Businesses do the heavy lifting
“Even though it may be tempting to flatter oneself, it is the businesses we invest in that do almost all the heavy lifting in the wealth creating process.”
Business
Their edge is being more rational
“If Zak and I bring something to the investment party, and I may be stretching things a little here, it is to be more rational than other investors.”
A deep keel resists industry conformity
“All the social pressure will be to conform with industry norm but [misunderstood firms] have a deep keel that keeps them upright.”
Fund industry lives on constant novelty
“Indeed, it seems to us that it is the industry that has to constantly say something new to keep the game going: new funds, new products, new investment stories, new ‘ aligned’ performance fees, new firms.”
Shouted marketing turns concepts into dogma
“At any rate, one cumulative effect of years of the industry’s shouted marketing claims has been to elevate well-meaning concepts to the status of industry dogma. In part, this happens through the cr owding out of contrary argument.”
Locker room culture wins by any means
“[The locker room culture] is an attitude whereby the players just have to win, and they are not too squeamish about the means.”
Corner-cutting results dazzle for a while
“Sales targets and profit margins achieved through cutting corners may be inherently worthless in the end, but they can dazzle for a while, and that is their value to the locker room set.”
Companies and investors get what they deserve
“We would argue that not only do companies get the investors they deserve, but investors also get the companies they deserve. Schlock begets schlock, as it were.”
Locker room mindset persists because it pays
“So, the mindset is prevalent because it pays in the short term. But this does not make it the right thing to do, nor does it make it profitable over the long-term.”
It helps to be outside the bubble
“We would argue that locker room behaviour is more likely to be spotted by patient, generalist investors deploying common sense, as it helps to be outside the bubble to see the bubble.”
Holding means deciding daily not to sell
“[Buying a great business] appears to require just one decision (to buy the shares) but, in reality, it requires daily decisions not to sell the shares as well!”
A firm's character matters more than realised
“Second, we have learned or, rather, come to appreciate, that the character of a firm - call it the ability to resist locker room temptation - is far more important than first we realised.”
Resisting the urge to fiddle reduces reinvestment risk
“Third, if our firms can successfully grow, and we can resist the temptation to fiddle, then we can meaningfully reduce the reinvestment risk embedded in lots of share buying and selling.”