166: Reinventing Equity Investing: James Anderson's Journey, From Scottish Mortgage Investment Trust to Managing Partner & CIO of Lingotto's Innovation Strategy
Feb 6, 2025
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James Anderson, a renowned investor and Managing Partner at Lingotto, shares his transformative journey in equity investing. He discusses the inadequacies of traditional evaluation methods, focusing instead on innovative approaches tailored for the tech-driven market. The conversation touches on how successful investments in companies like Tesla and Amazon reflect changing dynamics, and addresses the critical gap in Europe’s ambition for long-term investment success. The debate on the benefits of public versus private ownership further enriches this insightful dialogue.
James Anderson emphasizes the shift in evaluating companies, arguing that traditional analysis methods are no longer effective in today's market landscape.
The podcast discusses the necessity of nurturing curiosity in young investors to foster innovative thinking and better investment strategies.
A cultural shift is needed in Europe to enhance entrepreneurs' ambitions and enable them to compete more aggressively on a global scale.
Deep dives
The Impact of Curiosity on Career Paths
A personal recount highlights the role of curiosity as a driving force in career development. The speaker reflects on their childhood inquisitiveness, describing a persistent habit of asking 'why' during formative years. This natural curiosity may have led to an unconventional career path, transitioning from a history degree at Oxford to exploring various fields, including finance. The importance of nurturing this curiosity in young investors is emphasized, as it can facilitate better understanding and innovation in investment strategies.
Corporate Longevity and Investment Philosophy
The conversation includes insights on corporate longevity, supported by data suggesting that a small number of companies generate a significant portion of stock market returns. A historical perspective indicates that despite market evolution, investment success often hinges on a few dominant companies. The speaker stresses the need for a longer-term view in investment strategy, learning from patterns observed in corporate performance over decades. They advocate for embracing a philosophy that focuses on nurturing potential winners rather than merely chasing immediate returns.
The Importance of Different Thinking in Investing
The discussion addresses the shortcomings of conventional investment analyses, advocating for thoughtful, long-term perspectives that resist reliance on traditional data. The speaker emphasizes the necessity of identifying revolutionary companies through unique insights rather than common metrics. Examples like Tesla highlight the potential of understanding underlying innovations and market dynamics to inform investment decisions. This approach encourages speculation on future growth rather than limiting outlooks to immediate market projections.
Navigating Market Dynamics and the Role of Risk
Market dynamics pose considerable challenges for investors, particularly concerning risk management and capital allocation. The conversation centers around the philosophical differences between private and public market investments regarding long-term growth potential. The speaker argues that venture capital and private investment typically allow for a more supportive environment for company growth, free from the pressure of quarterly performance. The focus on individual company health instead of short-term volatility is highlighted as a more effective approach to investing.
The Need for Reprogramming European Entrepreneurs
The discussion highlights the challenges faced by European entrepreneurs in scaling their businesses compared to their American counterparts. A call for a cultural shift emphasizes the necessity for entrepreneurs to recalibrate their mindsets toward longer-term ambitions and commitment to building thriving companies. This includes recognizing the complexities of venture capital funding and the importance of supportive ecosystems for growth. By nurturing a more ambitious and innovative outlook, Europe can reclaim its competitive edge in the global market.
In today’s episode we have the chance to talk to one of the most successful investors of his generation, James Anderson, Former Partner at Baillie Gifford.
I'm joined by Mark Wallace, MD of Rothschild & Co, who brings his expertise on US tech equities to this discussion.
From 1987 until 2022 he led their flagship fund, the Scottish Mortgage Investment Trust. His early investments in Google through to Tesla paid handsome returns to investors, and have made him both highly respected and widely admired.
Now he is at Lingotto, the independent investment management company wholly owned by Exor N.V..
James discusses how his approach to evaluating companies has evolved and what he means by “the normal ways of looking at companies is no longer valid”. He discusses companies’ life cycles and why such a small percentage of listed companies actually deliver the big returns.
He then reflects on the importance of the academic community in sourcing, as well as validating investment ideas before moving on to the vision exhibited by founders and vested principals in newer businesses, from Amazon to Tesla.
He describes his investing priorities thematically, including risks, mistakes, accessing long-term capital and why Europe seems to lack ambition in both seizing and scaling the opportunities.
Finally, he reflects on the public versus private debate, asking and answering the question as to which of those two may be the better sources of return.
