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James Anderson on Why Fund Management Is 'Broken' (Podcast) · Masters in Business

• 0:00
  Speaker 1: M This is Mesters in Business with Very Results on
• 0:06
  Speaker 1: Bluebird Radio this weekend. On the podcast man Strap Yourself In.
• 0:12
  Speaker 1: I love finding these people, just rockstar fund managers who
• 0:17
  Speaker 1: who just blow everybody else's doors off, but have somehow
• 0:22
  Speaker 1: managed to maintain a relatively low profile over the decades
• 0:26
  Speaker 1: they've been in in the business, and today's guest is
• 0:30
  Speaker 1: absolutely an example of that. James Anderson has been at
• 0:34
  Speaker 1: Bailey Gifford since nine His track record is superlative. But
• 0:41
  Speaker 1: what I'm really fascinated by is not just the outcomes
• 0:44
  Speaker 1: of his investments. It's how his process is so atypical
• 0:50
  Speaker 1: of what we see in the world of investment. Very thoughtful,
• 0:55
  Speaker 1: very eccentric, really considers investments in in terms of decades,
• 1:01
  Speaker 1: forget years, decades. I don't know how else to describe
• 1:05
  Speaker 1: it other than strap yourself in. For this one, it's spectacular.
• 1:10
  Speaker 1: With no further ado. My conversation with the soon to
• 1:14
  Speaker 1: be retiring manager of the Scottish Mortgage Investment Trust and
• 1:18
  Speaker 1: partner at Bailey Gifford, James Anderson. This is Mesters in
• 1:25
  Speaker 1: Business with very renorlts on Bluebird Radio. My extra special
• 1:31
  Speaker 1: guests this week is James Anderson. He is a partner
• 1:35
  Speaker 1: at Bailey Gifford, where he runs the Footsie one hundred
• 1:38
  Speaker 1: listed Scottis Mortgage Investment trust funds. It's about twenty three
• 1:43
  Speaker 1: and a half billion dollars last I checked. He has
• 1:45
  Speaker 1: generated returns over the past two decades of over. Bailey
• 1:53
  Speaker 1: Gifford also manages about four hundred and seventy billion dollars.
• 1:57
  Speaker 1: James Anderson, Welcome to Moomberg. Thank you. It's a pleasure
• 2:02
  Speaker 1: to be with you. Let's talk about your career. You
• 2:05
  Speaker 1: join Billy Gifford back. Tell us how you found your
• 2:09
  Speaker 1: way into finance and how did your financial career begin. Barry.
• 2:13
  Speaker 1: I think it's a combination of a fairly um normal
• 2:19
  Speaker 1: British establishment story with a few twists. UM. I came
• 2:23
  Speaker 1: from a very medical family. UM I didn't much care
• 2:27
  Speaker 1: for the idea of being a doctor, although everybody assumed
• 2:30
  Speaker 1: that's because I wasn't remotely clever enough, which used to
• 2:33
  Speaker 1: annoy be a bit. I did a history degree at Oxford,
• 2:36
  Speaker 1: which may or may not have been relevant, and I
• 2:39
  Speaker 1: then spent a couple of years at university abroad, in
• 2:42
  Speaker 1: particular a year at Johns Hopkins and Bologna in Italy,
• 2:47
  Speaker 1: which was originally set up to use for the c
• 2:50
  Speaker 1: I spent spy on the Italian communist parties involved by then,
• 2:54
  Speaker 1: but it gave me a first for hearing different interpretations.
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  Speaker 1: There were people from approximately forty different tris and really
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  Speaker 1: made me a great deal more curious than I was
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  Speaker 1: when I was being talked down straight lines at Oxford.
• 3:06
  Speaker 1: And I think, and I think you would probably agree,
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  Speaker 1: fund management is great if you're really curious about the world.
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  Speaker 1: Journalism was the only other thing I considered um and
• 3:17
  Speaker 1: I didn't much like London, so Edinburgh was quite interesting.
• 3:22
  Speaker 1: So so you're barely Gifford in eighty three, how do
• 3:25
  Speaker 1: you eventually become the manager of the Scottish Mortgage Investment Trust,
• 3:30
  Speaker 1: which dates back to practically the turn of the last centric.
• 3:34
  Speaker 1: That's right, and to be honest, Barry, I think that
• 3:37
  Speaker 1: some of the events in the early years of Scottish
• 3:40
  Speaker 1: bortgage quite fascinating. You might be intrigued to read, for instances,
• 3:45
  Speaker 1: accounts of UH ninety thirty, where it was much more
• 3:50
  Speaker 1: concerned about which member of the Scottish middle classes was
• 3:53
  Speaker 1: going to be appointed to the board than it was
• 3:55
  Speaker 1: by what was happening on Wall Street. It's account of
• 3:58
  Speaker 1: why Canada and Argentina were more interesting than America was
• 4:03
  Speaker 1: interesting the backstory that for many years, UM, but I've
• 4:07
  Speaker 1: always thought that investment trusts are a fantastic instrument UH
• 4:13
  Speaker 1: and you know that's come across even more in recent
• 4:16
  Speaker 1: years because our freedom to go where we want an
• 4:19
  Speaker 1: investor in whichever form we want UH, and to try
• 4:23
  Speaker 1: and offer at low costs to retail investors has been
• 4:26
  Speaker 1: something that I really value. And so the unpopularity of
• 4:31
  Speaker 1: that form which existed back in UM, you know, it
• 4:35
  Speaker 1: was just a fascinating project to try and get involved
• 4:38
  Speaker 1: and gradually UM see the benefits of it. And I
• 4:41
  Speaker 1: much admired my predecessor, Max Would, who had the same
• 4:46
  Speaker 1: thirst for growth investing. Billy Gifford made a huge mistake
• 4:50
  Speaker 1: because in the late nineties seventies Max was by far
• 4:53
  Speaker 1: our most outstanding investor UM, and of course so many
• 4:57
  Speaker 1: of our assets were in the UK at that time.
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  Speaker 1: Max was persuaded to be in charge of the UK
• 5:03
  Speaker 1: market when his heart was in America. And I think
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  Speaker 1: Scottish Borgage shouldn't really give a right had been further onwards.
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  Speaker 1: If we'd revert that last year you happened to say
• 5:14
  Speaker 1: fund management was irretrievably broken. Um explained that a little bit.
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  Speaker 1: That's a fascinating quote. Yeah, well, and I'd be very
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  Speaker 1: interested to pursue this and follow up questions from you Berry,
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  Speaker 1: because I think it's a critically important issue. I think
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  Speaker 1: fun of management has inherently become inward looking. And you
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  Speaker 1: know this as well as I do. People measure themselves
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  Speaker 1: by how they do to their comparators. If I go
• 5:44
  Speaker 1: back to the early days of stock markets, what we
• 5:48
  Speaker 1: were in the business of was helping to create a
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  Speaker 1: nurture great companies. So we're going to move society as
• 5:57
  Speaker 1: well as investors onwards, and I think that we've lost
• 6:01
  Speaker 1: that sense of purpose over the years. So that is
• 6:05
  Speaker 1: absolutely central to how I see it. I would evidence
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  Speaker 1: it by not just all the type of short run
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  Speaker 1: performance statistics and short run media coverage there is, but
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  Speaker 1: by the lacerating overall facts that both in Britain and America,
• 6:21
  Speaker 1: for a very long decade now, more money has been
• 6:26
  Speaker 1: given back by companies in the quoted markets than has
• 6:30
  Speaker 1: been raised. Um. You know, he's become a machine for
• 6:34
  Speaker 1: recycling rather than a machine for creation. Now I could
• 6:38
  Speaker 1: go on, but fundamentally, I think that is the great
• 6:42
  Speaker 1: trouble and has led us to have have to reinvent
• 6:47
  Speaker 1: a different way of really providing serious equity capital outside
• 6:51
  Speaker 1: the public markets. That's really interesting. So when you say
• 6:55
  Speaker 1: a machine for recycling rather than inventing, are you referring
• 6:59
  Speaker 1: to share buy backs rather than R and D, research
• 7:03
  Speaker 1: and development and investment in new ideas. Yeah, that that's
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  Speaker 1: absolutely right. Share back buy backs um in many cases
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  Speaker 1: successive divid and insufficient investment UM, and particularly in capital
• 7:18
  Speaker 1: intensive business, which, as you know of not on the
• 7:20
  Speaker 1: whole being what's been on people's minds for most of
• 7:23
  Speaker 1: the last that he is. But yeah, I think this
• 7:25
  Speaker 1: is a real problem. And to build these companies you
• 7:29
  Speaker 1: need a time horizon that is well longer earth than
• 7:33
  Speaker 1: quarters years and possibly even the decades. Huh. There's another
• 7:38
  Speaker 1: quarte of yours related to this exact issue that I
• 7:41
  Speaker 1: found very amusing. Fund managers are addicted to the near
• 7:45
  Speaker 1: pornographic allure of earnings reports and macro economic headlines. Is
• 7:52
  Speaker 1: that just a colorful way of saying they're too short term,
• 7:55
  Speaker 1: They're not thinking long term enough. That's that's certainly part
• 8:02
  Speaker 1: of it, but I don't think it is underneath even
• 8:08
  Speaker 1: in terms of the moment the critical part of it. UM.
