The Exchanges

Q Are there other examples that come to mind? I really like this thread of the bear case is the bull case.

A You've had Brad Jacobs on your podcast. We first invested with Brad in 2013. There've been more than a few occasions through that journey where the kind of being able to get into that last five to understand in a way that wasn't commonly appreciated, I think allowed us to be a holder and an owner in a way that Would have been difficult for a lot of folks that were only approaching that on the surface. So the, the first one, 2015, you made a big acquisition. It was a big pivot. 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. His frame was, you know, we're asset light, brokerage, truck brokerage business. He pivoted to go into the LTL industry, Which was capital intensive. And even when the deal was announced, even, you know, even I was taken back like, but when we made the initial investment, we spent a lot of time on, on Brad as a, as a CEO, as a capital allocator. He's a serial entrepreneur. And one of the things that's very clear in his track record is he's, he's a capital allocator and he's opportunistic. When we pushed on this and the strategic logic of it, he framed it from the perspective of, An opportunistic situation to create something special that wasn't in the original plan, but was uniquely attractive. And if you understood him an…

AI assessment note: “You've had Brad Jacobs on your podcast. We first invested with Brad in 2013.”

Q skills and the environment necessary to be successful at those two things are sort of Opposed. How do you think about Buffett and his style changing four or five times over the course of his career? You know, he was never a day trader, but he went from cigar butts to buying, and I wouldn't say holding, but trading, you know, quite frequently to buying and not trading as frequently.

A How are you going to adapt your game to something that's authentic to you in a way that can play to your strengths, right? Market change. I even, I've seen that from the time that I started the mid nineties to today, right? And so if you're playing cigar butts, Um, which can be very profitable. Um, 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. And we know that Munger was also, you know, a key part of like that conversation and framing and helping Warren think about what he focused on. Underneath that is thinking about how he needed to adapt based on his own size and the amount of capital he was trying to deploy.

AI assessment note: “as his capital grew over time, you know, you have to think about how you show up”

Q What role does writing play in terms of thinking and what's the process? Do you share this with the team? Is there a A format. What, what variables are you writing about?

A You know, one of the themes is like, how do you accelerate learning and accelerate feedback loops? And so 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. When you go through the investment process, you write up, you know, your various research reports. When you want to buy it, you put forward something to the investment committee. Um, you debate it and then you buy it in your paper portfolio and what you're For any decision to buy or sell, you're writing down your reasoning. You're putting down why you're buying, what the thesis is. Um, I like it when you show the things that I want to be looking for, holding accountable to. Just writing things down, like, helps you crystallize the why, and putting it down, and then tracking, you know, show your work, and then track it. One of the things that we do every six months is, you know, we consolidate that, we look at the performance, and then we share that with the team members. It's a really powerful feedback mechanism for the analyst. But it's also powerful for us as we're thinking about, um, you know, looking at the simulation, if you will, like, who's making good decisions and what kind of decisions? Are you demonstrating more skill on the buy decision, the sell decision? Are you doubling down when something's working against you? Are you m…

AI assessment note: “For any decision to buy or sell, you're writing down your reasoning.”

Q have created this. I might not have anticipated it. My contribution to this might be really low, but it doesn't change the fact that I'm here. And where do I go next? And what do I do next? We talked about time allocation as sort of capital management. There's another parallel, I think, between business and life, which is Personal life and sort of overhead. Talk to me about that.

A This is much less discussed, but I think is squarely in your positioning frame is, you know, 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 need the investment to work as opposed to making, you know, what you think are good risk-adjusted decisions. And I think once you kind of cross over into needing to work, You've changed the dimensions of your, your temperament and your emotions. And once you do that, you put yourself in a bad position to make great decisions. And companies do that. I mean, that's something to be very mindful of. It's something to think about as a firm and investment teams. Like it's, you're looking for a certain type of individual, but you're trying to create a certain culture within the team. You're trying to have a certain relationship with your clients. Like those are all part of enabling you to try to make the best decisions In the way that worked for you. But if you break any one of those kind of components of the flywheel, if you will, like then you really got grit in the flywheel and it could be dangerous, you know, in its worst case.

