Nov 12, 2024 · 1h 12m · knowledge-project
Adam Karr: The Investing Blueprint
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The Knowledge Project, host Shane Parrish interviews Orbis president Adam Karr on 'the blueprint'—a rigorous framework encompassing game selection, deep fundamental research, behavioral decision analytics, and deliberate practice.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shane holds 26.4% of the talking time here. How this is scored →
Shane as informed peer 4.9 Guest teaching 4.1 Guest disagreement 0.9 Shane pushing back 1.2
speaking balance: gold is Shane, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:09:25 Critique of performative contrarianism
Shane sharply dismisses people who act contrarian merely for the sake of being different, comparing them to broken lottery tickets, which Carr reinforces as futile without truth-seeking.
Hardest push from Shane ▶ 15:23 Challenging obsolete blueprintsShane pushes back against uncritically following older mentors, arguing that blueprints from decades ago may fail when environmental conditions have radically shifted.
Biggest teaching moment ▶ 10:56 Low base rates of public turnaroundsCarr educates on the severe structural differences between private equity asset turnarounds and public company turnarounds, citing dismal base rates.
Shane holds their own ▶ 48:00 The cookie compression modelShane demonstrates strong conceptual command by unpacking how raw experience compresses into heuristics, illustrating it with his household cookie baking experiment.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shane as informed peer | Guest teaching | Guest disagreement | Shane pushing back | Why |
|---|---|---|---|---|---|---|
| Game Selection, Obsession, and Client Alignment | 5 | 4 | 1 | 2 | Shane engages constructively on the tension between long-term investing and short-term trading environments, citing Buffett's evolution across his career. Carr explains game selection, obsession, and client alignment as structural boundaries. | |
| Assessing CEOs and Public Market Turnarounds | 6 | 4 | 1 | 2 | Shane brings in a strong analogy comparing public CEOs to incoming sports coaches taking excessive short-term risks due to tenure constraints. Carr agrees and shares how his private equity turnaround mindset failed in public markets due to poor base rates. | |
| The Blueprint Framework and Imitative Learning | 5 | 4 | 1 | 2 | Shane pushes on the idea that mentors and blueprints can be outdated if their operating environment has changed significantly. Carr clarifies that fundamental operating principles endure while delivery tactics must be adapted. | |
| Peter Lynch's Enduring Investment Principles | 4 | 4 | 1 | 1 | Carr details how Peter Lynch's frameworks and hit-rate expectations formed his foundational blueprint, while Shane adds brief humorous commentary on Graham's Security Analysis. | |
| Sponsor Messages: Accenture and Google Chrome | 4 | 5 | 1 | 1 | Following an ad break, Carr explains Orbis's internal decision analytics system, paper portfolios, and automated behavioral nudges designed to counter regret aversion and the endowment effect. | |
| Simplicity, Firsthand Experience, and the Last 5% | 6 | 4 | 1 | 1 | Shane delivers a detailed monologue distinguishing direct experience from second-hand distillations. Carr affirms the insight and elaborates on finding proprietary edge in 'the last 5%' of deep fundamental research. | |
| Deep Conviction Case Studies: Motorola Solutions and XPO | 4 | 6 | 1 | 1 | Carr shares detailed case studies of contrarian conviction in Motorola Solutions and XPO Logistics, describing forensic due diligence during a hostile short attack. | |
| The Learning Machine and Interim Milestones | 4 | 4 | 1 | 1 | Shane asks how to practically accelerate learning machines, and Carr highlights setting and measuring incremental milestones rather than waiting for multi-year outcomes. | |
| Handling Disconfirming Evidence and Allan Gray's Dissonance | 5 | 5 | 1 | 1 | Shane references Darwin's method for tracking disconfirming evidence, prompting Carr to reflect on Allan Gray's intellectual dissonance and willingness to instantly reverse conviction when presented with counter-evidence. | |
| Unfiltered Sources, Andy Grove, and the Cookie Analogy | 7 | 3 | 1 | 1 | Shane articulates an extended theoretical framework on knowledge compression loops using the metaphor of baking cookies. Carr warmly builds on the analogy by linking it back to journaling and personalized recipe adaptation. | |
| The Will to Practice Versus the Will to Win | 5 | 4 | 1 | 1 | Shane and Carr compare daily deliberate practice in elite athletes like Kobe Bryant and Tom Brady to practicing probabilistic thinking and deferred gratification in investing. | |