• 8:14
  Speaker 1: I'd cite for instance that I spend a lot of
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  Speaker 1: time asking companies when they've been fortunate enough to be successful,
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  Speaker 1: what have been the critical moments, critical decisions? And very rarely, Barry,
• 8:32
  Speaker 1: do they say it was because we had a great
• 8:35
  Speaker 1: quarter in or of course we beat ourn ex expectations
• 8:40
  Speaker 1: in two thousand and five. And indeed, I think if
• 8:43
  Speaker 1: you if you drill down from that, very often the
• 8:47
  Speaker 1: most significant moments of companies history have been when they've
• 8:53
  Speaker 1: done something that is annoyed in the quarterly reports sense um.
• 8:58
  Speaker 1: And you know, I I would cite, for instance, the
• 9:02
  Speaker 1: extreme drawdowns we saw with Amazon around the time of
• 9:08
  Speaker 1: developing Prime, which was plainly a fantastically good long run
• 9:14
  Speaker 1: term value creating proposition, but yet the preoccupation was with
• 9:21
  Speaker 1: the short term impact on earnings. And you know, I
• 9:24
  Speaker 1: think you can drill into that again in a different
• 9:27
  Speaker 1: way by asking what are the questions that happen in
• 9:32
  Speaker 1: quarterly earning schools? As you know, very rarely do you
• 9:36
  Speaker 1: see major investors in the company. UM. The focus of
• 9:42
  Speaker 1: those discussions. It is about the brokerage industry, the investment banks,
• 9:48
  Speaker 1: and the next quarter, and I think that is profoundly
• 9:52
  Speaker 1: dangerous and does have an impact. So I think it
• 9:55
  Speaker 1: actually goes well beyond just the time frame a justice
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  Speaker 1: though that's a unimportant when plainly it's deeply, deeply important.
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  Speaker 1: But I think you actually get the immediate discussions as
• 10:09
  Speaker 1: well as the long term discussions bias towards whether the
• 10:13
  Speaker 1: next quarter is going to be up or down relative
• 10:16
  Speaker 1: to a set of analyst expectations. You were early desparked
• 10:21
  Speaker 1: the potential for some really explosive growth stocks, and they're
• 10:25
  Speaker 1: all very different. I'm thinking about Tesla Ali, Barba, Amazon,
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  Speaker 1: What were the tells of each of these that led
• 10:34
  Speaker 1: you to think, Hey, there's really something special here. I
• 10:39
  Speaker 1: think fundamentally there are two important tracks in this Barry
• 10:45
  Speaker 1: uh to discuss try and um elucidate our thought process
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  Speaker 1: of now. I think really you're looking for the scale
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  Speaker 1: and this has become almost bernal to say, but the
• 11:00
  Speaker 1: scale of the addressable market that is there, and very
• 11:05
  Speaker 1: often I think it's it's it's key to stress this
• 11:09
  Speaker 1: that scale is not necessarily all that obvious at the
• 11:15
  Speaker 1: start of it. You know when Amazon was a bookseller,
• 11:19
  Speaker 1: when Tester was a sporting goods company, or you read
• 11:21
  Speaker 1: about the early days of Ali Baba when there were
• 11:24
  Speaker 1: twenty of it, but you can't really guess to that.
• 11:27
  Speaker 1: But I think that means that a critical important part
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  Speaker 1: of this is a management that can accept that type
• 11:37
  Speaker 1: of open endedness and that type of time horizon and
• 11:41
  Speaker 1: that type of business decisions that we were talking about. Now,
• 11:45
  Speaker 1: if I look at this from an intellectual point of view,
• 11:49
  Speaker 1: we've had a splendid relationship with a set of academics
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  Speaker 1: who have tried to focus on what really happened in
• 12:01
  Speaker 1: the stock market from that that point of view, UM
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  Speaker 1: And you know, I think the history is going right
• 12:09
  Speaker 1: back to the Dutch East India company that a very
• 12:12
  Speaker 1: small number of people dominate. And this was our experience
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  Speaker 1: ourselves that you had to have that ability of the
• 12:20
  Speaker 1: management to think in those brought raw terms. But we
• 12:24
  Speaker 1: we we we acquired ever greater conviction of this when
• 12:28
  Speaker 1: it wasn't just our own experience but from the work
• 12:31
  Speaker 1: of Hendrick Bessing Bhind at Arizona State University UM in
• 12:36
  Speaker 1: just stocks out performing treasury builds and they're onwards and
• 12:39
  Speaker 1: to put this in context. Um, you know, his data
• 12:42
  Speaker 1: on the American market goes back to twenty four thousand
• 12:46
  Speaker 1: companies in US common stock. Since then, um, now, over
• 12:52
  Speaker 1: that time, half the value of the key bills has
• 12:55
  Speaker 1: been created by just ninety companies. Now, talking to Hendrick,
• 12:59
  Speaker 1: he would agree that these companies don't just have huge markets,
• 13:04
  Speaker 1: but they have a willingness to say, we don't know
• 13:08
  Speaker 1: there's going to take us. And you mentioned there as
• 13:11
  Speaker 1: we we we all often do Amazon within this now,
• 13:16
  Speaker 1: possibly of all the many brilliant things that Jeff Bezos
• 13:19
  Speaker 1: has said and done, I think it was one of
• 13:22
  Speaker 1: his initial comments that there was this weirdness about his
• 13:26
  Speaker 1: business that everything he and Amazon News got better and cheaper,
• 13:30
  Speaker 1: usually by around perannum um. And then he paused and
• 13:36
  Speaker 1: probably gave a characteristic laugh and said, which I think
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  Speaker 1: is really important. I don't know where this is going
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  Speaker 1: to take me, but I think it is going to
• 13:44
  Speaker 1: be very exciting. Now we don't know, and surely we
• 13:48
  Speaker 1: didn't know about a WS and the like. And you know,
• 13:52
  Speaker 1: I think what you're there by looking for is both
• 13:55
  Speaker 1: that type of management attu in general and something specifically
• 13:59
  Speaker 1: in the vigil. We'd be lucky to have on the
• 14:02
  Speaker 1: board of Scottish Mortgage and sadly now retired professor per
• 14:08
  Speaker 1: s John Kum, who is his work. You probably know
• 14:13
  Speaker 1: m but you know a truly brilliant and thoughtful economist
• 14:18
  Speaker 1: who really puts Tom Slater. You've talked to him myself
• 14:23
