My guests this week don't need to be introduced. In celebration of the one year anniversary of invest like the best, I asked Josh Brown, Mike Batnick, and Barry Ritholtz to join me for a hour, during which I spent more time laughing than asking questions.
I chose this team because they are the pioneers of mold breaking honesty and personality in our industry. They all figured out that just being themselves yields incredible results. This is a strategy that everyone should try, but very few do. Honesty and transparency require vulnerability, which is hard for most of us. I still struggle with it. But the evidence is in. The Ritholtz team has grown as fast as almost any RIA. Listen to this and tell me you wouldn't want to spend your career working with people this friendly, funny and open. Hell, I want to give them some money just so I have an excuse to drop by more often.
Thanks to everyone who has listened in the past year. We are past 1.25mm listens, and growing fast. You own this thing as much as I do, because the size helps me penetrate deeper and get the best people, which begets more listeners. This podcast is one hell of a discovery machine, and the first year was our warm up. We have a ton of new angles, formats, and events coming in year two. Stay tuned. But first, time to laugh in celebration of year one. Please enjoy my conversation with team Ritholtz
For comprehensive show notes on this episode go to http://investorfieldguide.com/ritholtz
For more episodes go to InvestorFieldGuide.com/podcast.
To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.
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
Links Referenced
Scott Galloway and Aswath Damodaran on Bitcoin vs Gold
Latest 'These Are the Goods' post
Show Notes
2:35 – (First question) – What stock best represents you
5:09 – How was this team assembled at Ritholtz
8:50 – Why larger asset management firms are slow to pivot on new technology
10:00 – The humor of Barry @ritholtz on twitter
11:48 – What technology channels are working best
13:08 – What would happen in a Ritholtz stock picking contest
15:19 – How do you keep investors from wanting to move money into or out of buzzworthy trades
20:23 – Pricing out the news and the value premium
23:41 – Why people want complexity and activity in their portfolios
29:51 – People always want to be a part of the next frontier, example bitcoin
31:08 – a16z Podcast
33:13 – Exploring research in action and living the investments
39:35 – Biggest argument against bitcoin could be the underlying utility and what will make it successful
45:13 – The Hindenburg Omen
46:34 - Scott Galloway and Aswath Damodaran on Bitcoin vs Gold
47:38 – How the relationship with clients has evolved
49:50 – Mike’s new book project that he is working on
51:41 – Why the Mark Twain chapter is the most interesting in his book thus far
53:32 – How a business should balance sales and marketing
58:09 – Who would they draft to the Ritholtz team
58:22 – Latest These Are the Goods post
1:05:18 – Kindest thing anyone has done
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
My guest this week is Pat Dorsey, who was the longtime director of equity research at Morningstar, where he specialized in economic moats: sources of sustained competitive advantage that allow a few companies to deliver huge returns over time. Several years ago he left Morningstar to form his own asset management firm, Dorsey asset management, and build a portfolio of companies with wide moats like those he studied at Morningstar. And while moats are critical, equally important is how companies allocate the capital generated--or made possible--by the existence of the moat.
A special thank you to Brian Bares who introduced me to Pat, and to Will Thorndike--an earlier guest on the show. In the vast majority of conversations you hear on this show, I'm meeting the guest for the first time. I mention this to encourage you to connect me with anyone whose story or way of looking at the world might resonate. Always feel free to contact me with ideas.
Pat and I begin our discussion with the key differences between the sell side and the buy side, and then discuss all aspects of moats and capital allocation.
For comprehensive show notes on this episode go to http://investorfieldguide.com/dorsey
For more episodes go to InvestorFieldGuide.com/podcast.
To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.