| Time Allocation and Filtering for Knowability | 5 | 4 | 1 | 1 | Carr discusses return on time over return on capital using TSMC as an example of an unknowable geopolitical question. Shane supports this with Buffett's filter on knowability. | |
| Personal Overhead, Adversity, and Positioning | 6 | 4 | 1 | 1 | Shane highlights Buffett's strategy of positioning rather than predicting. Carr relates this to weathering his brutal 2018 triple-drawdown year (Symantec, PG&E wildfires, XPO) and keeping personal fixed overhead low to protect emotional resilience. | |
| Core Tenets: Alignment, First Principles, and Advantageous Divergence | 6 | 4 | 1 | 2 | Carr outlines his foundational principles of alignment and refundable fee structures. Shane reframes first-principles contrarianism into the concept of 'advantageous divergence', emphasizing that non-consensus views must be correct to matter. | |
| Redefining Success as a Dream Builder | 2 | 3 | 0 | 0 | Shane asks his signature closing question regarding the definition of success. Carr reflects on his personal shift from financial targets to mentoring others as a 'dream builder.' |
Statements from this episode (29)
Karr: Orbis invests with a four-to-five-year horizon
“So we consider ourselves long-term investors. We're trying to take a four to five year view to be infinite investors, right?”
Karr: Cigar-butt investing is profitable but difficult to scale
“And so if you're playing cigar butts which can be very profitable. But it's difficult to scale that. And so as his capital grew over time, you know, you have to think about how you show up and how you approach it.”
Karr: Fund managers are only as long-term as their clients allow
“You might say, I'm a long-term investor, but you're only going to be able to be as long-term as your clients allow you to be, right? If you're in a position that's offsides to kind of the market sentiment at that time, and you have in your mind that, you know,…”
Karr: Average S&P 500 CEO tenure is three to four years
“I think the average S&P tenure is somewhere between three and four years.”
Karr avoids betting on management-driven public market turnarounds
“Very leery to go into turnaround situations where I'm betting on the management team making some kind of dramatic change. Like the base rates suck. It's very difficult to do”
Karr: Anyone can have any mentor by studying public records obsessively
“You can have any mentor in the world that you want. There's so much out there, like, pick somebody that you really respect, and just, like, be a sponge, get obsessive, learn everything you can about them. How did they do it? What did they do? Like you can real…”
Parrish: Perspective comes from past masters; skills require modern practitioners
“If you want perspective, you want to go to somebody who's at the end of the maze, who, who's done it before. And it's almost regardless of when they did it could be, you know, six months before, and it could be. 2030 years before, but they're going to give you…”
Karr: A 55% win rate is strong; expect to be wrong often
“And then you, you're investing in like, if you're right, 55% of the time, like you're doing pretty darn well. And so being wrong a lot is an important concept to internalize.”
Karr: Studies show emotional awareness improves investor performance
“There are studies that show that those people that are better at describing what emotions they're feeling end up demonstrating better investment performance.”
Karr: Orbis has required analysts to run paper portfolios for decades
“One of the things that we do is all of our analysts run paper portfolios or model portfolios. And this is something we've done for decades.”
Karr: Orbis runs a dedicated four-person team to track investor biases
“One of the things that we did a couple years ago which has been really interesting is we created this, what we call decision analytics initiative, right? So we have a standalone team for individuals. We went out and got third party software and we run all thes…”
Karr: Scaling into new positions is an error driven by regret aversion
“So when I'm initiating a position, I tend to scale into it. So let's say I want to take it to three percent of capital. I'll buy 50 basis points, you know, another 50 and I'll scale into it. Turns out that's wrong. The bias that I'm demonstrating the reversion…”
Adam Karr: Persuasion in Stock Pitches Undermines Objective Risk Assessment
“There's a tendency to want to convince somebody or persuade somebody to buy a stock. And so when you're persuading, and you may not as equally kind of pull out the potential risks or other factors to weigh against that.”
