The Value Perspective

In the first episode of 2021, we have Jake Taylor, CEO of Farnam Street Investments, author of The Rebel Allocator and host of the Five Good Questions podcast and Value: After Hours series on YouTube. Jake, like us, seeks to apply learnings from other professions and perspectives to value investing. Committed to value investing since he had lunch with Warren Buffet while in business school, Jake shares with us his passion for learning from others and discussing the value style with potential converts.   You can find Jake on Twitter @farnamjake1 Episode minutes: 01:07 Intro 01:53 Jake’s background 03:36 How Jake became involved in value investing 04:49 Value investing in financial education 07:45 The role of accounting in value investing 08:38 Jake’s podcast, YouTube series, and book 13:15 A call from Charlie Munger 16:00 How do we know if something is True? 20:05 How to implement base rates and other ‘best practices’ 24:39 How do you deal with uncertainly and maintain long term focus in an industry that is increasingly short term? 28:08  How do you make decisions when faced by a litany of individual probabilities with the visible and invisible webs? 34:03 The power of saying ‘no’ 37:42 Reflecting on reasons why you said no 41:25  What is a bad decision you made? 45:40 Book Recommendations: Nature of Value by Nick Gogerty, Nonzero: History, Evolution, and Human Cooperation by Robert Wright and The Essays of Warren Buffett NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts and other podcast players. GET IN TOUCH: send us a tweet: @TheValueTeam  Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.          

Marvin Barth, Head of FX and EM Macro Strategy at Barclays, joins Andy Evans and Juan Torres Rodriguez on this episode of the Value Perspective. In July, Marvin wrote a piece called 'Managing Uncertainty' which explores how, in this current time of uncertainly, we can look back to other instances like the Great Depression and Dot Com Burst, to learn how people behave under these circumstances and how you can avoid common behaviour traps.    RUNNING ORDER:  01:07 Intro 01:36 Managing Uncertainty - what do people do during times of uncertainty? 06:55 Defining risk and uncertainty - in quantifiable and un-quantifiable terms  11:58 Is this the most uncertain time we've been through in the modern era?  16:01 Has the greater availability of information increased or decreased uncertainty?  18:17 How can measurements of uncertainty be factored into risk models? 21:30 How is asset pricing affected by uncertainty?  24:53 What behaviours changes can be observed during times of uncertainty - chronic stress vs. acute stress 27:46 Marvin's five step framework for making better decisions  33:52 Does a framework give us false confidence when dealing with uncertainty?  35:44 An example of a bad decision that was due to luck or process and book recommendations: Calling Bulls**t: the Art of Scepticism in a Data-Driven Work by Carle T Bergstrom and Jevin D West   NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts and other podcast players. GET IN TOUCH: send us a tweet: @TheValueTeam  Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.

This week, the Value Team met with Hannah Mills, Olympic Sailor for Team GB who brought home the Silver in the 2012 Olympics and then the Gold in 2016 from Rio. Simon Adler, a fund manager in the Value Team and Sophie Ainsworth, a Team GB sailor and Schroders employee discuss with Hannah decision making on and off the water.   RUNNING ORDER:  01:07 Intro 01:37 Why decision making is integral in Olympic planning 03:57 How accurate to you think your decisions making is and how its changed over time?  04:55 What process have you put in place to improve your decision making in race environment?  06:06 What type of biases affect your decision making? 07:05 How does data inform your decisions?  08:26 Decision making in pairs 12:27 Adapting from solo sailing to team sailing   14:40 Sports psychology and how it helps open up viewpoints 17:51 Are you better at decision making in risky or safe environments?  19:38 What skills have you learned from psychology that help with decision making in races? 20:50 Are there any decisions that haunt you?  26:06 Have you found the decision making learned from sailing has followed you into everyday life?  28:28  Book recommendations: Thinking Fast and Slow by Daniel Kahneman   NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts and other podcast players. GET IN TOUCH: send us a tweet: @TheValueTeam  Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.

Annie Duke returns for her second appearance on the The Value Perspective. Juan Torres Rodriguez sat down to discuss with Annie more about the probabilistic mind-set. Annie shows how using probabilities to observe your everyday actions can help you to understand the decisions that you make and recognise how and why you make guesses. Her new book ‘How to Decide: Simple Tools for Making Better Choices’ is available now.   Minutes: 01:06 Intro to Annie  02:03 How can you help people to think about probabilities? How can use it to express uncertainty? 11:36 Using ranges to understand uncertainty – The Archer’s Mindset 17:10 How can you get better at understanding base rates? 27:28 Overcoming dispersion within a team 35:22 Making decisions under time pressure 41:06 Are outcomes only interesting when they weren’t what you expected? 53:43 How do you avoid “resulting” in reaction to bad outcomes? 01:01:26 Can you give an example of a decision that resulted in a bad outcome?   This episode's book recommendations:  The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel The Biggest Bluff: How I Learned to Pay Attention, Take Control and Master the Odds by Maria Konnikova  How to Change: the Science of Getting From Where You Are To Where You Want to Be by Katy Milkman (available for pre-order) NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts, Spotify, and other podcast players.   GET IN TOUCH: send us a tweet: @TheValueTeam    Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.