AI assessment note: “adopt a certain lifestyle, a certain fixed cost base, and then, like, you need”

Q What are the questions you ask? Like, what are the questions that come to mind when you're like, if I had 10 minutes with a CEO, And my goal is to determine if they're obsessed or not. What are the questions you're asking?

A Context matters a lot. And so you kind of never know. You got to be prepared to play jazz in the moment, but sometimes a very generative question that really opens it up and seeing where they take it can be super helpful. And sometimes that'll be, you know, they just, they're putting in the CD and they're giving you the script. That's not going to be really helpful, right? And you got to approach that very differently. But one of the things that I tend to, I like to go to is around culture. More often than not, They sit down with folks and they, they tend to be relatively short-term oriented. They want to understand something around the quarter or a particular, um, you know, profit margin point or capital allocation point. Tell me about your culture and what's important here to be successful, or, you know, my nephew is going to start at your company next week, and what would you tell them to be successful, right? Like, they probably haven't gotten that question, and so they, they can't use the, the CD. They got to go somewhere else. What do they talk about in that? And do you see that kind of that passion come out? And then you just follow that thread. Not always, but it can, it can often be very telling.

AI assessment note: “my nephew is going to start at your company next week, and what would you tell them”

Q We've sort of talked about knowing ourselves. We've talked about game selection. We've talked about having a blueprint or a model to sort of follow and imitate before you innovate. Consider this a map. Now what, now what do we do with this? How do we apply this to create an unfair advantage?

A So now it's about like accelerating that, that learning curve and those feedback loops, you know, try to put yourself in a place that's good game selection for you based on who you are and what your strengths are. You got a clear blueprint about how to go after that. And now, you know, you just want to, you want to turn the rocks and you want to accelerate the learning curve. And a big part of that, creating those case studies of Writing it down, like, why am I doing this? Showing your work. Part of showing your work is distilling for you why you're doing it, tracking that over time, and measuring yourself to it, and improving your algorithm. You know, how strong is the learning machine? Like, are you seeing them take in new inputs based on the feedback that they're getting? Adapt that and employ that as they go forward into, you know, how they're thinking about stocks, how they're making decisions. And it's really hard for us the way in our game selection, because we're, we're making these four or five year decisions. So it's very easy to say, well, it's about this and you know, let's check in in five years. 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 things I'm g…

AI assessment note: “now it's about like accelerating that, that learning curve and those feedback loops”

Q It's like intellectual ambidextrousness. Are there other lessons that stand out that you learned from him?

A There's so many. I mean, he, um, he's a special person. I mean, he, I mean, the first thing that comes to mind is just his enthusiasm, his love of the game, right? Like, it's just infectious. He used to say, there's nothing more perishable than a great idea. He was always turning rocks. Like, the secret to a good idea is A lot of ideas, like always turning rocks. But then when he saw something he thought was really interesting, like it was just, it was all in. There was this dissonance, right? Where he was incredibly convicted, but at the same time, he was always actively seeking the opposite side of the view. To your Darwin reference, like it's, it's, it's survival and adaptability, right? You want to be looking for the things that don't conform to the construct. And he always liked to talk to folks that were younger. Um, And I think for a couple of reasons, one was, um, it's, it's less filtered, that it's closer to the source. Hmm. Um, and it's probably more contemporary in its view. You know, I was reading earlier this year, I was reading, uh, it was a biography on Andy Grove, and it talked about you rise to the level in the company that you're a manager, a more senior engineer. Like you, you lose your connection to like the cutting edge engineering. And so, you know, it was very clear part of their culture. It was non-hierarchical, quite flat. They would interact directly a…

AI assessment note: “the first thing that comes to mind is just his enthusiasm, his love of the game”

Q I like the notion of time allocation and sort of capital allocation. Does that carry to your personal life as well?

