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Invest Like the Best

Exploring the ideas, methods, and stories of people that will help you better invest your time and money. Learn more and stay-up-to-date at InvestorFieldGuide.com
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Now displaying: June, 2019
Jun 25, 2019

This week I have a very special guest years in the making. Like another favorite episode, with anonymous guest Modest Proposal, this conversation is with one of the stars of the financial twitter universe who writes anonymously and goes by the pseudonym Jesse Livermore. I met Jesse 6 years ago after reading his unbelievably unique investing research, which tackled all the big and interesting issues in markets. He now also works with me as a research partner at OSAM, where’s he’s used our data to continue to his search for truth in markets. Despite being one of the brightest minds I’ve encountered he is also as humble and unassuming as they come. I’m at least a slightly better person because of trying to emulate how he conducts himself. I get to have many conversations with him that go from 0-100 fast, and I’m thrilled to be able to share one of those with you.

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

 

Show Notes

1:33 - (First Question) – Jesse’s origin story for investing

4:37 – Exploring his ways of problem solving starting with intuitive

            7:53 – David Epstein Podcast Episode

11:46 – Looking at the analytical way of problem solving

15:42 – Statistical inference

24:45 – Should we opt for simplicity in the investment process

25:26 – Does his own investing include all three, intuition, analysis, and statistics

26:09 – The evolution of his research, process, and thinking on various investment factors.

31:38 – Thoughts on inflation and its impact on market valuation

40:05 – The Earnings Mirage

46:25 – Free Cash flow and valuations

50:51 – What should investors take away from this research

53:01 – Thoughts on trend as an interesting market signal

59:00 – The problems with trend

1:00:34 – Post on “The Single Greatest Predictor of Future Stock Market Returns

1:11:15 – His work into understanding factors

1:15:36 – Looking at momentum

1:18:16 – His curiosity into the current market cycle

1:20:04 – Lessons learned from his time in the military, an effective way to create an environment where people can safely disagree with their co-workers

1:30:10 – The concept of progress in meaningful work

1:33:08 – Kindest thing anyone has done for him

 

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

Jun 18, 2019

My guest today is Chuck Akre, a now widely famous investor who founded Akre Capital Management in 1989, which now manages approximately $10B dollars. We discuss his investing style and his “three-legged stool” for evaluating companies. Please enjoy this great conversation. 

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Show Notes

1:06 - (First Question) – Advantage of being in Middleburg, Virginia

2:11 – What a day looks like for Chuck

3:06 – Why imagination is more important than knowledge

3:38 – Difference between curiosity and imagination

4:38 – The origins of the Nirvana Three-Legged Stool concept

10:14 – First leg of the stool, Extraordinary business and ROE’s with a focus on Bandag.

14:36 – How his evaluations of value has changed over the last 10-15 years

16:10 – A look at recent businesses that he’s bought and why they are interesting

19:56 – Why they keep things simple

21:35 – Second leg of the stool, the people involved and characteristics of managers he has invested in

23:20 – Role of capital allocation in the people he focuses on

28:03 – Favorite biographies

            28:22 – 100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities

29:34 – Third leg of the stool, reinvestment

21:09 – How does he think about diversifying across an investment area

33:32 – Great businesses wrapped in a bad balance sheet

37:35 – What would cause him to sell

38:52 – What does he look for in people

43:27 – How curiosity has impacted his interest in land conservation

43:51 – Advice for investors, especially younger ones

46:14 – Kindest thing anyone has done for him

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

Jun 11, 2019

My guest this week is Jerry Neumann. Jerry is one of the most thoughtful early stage investors that I’ve encountered, and his writings at reactionwheel.net are my favorite on this topic. He applies an incredibly structured way of thinking to a notoriously mysterious investment category. This is our second conversation, in which we cover why investing with one’s gut is a bad idea and why some of the popular edges in startups, like network effects, may be picked over. Please enjoy our conversation.

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

 

Show Notes

1:17 - (First Question) – His take on the venture landscape and the type of investments new VC’s are making vs what they should be making

3:44 – Most important implications of excess VC firms

5:32 – Misalignment of incentives in the VC space

8:19 – What he does differently from angel investors or VC’s

10:11 – The notion of risk and the types of risk the people he invests in takes

14:33 – Protections that he thinks about when it comes to the ideas he invests in

19:37 – Is there an area of expertise that provides an edge for startups

20:11 – Network effects are picked over

21:35 – IP protection

23:08 – One of the two most interesting things for VC’s to go after, brands

25:13 – The other most important thing, the value chain

27:42 – A current example of a disruptive value chain

29:14 – Innovation as the source of profit

            29:16 – Schumpeter on Strategy

31:50 – Efficiency innovation vs value innovation

            31:52 – Energy and Civilization: A History

35:50 – Efficiency investments he’s made

37:13 – Investment in Unsupervised and the machine learning landscape

41:25 – Investment in Sila

43:14 – Investment in Edmit

44:44 – investing on gut

50:32 – Black boxes and their value in investments

53:23 – Metrics about the predictive level of whether people are going to succeed

54:45 – What defines good people worth backing

57:50 – Advice for LP investors in this space and how they should evaluate VC’s in this space

 

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

Jun 4, 2019

I came across this week’s guest thanks to the overlap of three passions of mine: data informed investing, value creation, and basketball. 