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
2:23 – (First question) – Transition from the sell side to the buy side and the biggest surprise
3:40 – What is a moat
5:16 – What part of the stock market universe has a moat
6:57 – Pat’s framework for identifying moat, starting with intangibles
8:32 – The power of brands
9:44 – what chance does an upstart have to come in and usurp a well-established brand
12:24 – Switching costs as part of the framework for identifying a moat
14:55 – The third component of identifying a moat, network effects, and what businesses should do to effectively build one
17:29 – Last component, cost advantages/economies of scale
19:29 – How do you analyze these four components into an investing framework that can be built into an actual strategy
21:13 – How does Pat think about this from a mis-pricing standpoint
23:37 – How does Pat incorporate current price of a company in consideration for future returns when pricing a moat
25:39 – How should a company with a moat operate to protect that characteristic, especially when it comes to their capital allocation
26:51 – Which characteristic of a moat does Pat find most intriguing
30:35 – What makes for good and smart capital allocation
35:58 – What is Pat’s process for identifying the best investment opportunities
38:38 – What are good economics when looking at a company
41:03 – If Pat could take any business, but have to swap leadership, what would he choose.
44:13 – Back to his process of finding investment opportunities
46:05 – Kindest thing anyone has ever done for Pat
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
My guests this week are both veterans of the podcast, Jason Zweig and Morgan Housel. They are two of the best in the world at making the complicated simple, and in that spirit, I’ll keep this introduction short. Morgan shifted from public markets to the private markets a year ago when he joined the Collaborative Fund, so we begin with what he has learned about venture capital in his first year on the job.
For comprehensive show notes on this episode go to http://investorfieldguide.com/writers
For more episodes go to InvestorFieldGuide.com/podcast.
To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.
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
The Devil's Financial Dictionary
Modern Monopolies: What It Takes to Dominate the 21st Century Economy
Shoe Dog: A Memoir by the Creator of Nike
Online References
A Rediscovered Masterpiece by Benjamin Graham
Small Companies Are Gone, But Should they Be Forgotten (Zweig Column)
Show Notes
1:43 – (First question) – Morgan on why he got disenchanted with the investment industry and shifted to venture capital
4:05 – Jason’s thoughts about investing in the private markets
5:19 - A Rediscovered Masterpiece by Benjamin Graham
7:57 – Morgan’s thoughts on how private market investments differ from public market investments
10:24 – Exploring valuations of businesses and what they say about broader trends in the market
13:21 – How much does Jason think about individual companies when exploring the overall market trends
18:41 – The Devil's Financial Dictionary
19:28 –What does it take to be a successful founder
23:40 – How does Jason look at activities that are work related vs just for pleasure
25:33 – If Jason had to start a business, what would he do
27:22 – What business would Morgan start
29:18 – Problems with the financial planning industry
30:56 - The role of stress in personal and business development
31:04 – Modern Monopolies: What It Takes to Dominate the 21st Century Economy
38:17 – Are there signs that let you know when to cut and run vs when to keep slogging along with something
42:02 – Thinking, Fast and Slow
44:03 – Shoe Dog: A Memoir by the Creator of Nike
44:20 – Principals to approach learning
50:10 – The idea of keeping your identity small in a world where social media encourages one-upmanship
53:56 – Last significant thing Morgan changed his mind about
55:23 – Why Morgan chooses passive investing with stocks, but as a VC, essentially is a stock picker in private markets
1:00:44 – Rishi Ganti podcast
1:02:14 – What major thing did Jason change his mind about
1:02:30 – Small Companies Are Gone, But Should they Be Forgotten (Zweig Column)
1:06:33 – What was the most interesting idea Jason and Morgan have been tackling and what data helped to spark that interest
1:09:32 – Life and Fate
This week's conversation is about performance. More specifically, it is about the ins and outs of steady progress and growth. My guest is Brad Stulberg who coauthored the book Peak Performance, which combines research from many fields into a description of how athletes, creatives and others continue to push boundaries in their respective crafts.
As someone who is intermittently lazy, the growth equation framework that Brad and I explore has impacted me often since I first read the book several months ago. I hope you enjoy this conversation, which isn't about investing, but which is, at its heart, still about the power of compounding.
Books Referenced
Outliers: The Story of Success
Peak: Secrets from the New Science of Expertise
Online References
Show Notes
1:32 – (First question) – How Vick Stretcher influenced the book, Peak Performance
4:32 – Looking at some of the preliminary research at the science of purpose
7:58 – The idea of a growth equation and the components that can lead to success
11:47 – How the introduction of stress can help in all sorts of creative and entrepreneurial pursuits.