In this episode, Juan and Andy speak with Taylor Pearson, a fund manager with a particular interest in creating research-backed systems to make decisions in an uncertain world, thus making people more ‘antifragile’. One of these systems included ergodicity which can be explained as a scenario where the average outcome of the group is the same as the average outcome of the individual over time. An example of an ergodic systems would be the outcomes of a coin toss (heads/tails). If 100 people flip a coin once or 1 person flips a coin 100 times, you get the same outcome. Taylor discusses how this theory can help people make decisions in uncertain environments.   Minutes: 01:10 Intro to Taylor  01:35 Notable days in history and their volatility 03:59 How do you define risk? 05:43 What is ergodicity? 08:23 Where is ergodicity relevant in our everyday life? 16:42 What is the best advice to give someone who may be succumbing to non-ergodic systems? 18:53 How does ergodicity apply in stock market scenarios? 23:53 How does diversification play a part? 26:25 Does diversification need to be oppositional? 29:52 How do you communicate probability in a way clients easily understand? 31:45 The Kelly Criterion: utilising a theory to size your decisions 34:36 An example of a bad decision 36:08 Book Recommendations – The Three Body Problem by Liu Cixin and The Origins of Political Order by Francis Fukuyama NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts, Spotify, and other podcast players.   GET IN TOUCH: send us a tweet: @TheValueTeam    Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.  

Juan and Andrew met with Sean Sutcliffe, the CEO of Oxford Space Systems, to learn how he deals with uncertainty not only in a start up business but also in a complex environment like space.  RUNNING ORDER: 01:12 Introduction 01:47 How does uncertainty impact a space start up? 03:41 Balancing market and technical uncertainties 05:33 Start-ups vs incumbents: Finding success through exploiting niches 08:14 How do you instil patience in investors over long timelines in a short-term focus environment? 12:30 Utilising milestones to help investors understand the component of time. 14:15 How the scientific approach to engineering testing aligns with market testing 17:49 Coping with failure and unexpected surprises 20:21 Understanding when you need to make a change in direction 24:33 Removing bias from investment cases – the human element in company management 26:51 When a good decision has a bad outcome 29:16 How do you build a successful team? 32:07 Book recommendation   NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts, Spotify, and other podcast players.   GET IN TOUCH: send us a tweet: @TheValueTeam    Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.

This week Nick and Juan meet Maj Nics Wetherill and LSgt Sophie Montagne, members of the Ice Maiden Expedition, the first all-female team to ski coast-to-coast across Antarctica by muscle power alone, to discuss making risk decisions as a team in the most extreme of environments.   RUNNING ORDER: 01:00 Introduction 03:20 How do you assemble a team? 08:00 Identifying what characteristics make for a strong, cohesive team in difficult conditions 10:45 The ‘human element’ versus technical skills 13:20 Learning to lead from other’s failures 15:47 Utilising outside perspectives to review planning 17:36 How do you build a process to prepare for the unknown? 20:08 How did you decide on roles within the team? 23:56 The decision framework within a democratic team 26:25 Preparing for and dealing with uncontrollable factors 30:32 How to weigh risk against reward 32:20 Ensuring that all team members are equipped mentally and physically 35:57 Key takeaways   NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts, Spotify, and other podcast players.   GET IN TOUCH: send us a tweet: @TheValueTeam    Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.

In this episode, we have the opportunity to sit down with Hector Ibarra, the CEO of Global Parametrics. Hector has worked for over 20 years in innovating the financial industry's approach to disaster risk financing products. We discuss how his company creates products that help people hedge their risks against natural disasters and increase their chances of survival. RUNNING ORDER: 00:52   Introduction 01:57   What are parametrics? 03:37   Hedging products vs. Insurance products 06:55   How do you define and quantify risk in an environment where there is little data? 09:54   Pricing in the unknown 11:53   The human dimension in Emerging Markets: how to approach risk when in survival mode 14:18   Acknowledging the systemic risk of climate change 16:26   Short term memory: telling the complex story of climate change to a global audience 19:22   Working with the scientific community to inform your decisions 20:58   Contextualising risk and probabilities through art and games 24:07   How do you communicate risk to clients? 26:20   Creating scenarios when working with catastrophes 27:52   The importance of ESG investing for emerging markets NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://tvpschroders.podbean.com/feed.xml) in Apple Podcasts and other podcast players. GET IN TOUCH: send us a tweet: @TheValueTeam  Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.

The Value Perspective team sit down with former professional poker player and author of Thinking Bets, Annie Duke to discuss probabilistic thinking, base rates, and outcome focus thinking.  RUNNING ORDER: 01:26 Why thinking probabilistically is helpful in decision making 03:30 How do we scale probabilistic thinking in line with more complex situations? 08:30 Working with incomplete information  10:46 How to utilise reference classes to sharpen your probabilistic thinking 13:30 Using outside perspectives to test your thinking 19:00 What is tilt and how do we overcome it? 31:23 How are you focusing on decision quality? 41:57 Working with longer time frames when assessing decisions NEW EPISODES: You can subscribe via Podbean or use this feed URL (https://feed.podbean.com/schroderstvp/feed.xml) in Apple Podcasts and other podcast players. GET IN TOUCH: send us a tweet: @TheValueTeam    Important information. This podcast is for investment professionals only. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. The views and opinions contained herein are those of individual to whom they are attributed, and may not necessarily represent views expressed or reflected in other communications, strategies or funds. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Past Performance is not a guide to future performance and may not be repeated. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change.