  Speaker 1: on our biggest tests, board meetings and other discussions. But
• 14:28
  Speaker 1: I think one of the best sentences that even John
• 14:31
  Speaker 1: has as written um is the start of one of
• 14:35
  Speaker 1: his books where he compares great companies with fiction, and
• 14:41
  Speaker 1: he cites the first line of Van Karenina, which says
• 14:45
  Speaker 1: that all unhappy marriages are different, but all happy marriages
• 14:50
  Speaker 1: the same. And John's take as a second line is
• 14:53
  Speaker 1: it's the reverse in companies, that all great companies are
• 14:57
  Speaker 1: unique and all mediocre companies that are saying. And I
• 15:00
  Speaker 1: think if he runs through all these examples, and we
• 15:03
  Speaker 1: may well do with some of those, they are unique
• 15:06
  Speaker 1: and they have a different interpretation. So my challenge to myself,
• 15:11
  Speaker 1: you know, sticking with the Amazon example, is instead of
• 15:16
  Speaker 1: we spotted it early, what took us so long? Because
• 15:19
  Speaker 1: we only became major owners of Amazon in approximately two
• 15:22
  Speaker 1: thousand and four. I think if you go back and
• 15:26
  Speaker 1: read and try and x out you know, all the
• 15:29
  Speaker 1: subsequent UM successes. But if you read what Jeff based
• 15:35
  Speaker 1: Us wrote, I think you and I would agree that
• 15:39
  Speaker 1: it is a unique document, and I think you can
• 15:42
  Speaker 1: find that form of thought processes about the future of
• 15:47
  Speaker 1: their companies in all the truly great companies. Yeah, I
• 15:51
  Speaker 1: think a lot of us read that initial letter to shareholders,
• 15:56
  Speaker 1: but we probably didn't see it for a fifteen or
• 15:58
  Speaker 1: twenty years. Not a lot but read it and really
• 16:02
  Speaker 1: understood it back in that that may be. I mean,
• 16:07
  Speaker 1: I I almost think of, you know, to come back
• 16:10
  Speaker 1: to my comments about our ownership, we made it more
• 16:13
  Speaker 1: more difficult for ourselves varied by waiting those intervening six
• 16:19
  Speaker 1: or seven years, because you know, I think one skepticism
• 16:22
  Speaker 1: had only grown over that point. And you know, I'm
• 16:25
  Speaker 1: always amuse frustrated now when people UM talk about the
• 16:32
  Speaker 1: late ninety nineties as some sort of just simply a bubble.
• 16:37
  Speaker 1: I think there was also and here for once I
• 16:40
  Speaker 1: would find myself agreeing with Peter Deal. There was also
• 16:43
  Speaker 1: a huge amount of clarity around that point, and I
• 16:46
  Speaker 1: think people's ability to explore those ideas was there. But yet,
• 16:51
  Speaker 1: if I compare what Amazon was saying what Jeff Besis
• 16:54
  Speaker 1: was saying about that point of time, UM, compared to
• 16:58
  Speaker 1: what the average telecoms or media company equally sucked up
• 17:03
  Speaker 1: in the whole boom was. I think you could make
• 17:05
  Speaker 1: those differentiations. So you know, I know that a periods
• 17:09
  Speaker 1: of stress, and plainly there's another one at the beginning
• 17:12
  Speaker 1: of this year. Um, the correlations go to one and
• 17:16
  Speaker 1: all companies are regarded as the same. But I genuinely
• 17:20
  Speaker 1: believe that the market and the articulation given by individuals
• 17:24
  Speaker 1: and companies of their culture and ambitions does enable you
• 17:28
  Speaker 1: to differentiate. Really interesting, So you mentioned Jeff Bezos and
• 17:34
  Speaker 1: Peter Till, what is the allure of the enigmatic founder?
• 17:39
  Speaker 1: How much of the buyers you made in companies like
• 17:41
  Speaker 1: Amazon and Tesla are because the companies were helmed by
• 17:46
  Speaker 1: visionaries like Jeff Bezos and Eon musk H. Of course,
• 17:52
  Speaker 1: of what I've said about the power of truly great
• 17:56
  Speaker 1: businesses has come from reinterpreting uh the industries in which
• 18:01
  Speaker 1: they operate, and very often, as the examples you side show,
• 18:05
  Speaker 1: there are people who are basically from outside the industry.
• 18:09
  Speaker 1: I think it is very very hard, um, not to
• 18:14
  Speaker 1: think that that is an absolutely critical factor. Um. You know,
• 18:17
  Speaker 1: I would be intrigued. Uh. And you know we may
• 18:21
  Speaker 1: come onto one or two counterexamples, but I wouldn't treat
• 18:24
  Speaker 1: as how many companies have managed to rise to Chew
• 18:27
  Speaker 1: greatness without having had that at the start of the Uh.
• 18:32
  Speaker 1: There that the life stories And again that's something that
• 18:36
  Speaker 1: basically Henry Bess and Binder would agree with us. If
• 18:38
  Speaker 1: you go back early companies, that is also true of them.
• 18:43
  Speaker 1: You know, I find we were talking Amazon them. But
• 18:47
  Speaker 1: I think the test A story in that sense is
• 18:49
  Speaker 1: even more remarkable. Um. Somebody I much admard within the industry,
• 18:54
  Speaker 1: John L. Kind of Ferrari installantis um As has said
• 18:59
  Speaker 1: very clearly that he didn't think it could have Tessler,
• 19:02
  Speaker 1: could have been done by anybody from inside the industry.
• 19:07
  Speaker 1: So I think that different vision It very rarely comes
• 19:12
  Speaker 1: about without there being one single individual funders now to
• 19:16
  Speaker 1: undermine my own case Bury because you know, I think
• 19:20
  Speaker 1: that the nuance and the discussion is important here. Funny enough,
• 19:25
  Speaker 1: one of the companies that people don't seem to focus
• 19:28
  Speaker 1: on a lot, and they don't seem to ask me
• 19:31
  Speaker 1: a lot lot or about all my colleagues, But which
• 19:34
  Speaker 1: we probably most admire in the changes that have happened
• 19:38
  Speaker 1: in the world, would be ASML in Holland, and I
• 19:42
  Speaker 1: consider that both the extraordinary European example of a really
• 19:48
  Speaker 1: deep technology company that has actually succeeded. I also consider
• 19:53
  Speaker 1: it's possibly, in terms of what it enables, the most
• 19:56
  Speaker 1: deeply incomportant company in the world. You're not one of
• 20:00
  Speaker 1: the Internet helpfullys would basically exist unless, as abuts continued
• 20:06
  Speaker 1: More's law. But although there are individuals who have done
• 20:10
  Speaker 1: absolutely superb jobs, it's not so much associated with the
• 20:15
  Speaker 1: philosophy of one all domineering founders. And I find that
• 20:20
  Speaker 1: thereby an example that is even more intriguing. How do
• 20:24
  Speaker 1: you get to this level of ambition, this level of attainment,
• 20:27
  Speaker 1: this level of world leadership without having that sort of leader.
• 20:31
  Speaker 1: But I'm assuredly of the view that having one of
• 20:34
  Speaker 1: these sort of visionary leaders at the start is hugely important.
