Charley Ellis - The Evolution of the Asset Management Industry
Value Investing with Legends
The Loser's Game
The Loser's Game is the idea that if you keep the ball in play, other players will make a mistake sooner or later. Warren Buffett once said: "We only do a very few things that we really believe are really terrific" The most important thing for investment management is to minimize losing, he says.
Over the past several decades, asset management has transformed from a small industry with a few experts competing against a majority of amateurs in the market to a market saturated with well-equipped and highly resourced experts competing against each other.
When I think about my pantheon of all-time great investment thinkers and writers, our guest today stands out as one of the industry's legends. Charley Ellis has played the most significant role in how I think about the investment industry, and I can’t think of anyone better to talk about the industry's evolution.
Dr. Charles D. Ellis is the founder and former managing partner of Greenwich Associates, an international consultancy where he advised large institutional investors, foundations, and government organizations in more than 130 financial markets across the globe. Through that lens, he has been a keen observer of what works in organizations and markets for the last half-century. For nine years, Charley was chair of the Investment Committee at Yale, his alma mater, where he worked closely with its legendary Chief Investment Officer, David Swensen. He also served as a director of the Vanguard Group from 2001 to 2009. Charlie is a Harvard Business School graduate and has taught advanced investing courses at both Yale and Harvard. The CFA Institute recognized him as one of the twelve leading contributors to the investment profession, and along the way, Charlie has published nineteen books.
In this episode, Tano, Charley, and I discuss what inspired him to found Greenwich Associates, what goes into identifying the right questions to ask, how the industry has shifted from a winner’s game to a loser’s game, the massive changes in the asset management industry since the founding of Greenwich Associates, lessons from the Yale endowment model, Charley’s book recommendations, and so much more!
Key Topics:
- Welcome Charley to the show (1:13)
- How Charley’s early experience at Donaldson, Lufkin & Jenrette inspired the concept for Greenwich Associates (3:07)
- Structuring research and gathering the right kinds of questions (7:51)
- How Charley developed a passion for sharing insights with the public at large (10:00)
- The dual roles of academia and the industry itself in the evolution of the asset management industry (11:46)
- Simon Ramo and The Loser’s Game (13:33)
- Massive changes in the asset management industry since Charley founded Greenwich Associates (19:07)
- Why it was much easier for active managers to beat the market in the early days of the industry (25:03)
- Understanding the relentless pace of competition (29:35)
- The importance of actively determining the right investment strategy for you (32:44)
- Charley’s perspective on the legacy of Vanguard’s Jack Bogle (37:26)
- Why Charley cites John Neff as the best active manager of his time (43:27)
- David Swenson’s capacity for innovative thinking (46:51)
- Lessons from the Yale endowment model (51:02)
- Highlights from Charley’s book, Capital (58:38)
- Essential elements of creating and perpetuating a great culture (1:00:06)
- Why the willingness to address problems head-on is crucial in sustaining excellence (1:02:30)
- Charlie’s excitement about our education system (1:06:19)
- Which overlooked issue does Charlie wish garnered more attention? (1:07:07)
- Charley’s book recommendations (1:12:09)
- And much more!
Mentioned in this Episode:
- Charley Ellis’ Books
- Figuring It Out: Sixty Years of Answering Investors' Most Important Questions
- Inside Vanguard: Leadership Secrets From the Company That Continues to Rewrite the Rules of the Investing Business
- Winning the Loser's Game: Timeless Strategies for Successful Investing
- Capital: The Story of Long-Term Investment Excellence
- What It Takes: Seven Secrets of Success from the World's Greatest Professional Firms
- Charley Ellis’ Articles
- Burton G. Malkiel’s Book | A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy
- Neil deGrasse Tyson’s Book | Astrophysics for People in a Hurry
Thanks for Listening!
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