Adam Karr: Breakthrough Investment Insights Come From the Last 5% of Research
“Like I like to say the magic's in the last five percent, you know, all of the standard stuff, you know, you've got to do and looking at the balance sheet and understanding the core strategies and the key drivers of P&L, et cetera. But really like getting to th…”
Adam Karr: Identifying a Company's Core Driver Anchors Long-Term Ownership
“When you've grinded on it enough and you get to that point, if you've really been able to dial into that thing that is the driver, that can be a real ballast to help you through as an owner and a holder of it.”
Karr: Deep research reveals when consensus bear cases form bull theses
“Some of my favorite investment situations are the bear case is the bull case. So there's this common bear narrative. And if you don't kind of do it on your own work, if I were bringing up this name and I was talking to someone, they would have told me all of t…”
Karr: Brad Jacobs buying Con-way was an exceptional capital allocation decision
“Probably one of the best capital allocation decisions I've seen in my investment career. We bought a company called Conway. It was a complete pivot from the stated strategy at the time.”
Karr: Orbis invested about $1B into XPO after short report
“And we probably put a billion dollars into it on the back of that. And the stock was extremely dislocated.”
Karr: The base rate of corporate rollups is bad
“The common trope is rollups never work. And it's true. Like the base rate on rollups is not good. It doesn't mean all rollups don't work. What are the factors and common hallmarks of rollups that are successful? And are those conditions precedent here?”
Karr: Long-Term Investors Must Track Interim Milestones to Adapt
“No, like there are many incremental steps between now and then that you want to track to and hold yourself accountable to. It doesn't mean you're trading every day or every quarter, but you want to be really thoughtful on this is why I bought it. These are the…”
Karr: Investors must aggressively investigate emerging red flags outside main thesis
“If you're over myopically focused on one thing that you think is the important thing, you need to keep your mind open that there may be other things in the mosaic that are critical, and that when you do see those
And we started to get a little bit of the flags…”
Karr: Frame questions with specific premises so CEOs cannot deflect
“It can be a really valuable way when you sit down with a CEO is to frame a question in a way that they have to respond.
So
Like you might sit down and say, we've been hearing that you're having a lot of turnover in your sales department.
Why is that?
It puts i…”
Karr: Investors must practice deferred gratification and probabilistic thinking daily
“I think there's some parts of it that are temperament related, like just practicing deferred gratification. There's elements of it that are You know thinking about the world probabilistically, everything, just continuing to practice that every day or the uncer…”
Karr: Orbis will not tilt portfolios based on US election outcomes
“And I'm not going to position and tilt the portfolio for a particular outcome. One, because I wouldn't be well served to do that. But two, to this point, like it's unknowable. And so I just want to be resilient as opposed to spend all this time obsessing on, i…”
Parrish: Berkshire Hathaway holds roughly $300B in cash
“And if you think about it now, it's like they have three hundred billion ish in cash.”
Karr: Orbis held PG&E in 2018 before unexpected wildfire hit
“We had a position in a company called PG&E, which is a California utility.
Shane Parrish: the wildfires.
SPEAKER_05: Yeah.
Adam Carr: So we went into it after they had had their wildfires thinking that,
Legislation had passed, but there was this little loophol…”
Karr: High personal overhead ruins investors' risk-adjusted decision making
“How you run your personal life. Very much impacts your ability to make good decisions, particularly if they go sideways, right? And so you see people in the industry who then, you know, adopt a certain lifestyle, a certain fixed cost base, and then, like, you …”
Karr: Orbis avoids investing in attention-seeking and high-lifestyle CEOs
“Generally not. I mean, it's a part of the mosaic of, you know, what will be the driver. I mean, it's an interesting thing with CEOs are like, what are the characteristics that allow one to be in that seat? And they're not always correlated with the skills that…”