Supported by Greenhaven Road Capital, finding value off the beaten path.
- Writing, like any skill, takes practice.
- Writing is a way to organize thoughts.
- The only three questions that count.
- How Fisher picks stocks.
- Fisher’s favorite books.
Round two had new topics. Ready?
1/ Venn thinking/talent stacking. One way to succeed is to be great at a few things, the other is to be good at many. Charlie Munger is the latter. So is Scott Adams. Fisher says that companies can be like this too and calls it “multiple compound yields.”
“IBM never had the best computer but if you took all the pieces of what they did, they compounded to the best totality for the customer.”
There are two ways to escape from the triangle of mediocrity. The red path is to have many skills but none best in class. This is the Munger & Adams path. The other, yellow, is to have a few well-defined skills. Professional athletes, accountants, and pilots follow the yellow model. Fisher suggests that companies can be identified this way too. If IBM is pretty good at many things that make them a great company.
2/ Rapid fire.
- “People invest based on the way they feel, and the way they feel is almost always backward looking.”
- Annuities are a complicated contract “that’s almost never understood by the consumer.”
- The fiduciary rule is “a stupid rule with great intent.”
3/ Options. Ritholtz asks why private companies are staying private for longer and Fisher says it’s because they have options. There are alternative sources of capital and the public sphere of regulation costs and public pressures aren’t that appealing.
Remaining private may not be the end goal, but having the option to wait is valuable.
Arnold Schwarzenegger credits his movie success to his real estate investments. Schwarzenegger says that thanks to rental income from a four unit building he owned he could be choosy in for his roles. When he came off the body building tour, Schwarzenegger was mostly offered roles as a cop or prisoner or, and this is true, a body builder. He didn’t want to take these roles and he didn’t have to.
4/ Contrarian experiments. To outperform others in certain domains you must be different and you must be right. Sam Hinkie wrote about the challenges of this in a zero sum environment but it’s difficult in fields like investing too. Fisher says that because he was the youngest of the brothers:
“I had to figure out different things I wanted or how to get them a different way…I’ve been prepared to operate by trial and error, you can do a huge amount of small things on a small scale, test them and see if they work, and if they work do them on a bigger scale and if they don’t work move on to the next one.”
Being a contrarian experimenter has helped and it makes sense why:
- Keep doing what you’re doing and you’ll keep getting what you’re getting.
- If I knew what would work I would just do it.
Fisher says he found ideas for things to try in other domains. “What I try to do a lot in my career is to do things that people were doing in other realms that they weren’t doing in this.”
These things will look weird, that’s a good sign that you’re different. They may also look weird for a long time. That’s okay.
5/ A punch to the gut. “Most people haven’t been hit in the gut enough times (like a boxer) to know how they react when they get hit in the gut.”
Jim Chanos said, “I went through [the stock market crash in October] 1987 and I went through the Drexel insolvency in 1990, and I know what the fear of not getting paid is.” There’s something to having been through a difficult experience before. Whether its physical (hiking a mountain), relational (your first major fight with your spouse), or in business (losing a major client). Once you’ve done it and realize you’ll get through it, it allows for a different approach to the problem.
Fisher saw this in John Templeton and said “his spirituality led him to a form of internal calmness that’s rare. He would make investment decisions other people wouldn’t make because he was so at peace with himself.”
6/ See it to believe it. Fisher had a group of early mentors; his father, grandfather, and a “substitute grandfather.” Mentors influence and allow for see it then believe it to happen.
Reed Hastings had this happen to him, twice. His first instance was just getting in the room.
“The lucky break of my life was that I got to serve coffee in a teaching lab for computers. If I hadn’t gotten that first job serving coffee and been so exposed to very this alternative style computer architecture it would never have occurred to me. That changed my life.”
The second moment was when he saw YouTube in 2005. It wasn’t great video quality but it opened Hastings’s thinking to what could be possible.
Ken Grossman saw this too. He was on his way to being a trouble maker except for the men on his street who acted like fathers.
The people in our lives are like the sun. They’re there and if we don’t act to change the situation (get in the shade, put on sunscreen, have good mentors) there will be some effect (tanning, burning). Whether UV rays or ideas, exposures affect us all.
7/ Walking. Fisher says that he likes to walk and spends “as much time as I can in the woods.” History is full of walkers and there’s science behind it. This is what Stephen Johnson wrote:
“The history of innovation is replete with stories of good ideas that occurred to people while they were out on a stroll…How this works is easy to understand. When you exercise, you increase blood flow across the tissues of your body. Blood flow improves because exercise stimulates the blood vessels to create a powerful, flow-regulating molecule called nitric oxide. As the flow improves, the body makes new blood vessels, which penetrate deeper and deeper into the tissues of the body. This allows more access to the bloodstream’s goods and services, which include food distribution and waste disposal. The more you exercise, the more tissues you can feed and the more toxic waste you can remove. This happens all over the body. That’s why exercise improves the performance of most human functions.”
Thanks for reading.