• 20:38
  Speaker 1: So that raises a fascinating quandary, which is, how do
• 20:43
  Speaker 1: you separate the true disruptor, the folks like bezos and musk,
• 20:49
  Speaker 1: from the crowded fields of those who you know, promise
• 20:52
  Speaker 1: over promise and under deliver um. And I'm thinking of
• 20:56
  Speaker 1: either Adam Newman of of WE Work or Travis Clentic
• 21:00
  Speaker 1: of of Uber. Well, firstly, I I don't think I
• 21:07
  Speaker 1: will have any difficulty persuading you of this very let
• 21:10
  Speaker 1: alone the audience. Um, I think one accepts that the
• 21:14
  Speaker 1: hit rate is going to be comparatively low. You know,
• 21:18
  Speaker 1: another one of the points that Hedrick best of mind
• 21:21
  Speaker 1: who would make, is that he can stick up a
• 21:24
  Speaker 1: chart of where the returns in public equity markets, whether
• 21:27
  Speaker 1: in America or internationally, have come from, and people assume
• 21:32
  Speaker 1: it's a return structure of the venture capital industry rather
• 21:36
  Speaker 1: than the public equity markets. And inevitably that means you are,
• 21:40
  Speaker 1: just as in the venture capital We're going to have failures.
• 21:44
  Speaker 1: But yes, of course you both try and capture the
• 21:47
  Speaker 1: extreme and try and winnow out um where the differences,
• 21:52
  Speaker 1: and you know, I think it genuinely has to come
• 21:55
  Speaker 1: down to a judgment of the caliber and the persuades
• 22:00
  Speaker 1: us of those individual ideas. You know, to be quite
• 22:04
  Speaker 1: frank with you, we did talk to WE Work, but
• 22:07
  Speaker 1: we didn't invest. We did talk to to run Us,
• 22:10
  Speaker 1: but we didn't invest. Now, to some extent, you're relying
• 22:14
  Speaker 1: on network of people who you will have good conversations
• 22:17
  Speaker 1: with them when we might come that. Come back to
• 22:19
  Speaker 1: that later. But I think it is about whether when
• 22:25
  Speaker 1: you put to these people the difficulties, the drawbacks, why
• 22:29
  Speaker 1: do they believe in what they're saying, um, and why
• 22:33
  Speaker 1: do they think they might have a chance? Then I
• 22:36
  Speaker 1: think you can make a more intelligent answer to that
• 22:40
  Speaker 1: than you think. And you know, I think thereby and
• 22:43
  Speaker 1: this is I think a very are the easy question
• 22:47
  Speaker 1: for most investment managers. You are thereby coming down on
• 22:52
  Speaker 1: it being critically about making qualitative judgments rather than quantitative ones.
• 22:59
  Speaker 1: And when we were discussing earlier Ernie his cause and
• 23:03
  Speaker 1: the like, I think that that rushed to what you
• 23:06
  Speaker 1: can measure rather than what you can think about and
• 23:11
  Speaker 1: not even analyze but creatively enquire about is hugely important UM.
• 23:17
  Speaker 1: And I think your biggest single objective on that is
• 23:20
  Speaker 1: to try and understand whether there is a reason that
• 23:24
  Speaker 1: only the one company who are investing in can do
• 23:28
  Speaker 1: what was happening. So we we worry a lot about
• 23:31
  Speaker 1: companies in which the clones can easily happen. On that score,
• 23:37
  Speaker 1: one of my takeaways from the Bess and Binder studies
• 23:40
  Speaker 1: was that a lot of fund managers and staff pickers
• 23:45
  Speaker 1: were excellent at identifying the companies to buy, but they
• 23:50
  Speaker 1: weren't especially good at determining when to sell. And I
• 23:56
  Speaker 1: bring this up in light of you essentially cutting your
• 23:59
  Speaker 1: tes So steake in half at a time after it
• 24:04
  Speaker 1: had really ballooned up and was very fortunate timing. Was
• 24:08
  Speaker 1: this just a function of rebalancing or valuation or what
• 24:13
  Speaker 1: was the thinking behind the cell in in a substantial
• 24:17
  Speaker 1: stake of of your Tesla Holden. I'll try and answer
• 24:22
  Speaker 1: that directly first, but then I'd like to cover a
• 24:26
  Speaker 1: bit of the intermediary stage, because you know, I think
• 24:29
  Speaker 1: it is it is the holding on that is critically
• 24:32
  Speaker 1: important in this um. You know, I was very interesting
• 24:37
  Speaker 1: interesting you had a discussion a few months ago, I
• 24:39
  Speaker 1: think with Bill Gurley about the importance of the holding
• 24:42
  Speaker 1: all elements of this which you know I think is
• 24:46
  Speaker 1: essential to it. But let let me try and run
• 24:49
  Speaker 1: the testa one to you. So what we're constantly trying
• 24:53
  Speaker 1: to answer, and I will mention some less excience successful
• 24:58
  Speaker 1: examples of this, uh than how Tesla has seemed, at
• 25:02
  Speaker 1: least so far. What we're trying constantly to ask ourselves
• 25:07
  Speaker 1: is has this company got the possibility to be in
• 25:11
  Speaker 1: the top five pc of outcomes over the next five
• 25:14
  Speaker 1: years UM and even longer if if if we can,
• 25:18
  Speaker 1: and we do, we try to make it longer, so
• 25:20
  Speaker 1: you're sticking out, can it still produce enough return to
• 25:24
  Speaker 1: make it into that sort of very high level competition. UM.
• 25:29
  Speaker 1: We did not think last January that at the total
• 25:35
  Speaker 1: market capitalization, total enterprise values that Tesla was getting to,
• 25:40
  Speaker 1: that we could see that degree of upside. It was
• 25:43
  Speaker 1: not about a worry that it would go down, which,
• 25:47
  Speaker 1: of course, in the case of Teslary even more than
• 25:49
  Speaker 1: the case of ny NY companies always existed. It's that
• 25:53
  Speaker 1: we doubted there was sufficient upside. Now to bring that
• 25:57
  Speaker 1: up to day have to say that, if anything, we
• 26:04
  Speaker 1: have been i'd almost say taken aback by the excellence
• 26:10
  Speaker 1: the brilliance of Texas executions since that period of time.
• 26:15
  Speaker 1: And I don't think it's just in quarterly and it's
• 26:17
  Speaker 1: terms again to go back that I think their ability
• 26:22
  Speaker 1: to build out the factories, to build out their expertise
• 26:26
  Speaker 1: in the batteries broadly defined, their ability to internationalize, their
• 26:31
  Speaker 1: ability to in fact increase their leadership over the industry
• 26:35
  Speaker 1: rather than Saturn is truly remarkable. So you know you're
• 26:39
  Speaker 1: being kind enough to say it was not an ill
• 26:42
  Speaker 1: timed reduction, which it wasn't in terms of having held
• 26:46
  Speaker 1: on before. But it's perfectly possible we'll be wrong. And
• 26:49
  Speaker 1: that's much of my mind, Barry, because you know, I think,
• 26:54
  Speaker 1: if anything, although we pride ourselves hugely on our ability
• 26:59
  Speaker 1: to in juror and back companies for for years and
• 27:02
  Speaker 1: years and years, um, I think our longest holding is
• 27:06
  Speaker 1: in Atlas Copca in Sweden, which I first brought in
• 27:09
  Speaker 1: I think, and we still own it, but sometimes we've
• 27:13
  Speaker 1: given up and made very bad mistakes on that point
• 27:15
  Speaker 1: of view. You know, we were large owners of Apple.
• 27:18
  Speaker 1: I myself did the exercise of trying to see whether
• 27:21
  Speaker 1: I thought it could be in the top five cent
• 27:24
  Speaker 1: of outcomes over the next ten years, and I didn't
• 27:27
  Speaker 1: think it could do could be now that's approximately five
• 27:30
  Speaker 1: years ago now, um, so you know there is a
• 27:32
  Speaker 1: fallibility about this process, but it's absolutely about it. Does
• 27:36
  Speaker 1: it have the chance from here to continue to replicate
• 27:41
  Speaker 1: the style of performance that with successes we think is
• 27:45
  Speaker 1: the outcome? M hm. That's quite fascinating and it leads
• 27:49
  Speaker 1: to another question. I'm hearing you describe yourself as less
• 27:56
  Speaker 1: of a pure bottom up stock picker, unless of a
• 28:01
  Speaker 1: sort of macro market cycle economic guy, than someone who
• 28:05
  Speaker 1: is trying to visualize what the future might look like
• 28:09
  Speaker 1: and which companies can help shape it. Is that a
• 28:14
  Speaker 1: fair assessment. I don't want to oversimplify this, no, but
• 28:20
  Speaker 1: I respect that. But I think it's a decent simplification.