Sam Hinkie worked for more than a decade in the NBA with the Houston Rockets, and then most recently as the President and GM of the Philadelphia 76ers. He helped launch basketball's analytics movement when he joined the Houston Rockets in 2005, and is known for unique trade structuring and a keen focus on acquiring undervalued players. Today, he is also an investor and advisor to a limited number of young companies in which he feels his experience can improve outcomes. 

At one point in our conversation, Sam mentions that he tracked success via future financial outcomes, so I did some research and found many interesting stats about the 76ers surrounding Sam’s tenure. When he took over the franchise, it was 24th in ESPN’s franchise rankings, and today it is 4th. This is the result of an impressive crop of young talent—players like All-Star Joel Embiid and Ben Simmons—which resulted in large part from unconventional decisions Sam and his team made. 

While I’m sure these estimates are imperfect, Forbes estimated the 76ers value at around $418M when Sam took over and $1.2B a few months ago. NBA teams in general have grown in value, so a lot of that appreciation is obviously “beta,” but given that the 76ers had the top percentage growth number more recently of any team, some of it is “alpha,” too. While we can’t parse the exact amount, it seems his unique approach to building a team clearly created some large amount of current franchise equity value. And it looks like the dividends from those decisions will compound for many years to come. 

While basketball was where Sam plied his talents in the past, his approach is more elemental. It is about finding great people, using data, and structuring decisions that create the possibility of huge returns, be they financial or otherwise. I don’t know what Sam will do next, be it investing in companies, running one, or taking over another team, but I know it will be fun to watch. 

Please enjoy this unique episode with Sam Hinkie. 

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Books Referenced

Empire of the Summer Moon: Quanah Parker and the Rise and Fall of the Comanches, the Most Powerful Indian Tribe in American History

Selfish Reasons to Have More Kids: Why Being a Great Parent is Less Work and More Fun Than You Think

Links Referenced

International Justice Mission

Show Notes

3:24 – (First Question) Advantages of having a long view and how to structurally harness one

6:08 – Using technology to foster an innovative culture

            6:18– Empire of the Summer Moon: Quanah Parker and the Rise and Fall of the Comanches, the Most Powerful Indian Tribe in American History

10:16 – Favorite example of applied innovation from Sam’s career

11:34 - Most fun aspect of doing data analytics early on the Houston Rockets

13:38 - Is there anything more important than courage in asymmetric outcomes

14:29 – How does Sam know when to let the art of decision making finish where the data started

16:29 - Pros and cons of a contrarian mindset

17:26 – Where he wanted to apply his knowledge in sports when first getting out of school and how his thinking is best applied in the current sports landscape

21:39 – How does he think about trying to find the equivalent of mispriced assets in the NBA

23:12 – Where tradition can be an impediment to innovation

25:07 – What did the team and workflow of the team look like in the front office

27:03 -  The measure of truth in a sports complex

29:10 – What were the early factors coming out of the data that helped to shape NBA teams

30:42 – Best tactics for hiring

33:59 – Process of recruiting spectacular people

35:39 – Thoughts on fostering a good marriage

37:57 – Picking your kids traits in your spouse

            38:02 – Selfish Reasons to Have More Kids: Why Being a Great Parent is Less Work and More Fun Than You Think

40:45 – What kind of markers does he look for when evaluating long term investment ideas

42:44 – His interest in machine learning

45:55 – What’s more exciting, the actual advances in machine learning or the applications that can be imagined as a result

            47:15– International Justice Mission

48:11 – How he got started teaching negotiations and some of the points he makes in that class

49:16 – Effective techniques for negotiating

50:03 – Is negotiating contentious, do you need empathy

50:41 – A Rorschach test of Sam based on his reading of Lessons of History (book)

53:01 – Biggest risk Sam took in his career

54:37 – Biggest risks Sam took while with the 76ers

58:09 – Do people undervalue asymmetric outcomes in the NBA
1:00:11 – The players Sam has enjoyed watching over the years

1:02:45 – Why Robert Caro is a favorite author of his

1:04:30 – Kindest thing anyone has done for Sam

 

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

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