Joys of Compounding
Rick Buhrman & Paul Buser - Find Your X, Nurture Your N - [Invest Like the Best]
Episode guests
Podcast summary created with Snipd AI
Quick takeaways
- Successful investment firms prioritize talent and create cultures where the best people thrive, leading to long-term success.
- Successful firms ensure alignment of interests among their team and shareholders through incentivized structures, fostering shared goals and values.
- Succession planning and maintaining trust are critical for long-term success in investment firms.
- Compounding, both in investing and in life, is achieved by focusing on growth rate and exponent, emphasizing continuous learning and discipline.
- The institutional investment industry should prioritize sustained growth by nurturing the exponent, avoiding actions that interrupt compounding and overemphasis on new investments.
Deep dives
The Evolution and Adaptation of Successful Investment Firms
Successful investment firms constantly evolve and adapt to the dynamic nature of the market. They embrace change while maintaining discipline, navigating the tightrope walk between innovation and established practices.
The Importance of Cultivating Winning Teams
Great investment firms prioritize talent and create cultures where the best people thrive. They build winning teams that attract and nurture top talent, resulting in long-term success.
The Role of Incentives and Alignment of Interests
Successful firms prioritize alignment of interests among their team and shareholders. They create structures that incentivize long-term thinking and outcomes, ensuring shared goals and values.
The Challenge of Succession Planning and Trust
Succession planning and maintaining trust are critical for long-term success. Great firms navigate the challenge of transitioning leadership and cultivate strong relationships based on trust and mutual respect.
The Power of Compounding and the Importance of the Exponent
Compounding is a simple equation that involves the growth rate and exponent. The exponent, representing the duration or time horizon, is often more important for achieving significant outcomes. Lessons from successful investors like Warren Buffett and Dan Hur emphasize the value of both growth rate and exponent. The idea of compounding extends beyond investing to all aspects of life, including allocating time and resources. By focusing on the inputs to compounding, such as continuous learning and developing disciplines, individuals can increase their chances of achieving long-term success.
The Challenges in the Investment Industry
The institutional investment industry often faces challenges due to agency dynamics and collapsing time horizons. Many institutions struggle to maintain a long-term focus, often prioritizing short-term performance or reacting to market trends. This leads to missed opportunities and hinders the growth of investments. Over-diversification and an excessive emphasis on sourcing new investments can also hinder long-term success. The focus should shift towards nurturing the exponent by avoiding actions that interrupt compounding and instead fostering an environment that allows for sustained growth.
Lessons from Mentorship and Great Investors
Mentorship from successful investors like Will Thorndike, David Robinson, and Scott Malpass has shaped the thinking of the authors in important ways. They have learned the value of intellectual flexibility, simplicity, and alignment with one's values. Mentorship has taught them the importance of being all-in with a select group of trusted individuals and fostering true partnership. Building genuine friendships within the investment industry is critical in creating a supportive and growth-oriented environment. By learning from the experiences and wisdom of others, individuals can navigate their own journeys towards the good life.
Importance of studying the greats
The podcast emphasizes the importance of studying successful individuals and learning from their experiences. They believe that integrating the teachings of traditional faculty with modern mediums like podcasts can provide valuable insights for students. By studying the greats, they assert that individuals can gain a well-rounded education and enhance their understanding of entrepreneurship and company building.
Continuous learning and teaching
The podcast stresses the significance of continuous learning and teaching throughout one's life. They highlight the value of seeking knowledge, remaining curious, and dedicating oneself to personal growth and development. The hosts draw inspiration from legendary investors and educators who have dedicated their lives to teaching and investing. They also discuss the importance of finding one's passion, nurturing it, and devoting oneself to a purposeful life.
This is Rick Buhrman and Paul Buser. If you've listened to our Art of Investing trailer, then you'll already know that it was Patrick O'Shaughnessy who first got us into this whole crazy podcast mess.
We recently went on Patrick's show, Invest Like the Best, and wanted to share it to give you a better sense for Art of Investing's ethos and vision. Please enjoy our conversation with the very 'grovey' Patrick O'Shaughnessy.
For the full show notes, transcript, and links to mentioned content, check out the episode page here.
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Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.
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Show Notes
(00:04:00) - (First question) - Shifting from Notre Dame to Sator Grove, preserving integration and embracing change
(00:07:50) - An overview of Sator Grove
(00:13:19) - Launching in April 2021, they manage $300M for diverse, flexible investments
(00:17:17) - Investing in meaningful projects with trust, long-term focus, and high potential
(00:22:59) - Investors who they feel are dedicated to a greater purpose
(00:27:00) - Why Mitch Rales, Sator Grove's largest shareholder, embodies insatiable curiosity and lifelong learning
(00:31:39) - Learning from great investors by studying their strategies and evolution
(00:41:03) - Embracing change, adapting, and experimenting for success
(00:43:19) - How investors learn from failed companies and guard against survivorship bias
(00:53:39) - Investment success hinges on talent's judgment, character, adaptability, and trust
(00:58:23) - What they found concerning in firms and teams when assessing managers
(01:03:46) - Analyzing asset allocation challenges, including short horizons and over-diversification
(01:08:09) - Teaching compounding's power in everyday life and fostering disciplined habits for growth
(01:14:36) - The importance of nurturing compounding and learning throughout one's life
(01:22:51) - Creating meaningful connections and providing lifelong lessons
(01:28:38) - Wisdom from their mentors and its impact on their investing philosophy
(01:45:19) - Defining the good life: Quality projects, quality people, and meaningful integration
(01:46:59) - The defining moments of their investing careers so far
(01:49:29) - The kindest thing anyone has ever done for them
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