• 28:25
  Speaker 1: Or if I might trump put in a slightly different terminology,
• 28:29
  Speaker 1: what we're looking for, uh the era defining companies, and
• 28:34
  Speaker 1: I've never really understood this attempt to define it purely
• 28:39
  Speaker 1: as bottom up or top down. Now, I think we
• 28:43
  Speaker 1: haven't really talked about as yet, but I wouldn't be
• 28:45
  Speaker 1: surprised if we if we do in the coming minutes.
• 28:50
  Speaker 1: I think that we are also doing an element of
• 28:55
  Speaker 1: top down envisioning of what the world looks like. But
• 28:58
  Speaker 1: it's not from you know, to go back to the
• 29:01
  Speaker 1: analogy with the quarterly earnings, it's not from what is
• 29:04
  Speaker 1: the FED about to do? And you know, to be frank,
• 29:08
  Speaker 1: even if I knew what the Fed was about to do,
• 29:10
  Speaker 1: I'm not sure it would help me make good decisions.
• 29:12
  Speaker 1: But it is trying to think what are going to
• 29:15
  Speaker 1: be the main driving forces of our economy over the
• 29:19
  Speaker 1: years to come, and where can there be those forces
• 29:22
  Speaker 1: of change and where can we get insight into them? So,
• 29:26
  Speaker 1: rather than looking for what a bunch of market commentators
• 29:31
  Speaker 1: or hedge funds are saying, we try and talk to
• 29:35
  Speaker 1: academics and scientists who can give us some checkpoints on
• 29:40
  Speaker 1: whether you know, those fundamental points are happening. Um, So
• 29:46
  Speaker 1: you know, to continue with the TESTA one on that theme.
• 29:49
  Speaker 1: You know, what was critically important to us remains quickly
• 29:53
  Speaker 1: important to us. Um in thinking about that scale of
• 29:57
  Speaker 1: the market that we were addressing earlier, was do we
• 30:01
  Speaker 1: have that confidence that the whole panoply of technologies connected
• 30:08
  Speaker 1: with making electric vehicles better and cheaper can continue to
• 30:13
  Speaker 1: compound at somewhere between fifteen per annum that we had
• 30:19
  Speaker 1: back in two thousand and thirteen fourteen. And you know,
• 30:23
  Speaker 1: to me, that's both are far more valuable background to investing.
• 30:30
  Speaker 1: But also you know, here I would be particularly interested
• 30:33
  Speaker 1: in your thoughts a far higher probability of being right. Um.
• 30:39
  Speaker 1: You know, I think that back in two thousand and fourteen,
• 30:42
  Speaker 1: we had approximately seventy five confidence interval that that across
• 30:51
  Speaker 1: all the different parts of the industry was the improvement rate. Now,
• 30:57
  Speaker 1: if you have that seventy five cent and it's competing
• 30:59
  Speaker 1: with an industry improving a three percent to bit, as
• 31:02
  Speaker 1: long as you've got patients, it's going to work out
• 31:05
  Speaker 1: in your favor. So I think you've not just got
• 31:09
  Speaker 1: um a more impactful set of findings, but I think
• 31:15
  Speaker 1: you've also got i'm far greater probability. And you know,
• 31:20
  Speaker 1: come if I bring that up to date a year
• 31:24
  Speaker 1: or so ago, I think the probabilities of that we're
• 31:28
  Speaker 1: moving up towards somewhere around in most stock market bets.
• 31:32
  Speaker 1: You know you're lucky if you get wow that that's
• 31:36
  Speaker 1: really interesting. So so I want to stay with the
• 31:39
  Speaker 1: concept of evaluating early stage, emerging growth companies and ask
• 31:45
  Speaker 1: you how important do you find it is to listen
• 31:50
  Speaker 1: to scientists, technologists and other people who have an expertise
• 31:57
  Speaker 1: that might be beyond what your particular our skill set is. Absolutely,
• 32:03
  Speaker 1: and I mentioned curiosity earlier. I think you've got to
• 32:08
  Speaker 1: be interested in everything that forms that. Now, I know,
• 32:12
  Speaker 1: in a certain sense, people in recent years have paid
• 32:16
  Speaker 1: a lot of attention to the psychology and the behavioral
• 32:19
  Speaker 1: factors in markets. But I think you can do it
• 32:24
  Speaker 1: with a different set of thinkers. UM. Some of them
• 32:28
  Speaker 1: are directly scientists. There are some I would almost classify
• 32:33
  Speaker 1: barriers being most important to us. UM. I put it
• 32:37
  Speaker 1: as the philosophers of change UM. For instance, not just
• 32:43
  Speaker 1: in reading but also in extraordinary helpful direct conversations. UM.
• 32:50
  Speaker 1: The work of Colot of Paris at Sussex University have
• 32:53
  Speaker 1: been extremely valuable to us. You know, how do technologies,
• 32:58
  Speaker 1: finance and innovation work together? And you know I won't
• 33:02
  Speaker 1: go through them are of course plainly You've had many
• 33:06
  Speaker 1: distinguished guests in the past who talked about this a lot,
• 33:09
  Speaker 1: and many have done them more to creative but the
• 33:12
  Speaker 1: whole emphasis of the work around in the Santa Fe
• 33:15
  Speaker 1: Institute about the process of change, from hard technologies like
• 33:19
  Speaker 1: the work of Justice on batteries to the more general
• 33:23
  Speaker 1: conceptual work of Bran Arthur and Jeffrey West. I think,
• 33:28
  Speaker 1: you know, thinking about how the world changes is hugely
• 33:33
  Speaker 1: important to us. And you know I'd make two observations
• 33:37
  Speaker 1: about Santa Fe Institute on that score. One would be
• 33:41
  Speaker 1: a huge offer of thanks to Bill Miller for his
• 33:43
  Speaker 1: work in establishing and financing it. UM and and Secondly,
• 33:48
  Speaker 1: I think most of the successful investors of the last
• 33:51
  Speaker 1: fifteen to thirty years have owed a lot to the
• 33:54
  Speaker 1: Santa Fe Institute. And it's very different take on economics,
• 33:59
  Speaker 1: on chain, on increasing returns, on dis equilibrium, and you know,
• 34:04
  Speaker 1: I think we're all in the sense as Keen said,
• 34:08
  Speaker 1: you know, we're we're often much more in practical circles
• 34:14
  Speaker 1: at the whim of as he said, dead economists. But
• 34:17
  Speaker 1: hopefully most of these people are still very much living.
• 34:19
  Speaker 1: But they are still very much living. But you know,
• 34:21
  Speaker 1: I think we own much more to not just economists,
• 34:24
  Speaker 1: but philosophers, to scientists and thinking about the process of
• 34:28
  Speaker 1: change than we care to acknowledge in markets. And I think,
• 34:31
  Speaker 1: you know, if I go back to when you were
• 34:34
  Speaker 1: asking me about what I see as problems in the
• 34:37
  Speaker 1: stock market, I think a lot of it is this
• 34:40
  Speaker 1: other element of the self referential. We believe only finance
• 34:43
  Speaker 1: only market developments are worthier study. And I think that
• 34:48
  Speaker 1: is a tragedy in both for the world but also
• 34:52
  Speaker 1: in terms of trying to do reasonable investment. You will
• 34:55
  Speaker 1: not make the point even more forcibly, you will not
• 34:58
  Speaker 1: find much of what I'm talking about in the requirements
• 35:04
  Speaker 1: of new investors. So let's stay with that because a
• 35:08
  Speaker 1: question I have for you a little later. Uh, there
• 35:12
  Speaker 1: was a headline not too long ago quote see if
• 35:14
  Speaker 1: a study cast doubts on weather, passing the test is
• 35:18
  Speaker 1: a key to a fund manager's success, which raises a
• 35:22
  Speaker 1: broad question what makes for a good investment manager? But
• 35:25
  Speaker 1: in doing my research about Bailey Gifford, I get the
• 35:29
  Speaker 1: sense that c f A isn't a particularly desirable designation
• 35:35
  Speaker 1: for your firm. Uh, what do you do to attract
• 35:38
  Speaker 1: and retain the best talents in Edinburgh UM, which is
• 35:43
  Speaker 1: really more of an academic center than a financial center.
