Beating the Market 15 Years in a Row, Lessons from Jeff Bezos | Lisa Rapuano
Oct 24, 2024
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Lisa Rapuano, a retired professional investor famous for beating the market for 15 consecutive years, shares insights from her remarkable journey. She discusses her early bets on companies like AOL, Dell, and Amazon, revealing key lessons from Jeff Bezos. Lisa emphasizes the importance of independent thinking in investing and contrasts practical and theoretical approaches to finance. She also highlights the significance of sound capital allocation while transitioning from investor to startup CFO, stressing the need for effective financial strategies and inclusivity in the finance industry.
Lisa Rapuano attributes her consistent market outperformance to a unique investment mindset and the importance of learning from Jeff Bezos's experiences.
The conversation highlights the evolution of value investing, emphasizing that high growth can significantly enhance a company's overall value.
Rapuano stresses the necessity for businesses to balance growth ambitions with fiscal responsibility to avoid jeopardizing stability.
The podcast addresses gender disparity in investing, advocating for increased female representation to bring diverse perspectives and innovative strategies.
Deep dives
Investing with Jeff Bezos
The discussion highlights the early days of investing in Amazon, emphasizing the flexibility to turn free cash flow positive when needed. The speaker shares insights from observing Jeff Bezos as he faced challenges while building the company, recognizing that even the most intelligent and dedicated individuals can experience failure. The experience underscores the importance of understanding that the path to success is rarely straightforward and involves substantial risks and trials.
Lessons from Bill Miller
The conversation reveals the speaker's experience working with renowned investor Bill Miller, noting their collective success in the market over a span of 15 years. By providing a unique perspective on value investing, the speaker emphasizes that investors must think differently to gain an edge over the competition. Additionally, they highlight the collaboration between themselves and Miller, where the speaker formalized and structured ideas that contributed to their success.
The Importance of Thinking Differently
The speaker emphasizes the critical nature of approaching investments with a unique mindset. They explain that simply following conventional investment strategies will not yield exceptional results. Investors need to cultivate diverse mental models and look beyond the surface to uncover potential opportunities, which can lead to more informed decision-making and potential success.
Adapting to Market Changes
The podcast touches on the evolution of value investing, with a significant focus on recognizing the importance of growth within the investment landscape. The speaker recalls how they began to observe the value in high-growth companies during the mid-1990s, understanding that growth could enhance the overall value of a business. The realization that growth was equally important as the price-to-earnings ratio challenged traditional value investment models, leading to a broader understanding of what constitutes a thriving investment.
Insights from the Dot-Com Bubble
The conversation reflects on the mistakes made by Amazon after the dot-com bubble burst, pointing out how Bezos's decisions shaped the company's future trajectory. While Amazon faced significant challenges and backlash during this period, the speaker emphasizes the importance of learning from past experiences. Acknowledging the volatility of the market, they highlight how strategic missteps can offer valuable lessons that ultimately lead to more resilient business practices.
The Risks of Overextension
The speaker discusses the pitfalls of high-growth companies that raised excessive capital without a clear understanding of how to utilize that funding effectively. They stress the need for businesses to balance growth ambitions with fiscal responsibility, cautioning against rapid expansions that could jeopardize stability. This point speaks to the critical importance of maintaining a well-defined business model and assessing the true potential of expenditures to avoid costly mistakes.
Value Creation as a Core Principle
The dialogue underscores the significance of value creation as a guiding principle for businesses and their investors. The speaker illustrates how strong companies consistently look for ways to enhance their return on investments while understanding the fundamental concept of free cash flow. Fostering an environment that prioritizes long-term growth over short-term gains can drive sustainable business practices, securing stronger outcomes for stakeholders.
The Need for Diversity in Investing
The speaker addresses the gender disparity in the investment industry and advocates for increasing female representation among investors. They highlight that women often bring patience and a long-term perspective to investing, which can prove beneficial. By encouraging more diverse hiring practices and fostering an inclusive environment, the speaker believes that the industry can tap into previously underrepresented perspectives that drive innovative investment strategies.
Lisa Rapuano outperformed the market 15 years in a row in the 90’s and 2000’s. We go deep on how she did it, including early investments in AOL, Dell, and owning 24% of Amazon in 2002.
She shares what she learned from Jeff Bezos and Michael Dell, what makes a good investor, plus her experience as a startup CFO and how it influenced how she thinks about investing.
Timestamps:
(00:00) Intro
(03:18) Growing up middle class while dad worked at NASA
(12:31) Moving to Baltimore to work for Bill Miller
(18:12) What Lisa learned from Bill
(19:41) How value investing changed over the last 30 years
(26:40) Investing in internet stocks in the 90’s and 00’s
(29:50) Thinking a 13x win on AOL in 1996 would be the biggest of her career
(37:33) Teaching Barry Diller about the internet
(41:30) How Dell reinvented PC manufacturing and created a negative cash conversion cycle
(46:46) How Amazon survived the Dot Com Crash
(51:53) Buying 24% of Amazon in 2002
(53:15) Why companies get the investors they deserve
(57:22) What Lisa learned from Jeff Bezos
(1:04:31) Lessons from raising too much money
(1:07:57) Running her own fund from 2006-2016
(1:13:32) Why fees in asset management are too high
(1:15:20) Joining Facet out of retirement 2017
(1:20:20) What she learned about investing from operating
(1:23:47) Why women are better investors than men
(1:26:43) How to hire outlier candidates
(1:35:06) Why no one can be the next Warren Buffett
(1:39:54) When to sell your winners