A I can fall in the trap of like, Is this useful right now? That's a horrible question to ask with your kids, right? And so just to give yourself the space for play to just be in that moment with them on whatever it may be, you know, on Fridays and Saturdays, we have family dinners together and it'll start, call it at six o'clock and everybody's got a role in doing something and everybody's in the kitchen and you're just mixing it up and Um, you're just totally in that moment. The next thing you know, it's, it's 10 or 1030, and like, it's the end of dinner. Like, that's been a four, four and a half hour journey, and like, just totally lost in the moment of it. You know, those are some of the times that I value the most, and there was nothing intentional in that, except that you were going to be in that, in that space.

AI assessment note: “I can fall in the trap of like, Is this useful right now?”

Q And the environment is not just You know, the computers you might need if you're day trading. It's like if you're running a public firm, it's how do I maintain control of that firm so that we don't have an outside shareholder come in and take control. That'll make me change strategy or change environment. How do you think about environment and the role that it plays?

A Try to think about your obsessions. You never want to compete with somebody who's obsessed. Kobe Bryant, like he would say, what's your four AM? He's at the gym. At four AM shooting baskets. Are you at the gym at four AM? Because if you're not like you're competing against that guy who is, you know, he took up tap dancing because he wanted to strengthen his ankles so he could be a better basketball player. Are you obsessed to that degree that you're going to undertake those kinds of actions? The elements that you're so, you're so drawn to that you're willing to do those kinds of things and whatever the kind of the chosen aspect is, um, is really powerful. And if you consistently do that over time and that compounds, Set yourself up to play to your obsessions. I was just, I mentioned to you last night that I'm just back from Japan, and, um, the author, Murakami, is one of my favorites. You know, he's like, set your life up for your obsessions, because if you do that, like, you're, you're, you're all in. Like, you're just, you're grinding at that in a way that very few other people will do, and so it's to the setting up your environment that plays to all of the ways that you do your best work. The other side of that Um, is just the concept of alignment, right? And so 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…

AI assessment note: “setting up your environment that plays to all of the ways that you do your best work”

Q Is there a correlation between the clarity of people's writing and their performance?

A I haven't studied the data to specifically support that, but my, I believe so. When you're able to clarify your thinking and writing is a very strong representation that you've clarified the thinking. Right. And that's just one of the reasons why writing is so important is helping to distill it to what's really key. We do a lot of work. We're really fundamental. We can spend months working an idea and then, you know, you get this 50 page report. I don't want a 50 page report. Like I want a few pages that really distill. Like that's the hard part is to do all the work, but then distill it down to like the few things that two or three really key points. And in particular, where we see this differently than others, capturing that and knowing kind of those fulcrum issues, like that's the sauce. Coaching to how do you go through that process and do that really fundamental bottoms up work, but then be able to like really distill it. It's also a manifestation, I think, which, which you're pulling on that you've, you've gotten to that.

AI assessment note: “I haven't studied the data to specifically support that, but my, I believe so.”

Q episodes. Imagine having a smart assistant who reads through every transcript, finds just the best parts and serves them up based on whatever topic you're interested in. I use overlap every day to research, guess, explore, and learn. Give it a try and start discovering the best moments from the best podcasts. Go to joinoverlap.com. That's joinoverlap.com. How do we go about selecting the game that we're playing in life?

A Using the investing landscape, it surprises me all the time that, um, people don't think about that more deeply. You know, you see this over and over again in markets, and there's a whole continuum from, you know, one end of the continuum, the, the algos that are scraping to the millisecond, right? That's their game. And if that's your game, you have to do certain things. You have to invest in certain infrastructure, certain capacity to a day trader, to The, the hedge funds and pod shops that are trading on a catalyst and around a quarter quarter to call it Stan Druckenmiller, who likes to talk about, you know, I want to look 18 months out to us. So we consider ourselves long-term investors. We're trying to take a four to five year view to be infinite investors, right? A Buffett who is trying to own things forever, right? That's a, that's a huge continuum, but depending on what game you're playing, You're going to approach it quite differently. And so a really important question, and I see it over and over, even today, people in the business for years of like, well, what game are you playing? Um, and being really clear and thoughtful about that, and then really leaning into them, playing to that, I think makes a huge difference.

AI assessment note: “depending on what game you're playing, You're going to approach it quite differently.”