Sam Hinkie

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Supported by Greenhaven Road Capital, finding value off the beaten path.

Sam Hinkie joined Patrick O’Shaughnessy for a conversation about decisions, basketball, and marriage. The marriage (and parenting) portion, ~35:00 was an excellent portion. In a world of life hacks, time hacks, new apps we (I) sometimes overlook (forget) it’s the people that matter.

Following interests. Hinkie’s been a long-term thinker since he was fifteen. “I’m just wired this way.” Aligning actions with dispositions brings better results. Mohnish Pabrai said that if you’d rather see a movie than read annual reports, you probably won’t have the potency to be a great investor. Hinkie’s bent was toward long-term success as he defined it. It was a race where only he knew the distance. Scott Malpass told Ted Seides something similar:

“…at the end of the day we don’t really care much about what other people are doing. We’ve got our own risk tolerance, our own mission. We are going to do what we need to do for Notre Dame.”

Your mission doesn’t need to be an inebriated whim to charter a boat and sail around the world carpe diem style. Rather, pay attention. Hinkie said,”pay attention to what’s happening elsewhere and try to apply what’s working in other places to your place if it matches, to your decision criteria if it makes sense.” It sounds like Ray Dalio‘s advice to find another one of those. Dalio said, “Basically everything is another one of those … the key to success is to identify which one of those it is.” Start with, the world is this way because…

Sometimes which one of those is already figured out. Hinkie suggested; “Substitute your weak judgment, when you don’t know much about the place, for someone else’s strong judgment when they know more about it.”

And, “If it works there, kick it around and at least start with something that works somewhere else in some other place in the universe.”

And, “It’s conventional wisdom because the consensus has settled there and it’s more or less right. Conventional wisdom should be a high bar. It should be a bulwark against progressivism.”

And, “Where we are now might not be right, but it’s clearly the best answer we have.”

And, “Our early check was if the San Antonio Spurs did it.” If their day or two of analysis suggested something different from the Spurs they double checked the analysis. “The burden of proof,” Hinkie said, “is on the new comer.”

Hinkie focuses on things he can do well. He’s works best with a long-term orientation. He works best when he can help and is interested. For startups; “My criteria is; is this in a space I deeply want to learn about and I think is likely to be very big…and, is there something about their stage, experience, or needs that I might actually be able to help them?”

Solving puzzles. “The most fun for me,” doing data analysis, “was all the behind the scenes work with the people in the trenches trying to get to the right answer.” That’s not to say there is a right answer. Data isn’t a silver bullet, it’s a shovel.

Mina Kimes said, “I look to data to find answers to basic questions and if I don’t I almost find it more interesting that if I did find the answer.”

“There’s art to every single process,” said O’Shaughnessy. “I think you’re on a never-ending search for better inputs,” said Hinkie.

What’s important is to be solution agnostic. In another Invest Like the Best podcast, Morgan Housel said, “The most powerful concepts are those that span multiple disciplines.” Jason Zweig added, “If you are not judging the validity of ideas by long-term, objective, peer-reviewed evidence then you are just protecting your own identity and that’s foolish.” It’s the ego, not the hammer, that sees every problem as a nail.

“I don’t care how to get to the best decision, I just want to get there,” Hinkie said.

How do you get this? “What you really need are intellectually curious thoughtful people, with all their own sets of experience to bring to bear on this and to have a culture of trust where you can call BS when you see it.”

It’s good people within the right culture. Hinkie references Netlfix’s culture deck and co-molder of that deck was Netflixer Patty McCord who wrote:

“A great workplaces is not espresso or lush benefits or sushi lunches, grand parties or nice offices…Well, a question I often ask people when they ask me that, so I will ask you that, if you think about the time you went home from work and you spontaneously told your spouse or your pet, ‘Oh, my god, it was a great day at work today.’ It’s almost never that there were macadamia nuts and the cookies or that mojito was just right.”

Ben Horowitz agrees:

“Yes, yoga may make your company a better place to work for people who like yoga. It may also be a great team-building exercise for people who like yoga. Nonetheless, it’s not culture. It will not establish a core value that drives the business and helps promote it in perpetuity.”

Good culture is a decentralized command. Good culture is good arguments. Good culture is top-down support. That’s what Hinkie experienced. “I remember sending Daryl Morey a text afterward saying how proud I was to work with him because he would have the courage to do what is right even if it was unpopular.”

That unpopular move was possible thanks to top-down support. Morey’s boss, Leslie Alexander told him, “Who cares what other people think? It’s not their team.”

What Hinkie and O’Shaughnessy are striving for – what data and teams and culture are the means for; is figuring out the perception-reality gap. Hinkie tries to invert the endowment effect. “We would try to reverse it to get rid of the endowment effect. If I already had this player, would I trade for that. If the answer is clear in one direction there’s real signal in that.” Though even in his explanation if the answer is clear Hinkie implies the difficulty in this. The GMs come up with some solutions. So does Malcolm Gladwell and Bill James.

James (wrote Michael Lewis) succeeded because he was an outsider. He saw the game differently. Baseball Abstract (1984) “is a book about what baseball looks like if you step back from it and study it intensely and minutely, but from a distance.”

Gladwell told Bill Simmons this is what teams should do, literally. Have a veto-GM on another coast.

Another puzzle solving tip is to invert. In Hinkie’s class at Stanford he teaches negotiation and says the best way to negotiate well is to prepare well. “Deeply try to understand the other side in an empathic way.” Bryan Caplan created a test for that.

Thanks for reading.


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