going to be the kind of
questions he asks, you know, a, I have a saying, to always meet a
person that a question or book introduces you to, you know, and it's
very important to first select the guy that's a learner, because if your
learner, and you're working with guys that are not learners, you know,
you're gonna be banging your head against a wall. So that was the
that's the first thing.
The second thing is teach things to your analysts, peers, and, and
teach things to your Pm, you know, the, the you want to add value
to your peers, and don't expect credit for it. You know, my next
memo is about Julian Robertson. So I'm going through all of my
anecdotes that I've picked up over the years. And there were two guys
inside of Tiger in the 90s. One of them was Andreas aalverson. And
the second guy, he shall remain unnamed. But if you were a young
analyst, you went up to undress and said, Hey, I really liked this idea.
And I want to pitch it to Julian Andreas would say, look, let's work on
it together. I help you shape the idea show you point you in the right
directions, the strengths and weaknesses of the ideas and the process
that you should take, and so on. And then once you're ready, go and
pitch it to Julian. And that analyst would go and pitch to Julian and
Julian wouldn't even have a clue that Andreas had pushed us got
forward. Right? The other guy would would take the idea and, and
speak to Julian and say, you know, I spoke to so and so he's got an
idea. I think the idea is okay, but it's not really fine tune yet. I'm going
to help them fine tune it. Right. And then they would go and do that.
And that guy, that young analyst never really got the full credit from
from Julian. Right. Now, what's interesting is today, guess which guy is
actually the wealthiest and most successful the fund managers and
that by the way, the second guy is also very successful, but again,
doesn't matter. It's undress, right? So you want to be that guy. You
want to have a cultural impact on your business. So be the teacher. Of
course not everybody is going to learn. People are going to find you
preaching and all but you will find the guys that really you know what,
that was actually thoughtful you did add value to me. And part of
become meaning a partner. And the business, which is should be the
goal of any analyst is to have a cultural impact on the business. And
to do that, you have to have an impact on the values and the rituals
of the business. So I will say that's that, if you don't have that, you
have to go outside. You can't share information of your business. But
as much as you can find peers and mentors and groups on the
outside that actually can help you with that.
Makes sense? All right, this was terrific. I think people are gonna find
a lot of ideas in this. I hope. So. Thanks a lot for sharing, of course.
And listen, thanks for having me. And again, you know, thank you for
your work. You know, you, you, you, I think you make the market
more efficient by teaching things. The things that you're writing and
learning about so in a way, that's bad, but I learned a lot from it. I
learned a lot from it. And thank you.
Yeah, thank you. All right. Let me let me see

Learning For Analysts and Future Portfolio Managers With Alix Pasquet III

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Learning For Analysts and Future Portfolio Managers With Alix Pasquet III

Uploaded by

Copyright:

Available Formats

Learning for Analysts and Future

Portfolio Managers with Alix Pasquet III

Frederik Gieschen 00:01

Alix Pasquet III 35:15

I love this from Patrick O'Shaughnessy. He says, instead of pursuing

The intuition problem. So I once was at a lunch with Josh Waitzkin,

Alix Pasquet III 1:07:26

You want to develop the ability to crowdsource this is a key old

Or learn how to communicate, public speaking, writing one on one

Study philosophy to get an advantage. Great investors know that

You might also like