• 35:47
  Speaker 1: And how have you been able to do this so consistently? Well, Verry,
• 35:53
  Speaker 1: It's something that I absolutely owe a lot to our predecessors,
• 36:00
  Speaker 1: and this sort of intrigues me as to how they
• 36:03
  Speaker 1: managed to come to this view of themselves and instigated
• 36:08
  Speaker 1: across the firms in such a strong way. We we
• 36:11
  Speaker 1: always believed that you needed this broader set of background,
• 36:16
  Speaker 1: so always deeply skeptical of whether it be UM finance
• 36:22
  Speaker 1: qualifications or whether it be academic training. In those scenario words,
• 36:27
  Speaker 1: one of the investors who I most admired in, Betty Gifford,
• 36:31
  Speaker 1: and worked with for a long time. Although Japanese specialist
• 36:36
  Speaker 1: Sarah Whitley was a psychology graduate and you know, I
• 36:39
  Speaker 1: think embodied many of these values, so that principle was
• 36:42
  Speaker 1: always absolutely there. What we've tried to work on over
• 36:48
  Speaker 1: the last twenty or thirty years is trying to broaden
• 36:52
  Speaker 1: that out. You know, naturally one needs to get rid
• 36:56
  Speaker 1: of the prejudices that were thirty years ago established around
• 37:02
  Speaker 1: employing females, employing people of a different ethnic background. But
• 37:05
  Speaker 1: I think it has to go much more broadly that
• 37:08
  Speaker 1: you're looking for a great cognitive diversity, that diversity of
• 37:15
  Speaker 1: real thought and approaching where you are, and I think
• 37:18
  Speaker 1: that is absolutely critical. Um. Now, at one level, it's
• 37:23
  Speaker 1: not difficult for us to do. You know, we have
• 37:25
  Speaker 1: many thousands of people as you know, as is you
• 37:29
  Speaker 1: probably expect applying to us, as and do many other
• 37:32
  Speaker 1: fund managers. But it then becomes a question of having
• 37:35
  Speaker 1: the bride bravery of the right ones and persuading them
• 37:39
  Speaker 1: either to come to Edinburgh. Um. And on that one
• 37:43
  Speaker 1: I will make some comments. You know, I think that
• 37:47
  Speaker 1: Edinburgh has got fantastic attributes and fantastic drawbacks. You know,
• 37:52
  Speaker 1: I can wander out five or ten minutes, and I
• 37:55
  Speaker 1: can visit the graveyards of David Hume, I mean, and
• 37:59
  Speaker 1: Adam Smith, and that whole intellectual heritage, which you know,
• 38:04
  Speaker 1: in a sense you were being fair enough by saying academic,
• 38:07
  Speaker 1: but I think it ought to be much broader. You know,
• 38:09
  Speaker 1: there is an intellectual heritage, and we need to get
• 38:12
  Speaker 1: back to the bravery that Scottland demonstrated then, which was
• 38:16
  Speaker 1: actually inherent in the history of the Investment Trusts, rather
• 38:19
  Speaker 1: than becoming an instudent inward looking um and rather parochial place.
• 38:24
  Speaker 1: And I think that's a battle you have to fight.
• 38:26
  Speaker 1: But there is enough of the good here, you know,
• 38:29
  Speaker 1: for instance, what they do at the Edinburgh Fest intellects
• 38:31
  Speaker 1: to come here is still incredibly valuable to us. But
• 38:35
  Speaker 1: we also have to offer the option of people working elsewhere,
• 38:39
  Speaker 1: so we have offices in America and China as well
• 38:43
  Speaker 1: as a probably less imposing one in London. Um. So
• 38:48
  Speaker 1: you know, I think we need to combine the history
• 38:51
  Speaker 1: of the firm with the evolution with the good of
• 38:54
  Speaker 1: Edinburgh rather than the limitations. And equally we have to
• 38:57
  Speaker 1: be prepared to follow great people around the world. HM.
• 39:01
  Speaker 1: Fantastic descriptor and really helps to explain how Bailey Gifford
• 39:08
  Speaker 1: has been as successful as it has been. Uh and
• 39:13
  Speaker 1: taking such a non traditional approach. You know, we've been
• 39:17
  Speaker 1: talking about mostly US companies for a while. UM, let's
• 39:22
  Speaker 1: talk a little bit about what what you see that's
• 39:24
  Speaker 1: attractive overseas. In fact, you've you've recommended Chinese and other
• 39:29
  Speaker 1: emerging markets markets before, other emerging stocks before. Tell us
• 39:34
  Speaker 1: a little bit about the mindset you have to have
• 39:36
  Speaker 1: to invest in these or is it the same process
• 39:40
  Speaker 1: no matter what country you're investing in? Fundamentally, Barry, it
• 39:46
  Speaker 1: is the same processs But of course the standards of
• 39:51
  Speaker 1: proof need absolutely to be there, and I we we
• 39:56
  Speaker 1: we we were talking earlier about the hortons of science
• 40:03
  Speaker 1: and academia. Now, what I think the corollary of that
• 40:08
  Speaker 1: is is what's critically important to us um in determining
• 40:15
  Speaker 1: where we are searching, where we're looking for, is that
• 40:20
  Speaker 1: we need to see evidence of, if you like, that
• 40:25
  Speaker 1: rising educational standards, those rising academic stars in the markets
• 40:31
  Speaker 1: that we're talking about, and we need those to be,
• 40:34
  Speaker 1: if you like, in charge of society. So you know,
• 40:38
  Speaker 1: I've always felt very uncomfortable, uncomfortable, I don't know about you.
• 40:42
  Speaker 1: With this label emerging markets, it's always been made up
• 40:45
  Speaker 1: of some countries which emerged two thousand years ago and
• 40:49
  Speaker 1: then retreated with comping countries that are genuinely moving forward.
• 40:54
  Speaker 1: And I'd never liked at all, in particular the whole
• 41:00
  Speaker 1: brick discussion that used to happen. You know, I think
• 41:03
  Speaker 1: the differences between Brazil and Russia, UM, and to a
• 41:09
  Speaker 1: quite a large extent, India and China are profound on
• 41:12
  Speaker 1: the level we're talking about, UM. You know, when there
• 41:15
  Speaker 1: are some extraordinarily brains within Russia, but I do not
• 41:19
  Speaker 1: think they are central to the economic system, based as
• 41:22
  Speaker 1: it is on comparative exhaustion, extortion and energy production. UM.
• 41:29
  Speaker 1: So I think, you know, you start with making that.
• 41:31
  Speaker 1: But at the company level, and I found this intriguing,
• 41:36
  Speaker 1: we make exactly the same AH discussions. We may have
• 41:42
  Speaker 1: exactly the same set of ten questions that we asked
• 41:46
  Speaker 1: the companies in these areas, and we're looking for the
• 41:49
  Speaker 1: similar outcomes that we have in America or to some
• 41:54
  Speaker 1: extent in in Europe. And you know, I my my
• 41:58
  Speaker 1: real emotion about this is that, and I'm sure we'll
• 42:03
  Speaker 1: come back. There's despite the difficulties that this can sometimes
• 42:07
  Speaker 1: leads in operations, and the one shouldn't be naive about that.