13:39 – The ratio between physical and mental as an impact on this formula
14:56 – Just manageable challenges and the role that they play in the growth equation
18:06 – The idea of just manageable challenges through the example of an athlete
22:19 – Favorite example of a crazy feat of physical performance, stress on older athletes operating at high levels
23:30 – Thoughts about outside influences like mentors/coaches and how they help high performance individuals advance
25:51 – Describe catabolic and anabolic states and why anabolic is so important
29:13 – How the relationship of catabolic and anabolic states also helps the mind
30:47 – How does the idea of practice play into the growth equation
32:49 – Exploring the nuances of practice and why you don’t go all out
32:56 – Outliers: The Story of Success
33:00 - Peak: Secrets from the New Science of Expertise
34:24 – The idea of designing of a day
42:06 – What role can environment play on us
43:40 – How far is it healthy to run
46:25 – How does ego play into all of this
48:06 – The idea of camaraderie and study of Air Force Cadets highlighting this
49:28 – Fatigue and why it is believed to happen in the mind and not the body
54:00 – Most memorable day
55:43 - Method for finding purpose
56:29 – Jool Health
58:26 – Kindest thing anyone has ever done for Brad
Learn More
For more comprehensive show notes on this episode go to http://investorfieldguide.com/brad
For more episodes go to InvestorFieldGuide.com/podcast.
To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.
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
Several weeks ago my conversation with Leigh Drogen on quant investing proved timely and popular--because everyone in asset management is facing the rise of big data, and the use of data science in investing strategies. Because of the rise of quants, many are asking themselves how to survive and thrive in a changing industry. In short, how can traditional managers compete with quants?
This second conversation with Leigh was set up to answer many of the questions posed in the first one. If quants are taking over, what should other investors do about it?
Leigh proposes a method by which old school asset managers can restructure their thinking and their process to compete with and even beat purely quantitative competitors. The method involves pulling the best from both worlds and combining them into a hybrid structure. But it will be impossible without a wholesale change in mindset, which is where we begin. Please enjoy round two with Leigh Drogen.
Links Referenced
Revenge of the Humans Part II: A New Blueprint For Discretionary Management
Show Notes
2:14 – (First question) – What role will ego and mindset play for traditional hedge funds looking to transition into quantitative investing strategies
4:21 – Describes the traditional process that hedge funds use to make investment decisions and how the internal politics can hamper it
6:08 – What value has portfolio managers played at hedge funds traditionally as the quarterback of a fund
9:57 – A look at what Leigh has seen as he sits with teams
12:20 – A look at places that have tried to simply add quant to their firm’s strategies without “tearing it down to the studs” and properly integrating them into the process
15:00 – Leigh is asked to define the basics of a good investment firm’s strategies
16:57 – Strategies for writing down core beliefs, whether it’s for yourself or your firm
17:49 – Exploring the second step, finding a differentiating view and how to succeed with it.
21:43 – The importance of force ranking and structuring the unstructured
26:14 – Building factor models
29:42 – How the portfolio manager position should have less room for subjectivity than at the analyst level
33:44 – Is anyone integrating this kind of high level data at the portfolio manager level into the decision making the way Leigh describes
35:07 – What blind spots are created by systematizing their processes
36:18 – Why much of this applies more to shorter and structured periods
38:23 – Shifting to portfolio constructions and what Leigh would do to create the right mix
43:39 – Shifting to management structures in these firms starting with the role of the CIO
45:24 – Looking at the different quant roles that exist in a firm and what they should be responsible for; data engineers, data analysts, pure quants, and quantitative engineer
48:20 – If you are an undergrad or grad student right now interested in asset management, what are the roles you should be thinking about targeting
49:25 – Why communication skills are still so important, no matter what role you are in
50:25 – With all of the tools and skills that Leigh has at his disposal at Estimize, why not institute an active strategy
52:01 – What has Leigh observed in the dispersion of skill in the Estimized data set
53:47 – What is the relationship between specialization and accuracy among funds
55:29 – The pros and cons of the generalist
56:56 – A look at Leigh’s background into War Theory and what lessons that he still draws on today
1:00:19 – How the field of study around war and battle relates to the investing world
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
For complete shownotes, go to InvestorFieldGuide.com/leigh.
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