• 42:11
  Speaker 1: The companies have absolutely lived up to that bargain um.
• 42:16
  Speaker 1: You know. For instance, we've been large investors since well
• 42:21
  Speaker 1: before it was a public company in May Juan the
• 42:24
  Speaker 1: service company now that the food delivery and service companies now.
• 42:29
  Speaker 1: I remember so acutely, and it follows on nicely from
• 42:33
  Speaker 1: our discussions about Edinburgh. When the founder of Matuan first
• 42:39
  Speaker 1: visitors here, obviously we've seen him in China before, but
• 42:42
  Speaker 1: when he first visitors here, he organized a room that
• 42:47
  Speaker 1: looks out over historic Edinburgh and the castle. But before
• 42:51
  Speaker 1: he would speak to me about the company, he required
• 42:55
  Speaker 1: to me to give him somewhere between half an hour
• 42:59
  Speaker 1: and ours full disquisition on the difference between the Scottish,
• 43:04
  Speaker 1: the Edinburgh Enlightenment and the English Enlightenment. Now, fortunately, as
• 43:10
  Speaker 1: I was majesting, I've studied quite a lot of history,
• 43:12
  Speaker 1: and I've had to study quite a lot of Adams
• 43:14
  Speaker 1: with over the ages, so I could just about all
• 43:16
  Speaker 1: the way end up. But not the notion that this
• 43:18
  Speaker 1: is a standardized company that batually wants lawstened to its
• 43:24
  Speaker 1: slides about its next quarter or whatever. It's a long
• 43:27
  Speaker 1: long way way. And you know, I think many of
• 43:29
  Speaker 1: the individuals we've had the privilege of a meeting in
• 43:32
  Speaker 1: China absolutely stack up with some of the remarkable people
• 43:36
  Speaker 1: in America that we talked about. So let me ask
• 43:41
  Speaker 1: the question that seems to be challenging so many when
• 43:46
  Speaker 1: we look at what took place with China last year,
• 43:52
  Speaker 1: going after the leadership of their own tech sector, essentially
• 43:57
  Speaker 1: raising questions as to whether or not there there is
• 44:00
  Speaker 1: a well, at least a rule of law the way
• 44:04
  Speaker 1: we think of it in the traditional Anglo sense. Um.
• 44:08
  Speaker 1: You know, it led some people to wonder if China
• 44:11
  Speaker 1: was uninvestable. How do you respond when the leadership of
• 44:16
  Speaker 1: a country basically puts a series of policies and programs
• 44:22
  Speaker 1: that you know, the whole text actor there really has
• 44:25
  Speaker 1: gotten shelat Yeah, right, um, And again, you know, I
• 44:30
  Speaker 1: I appreciate having the chance to explore these questions rather
• 44:35
  Speaker 1: than just simply provide one word I agree or I disagree,
• 44:40
  Speaker 1: No two words our answers to to you. So can
• 44:44
  Speaker 1: I go back and Barry and I perhaps should have
• 44:47
  Speaker 1: should have said it when I was talking about the
• 44:49
  Speaker 1: attractions of distant countries. I would have considered myself by
• 44:54
  Speaker 1: colleagues in Shanghai, by being diffident large to be incredibly
• 44:58
  Speaker 1: naive if we thought about these issues beforehand. The Chinese
• 45:04
  Speaker 1: government does not conceal that it has the leading role
• 45:07
  Speaker 1: in society, and you know, surely we ought to have
• 45:10
  Speaker 1: known that. Um So, you know, I think that we
• 45:14
  Speaker 1: we we did have a mentality around this, that we
• 45:18
  Speaker 1: had to accept that there were risk suspective. But if
• 45:22
  Speaker 1: I then move on, I would differentiate in three ways
• 45:27
  Speaker 1: that I think are critically important for why we are
• 45:32
  Speaker 1: where we are now and what we might want to
• 45:34
  Speaker 1: do going forward. The first one is I think there
• 45:38
  Speaker 1: was a set of companies which both the Chinese authorities
• 45:43
  Speaker 1: and moreover many in society, many writing in the media domestically,
• 45:48
  Speaker 1: many authors who have listened to and I mentioned and
• 45:51
  Speaker 1: the book festival obviously, who had made it absolutely clear
• 45:55
  Speaker 1: that they thought the educational system and the tutoring system
• 45:58
  Speaker 1: was a very bad thing for Chinese society, and in
• 46:02
  Speaker 1: retrospect it's coming now. Scottish Mortgage did not hasten to
• 46:06
  Speaker 1: add invest in these companies, but we did have holdings
• 46:10
  Speaker 1: in some, particularly tell of the educational companies that needs
• 46:13
  Speaker 1: to be honest about and in some mandates for which
• 46:16
  Speaker 1: you know I have for some responsibility as well, So
• 46:19
  Speaker 1: I don't want to conceive that. And I think that
• 46:21
  Speaker 1: was a very bad, very serious mistake because we were
• 46:25
  Speaker 1: not listening to what the available information, the available flow
• 46:31
  Speaker 1: a government was saying about those areas. So, you know,
• 46:35
  Speaker 1: bad mistake. Absolutely agreed, I will at that point bringing
• 46:39
  Speaker 1: your uninvestable are it? Both amused and annoyed me that
• 46:44
  Speaker 1: many analysts in investment banks, having recommended all the educational
• 46:49
  Speaker 1: companies subsequent to the announcements, then said they were uninvestable.
• 46:53
  Speaker 1: It was not a great way to handle it. You know,
• 46:56
  Speaker 1: they have made a mistake, and I think we need
• 46:58
  Speaker 1: to be they need to be honest, like we need
• 46:59
  Speaker 1: to be honest about that. The second part of it
• 47:03
  Speaker 1: would be about regulation of the e commerce world. Now
• 47:09
  Speaker 1: I'm wary as are come on too is saying that
• 47:12
  Speaker 1: is all of technology. But let's deal with that at
• 47:14
  Speaker 1: the moment. In my view, in our view, all of
• 47:20
  Speaker 1: us in the West, whether it be Europe, whether it
• 47:25
  Speaker 1: be the UK, or whether it be still more America,
• 47:29
  Speaker 1: have to think through very seriously what the correct societal attitude,
• 47:35
  Speaker 1: regulatory attitude, government policy is towards the Internet companies and
• 47:41
  Speaker 1: the e commerce companies. You know, I think they're untrammeled.
• 47:44
  Speaker 1: Dominance has many both economic and societal problems within it.
• 47:51
  Speaker 1: If I look at it in that light, I think
• 47:54
  Speaker 1: the governance that the Chinese authorities are looking for and
• 48:00
  Speaker 1: currently obtaining from those Internet companies is justifiable, and more
• 48:07
  Speaker 1: than justifiable. I think in the long run, it makes
• 48:10
  Speaker 1: for a better functioning of the whole sector. It doesn't
• 48:14
  Speaker 1: crush new competition, it doesn't have such maligned social impacts.
• 48:18
  Speaker 1: And you know, I still don't think that America has
• 48:20
  Speaker 1: faced up to those issues in broad terms, And you know,
• 48:23
  Speaker 1: I think that would be fascinating to see what happens
• 48:26
  Speaker 1: over the next two years. I don't if I may,
• 48:29
  Speaker 1: and I know we're all struggling for the right words.
• 48:32
  Speaker 1: View the policy and the attitudes of the Chinese government
• 48:37
  Speaker 1: as in any way either illegitimate, unfecastable, or something that
• 48:43
  Speaker 1: one doesn't regard as perfectly intellectually and practically and humanitarianly
• 48:50
  Speaker 1: legal from the point of view of the overall set
• 48:53
  Speaker 1: of the society. Yes, it happened a great deal quicker
• 48:56
  Speaker 1: than we are used to in the West and without
• 48:58
  Speaker 1: as many abilities to control it. But you know, how
• 49:02
  Speaker 1: far does that tell us that really the West has
• 49:05
  Speaker 1: a problem with over overdominant companies. So you know, I
• 49:08
  Speaker 1: am not a wholehearted opponent either for the long term
• 49:12
  Speaker 1: good of the technology sector or at least the internet
• 49:16
  Speaker 1: sector and what has happened in China, and I think
• 49:19
  Speaker 1: it may actually be good policy and not bad for
• 49:22
  Speaker 1: economic outcomes in the long run. Lastly, I would as
• 49:26
  Speaker 1: probably been implying differentiate between this and hard technology. You know,
• 49:32
  Speaker 1: I think it's a point that Dan Wang of Gavical
• 49:37
  Speaker 1: makes of extremely artical in an extremely articulate manner, but
• 49:41
  Speaker 1: it's one that we would share. We don't necessarily think
• 49:44
  Speaker 1: that the Chinese government sees internet consumer consumer internet companies
• 49:50
  Speaker 1: as the peak of attainment UM in technology, technological and
• 49:54
  Speaker 1: societal advants. You know, I think those who think that
• 49:58
  Speaker 1: perhaps it's not a good thing for the rightist brains
• 50:00
  Speaker 1: in the West to spending their time on getting us
• 50:03
  Speaker 1: to click on more adverts possibly have a point, and
• 50:07
  Speaker 1: we don't really see. For instance, if we look either
• 50:12
  Speaker 1: in a beneficial sense about what's going on batteries, electrical
• 50:18
  Speaker 1: autonomous vehicles and the like, or in a more worrying
• 50:20
  Speaker 1: sense in ai that you know that there is actually
• 50:24
  Speaker 1: a tasa and the Chinese part to say that, I
• 50:26
  Speaker 1: think there's a desire to say we don't think that
• 50:30
  Speaker 1: the untrammeled dominance of the few um internet and e
• 50:36
  Speaker 1: commerce dominant companies is a good thing for society at large.
• 50:40
  Speaker 1: Really quite interesting. Before we leave Asia, what other countries
• 50:46
  Speaker 1: in the region do you find particularly intriguing, Vietnam, Korea,
• 50:52
  Speaker 1: what what catches your fancy? Well, firstly, I would stay
• 50:58
  Speaker 1: close to um to China, and I think it's consistent
• 51:02
  Speaker 1: with what we're talking about. Perhaps it is China. Um
• 51:05
  Speaker 1: you know, I think what TSMC has done in Taiwan
• 51:08
  Speaker 1: is truly remarkable. Now we don't really see that as
• 51:12
  Speaker 1: part of an overall pattern, but I think it would
• 51:14
  Speaker 1: probably also incline you to uh to guess that probably
• 51:18
  Speaker 1: career has been the place that's most interested at this
• 51:21
  Speaker 1: point of view. But could I just add one more thing,
• 51:24
  Speaker 1: very you know, I I quipped quibbled earlier at the
• 51:28
  Speaker 1: notion of emerging markets, and I think, you know, we're
• 51:30
  Speaker 1: probably both create shorthand, but one of the elements that
• 51:35
  Speaker 1: I feel incredibly strongly about in the world at large.
• 51:41
  Speaker 1: Is that really? Um, It's not about countries, whether it's
• 51:46
  Speaker 1: an inverted commas emerging markets or in inverted commas the West.
• 51:51
  Speaker 1: It is about individual cities and regions. And I say
• 51:55
  Speaker 1: that both in the current context, um. And you know,
• 52:00
  Speaker 1: historically this has been the way, you know, for a
• 52:03
  Speaker 1: long period of time. It's not quite so at the moment,
• 52:07
  Speaker 1: but for a long period of time, we didn't have
• 52:10
  Speaker 1: anything resembling a portfolio of American stocks. We had a
• 52:16
  Speaker 1: set of West Coast a conceptualized as a business. And
• 52:22
  Speaker 1: you know, I think the difference between New York capitalism
• 52:25
  Speaker 1: and San Francisco capitalism it may have softened somewhat now,
• 52:28
  Speaker 1: but was so strong for some reason that I think
• 52:31
  Speaker 1: that that's important to consider it. You know, I would
• 52:33
  Speaker 1: say this was true about China too, you know, predominantly, okay,
• 52:38
  Speaker 1: Beijing has become more important, but predominantly ours has been
• 52:42
  Speaker 1: a Ran Joe and Grand Dong and shen Zen portfolio
• 52:47
  Speaker 1: or set of individual companies rather than anything else. And
• 52:50
  Speaker 1: you know, I would even say that was true in Europe.
• 52:53
  Speaker 1: You know, we were talking earlier about the odditis of America.
• 52:56
  Speaker 1: But you know, I'm really interested in why a Eindhoven
• 53:01
  Speaker 1: or um Amsterdam or Stockholm or Berlin can do things
• 53:06
  Speaker 1: which doesn't seem to happen elsewhere in Europe. So, you know,
• 53:09
  Speaker 1: I think I'm much more a believer in the culture
• 53:13
  Speaker 1: of individual cities. And for a long time it's been
• 53:17
  Speaker 1: a real frustration under COVID and lockdowns. What what what?
• 53:21
  Speaker 1: One of my practices was was to go and spend
• 53:27
  Speaker 1: a year in a different city each year and took
• 53:32
  Speaker 1: actually usually carry on for two or three years. And
• 53:34
  Speaker 1: I did this in Berlin, I did this in Amsterdam.
• 53:37
  Speaker 1: I was just starting to em Paris. I was wanting
• 53:39
  Speaker 1: to do is in one of the cities in China
• 53:41
  Speaker 1: that we were talking about. Um. You know, I think
• 53:44
  Speaker 1: trying to understand the culture of individual citizen regions is
• 53:48
  Speaker 1: probably much more relevant than talking about countries at large.
• 53:52
  Speaker 1: And I feel that quite strongly about about about the USA,
• 53:56
  Speaker 1: for for instance. I think that fits with history. UM.
• 53:59
  Speaker 1: There was something book called, what's it called the geo
• 54:02
  Speaker 1: Geography of Genius in the Past, and one of the
• 54:05
  Speaker 1: points it was making is that the truly great ideas
• 54:09
  Speaker 1: very rarely came from the major cities, they came from
• 54:12
  Speaker 1: quite smaller places. Um. And you know, I think from
• 54:15
  Speaker 1: from Athens to Edinburgh and onwards that that was the
• 54:18
  Speaker 1: case in point and I think that, you know, it
• 54:20
  Speaker 1: is the differences in these individual cities and regions that
• 54:25
  Speaker 1: is truly important and investing. Huh, that's quite fascinating. That's um.
• 54:30
  Speaker 1: Eric Weiner wrote the book Lessons from the World's Most
• 54:33
  Speaker 1: Creative Places. So let's talk a little bit about Europe,
• 54:37
  Speaker 1: which has been lagging for what seems like forever. Uh.
• 54:44
  Speaker 1: Is Europe ever going to reach a point where it
• 54:47
  Speaker 1: can outperform or am am I being too optimistic to
• 54:52
  Speaker 1: expect that any time in our lifetimes? Ah? Well, it
• 54:59
  Speaker 1: arry it probably seems even longer to be because I
• 55:01
  Speaker 1: spent my most of my first fifty years or so
• 55:04
  Speaker 1: as an investor in Europe um. And so you know,
• 55:08
  Speaker 1: it's been something that's intrigued, frustrated and occasionally given hope
• 55:13
  Speaker 1: to me for a very very long period of time. UM.
• 55:17
  Speaker 1: And you know I have tended to carry on having
• 55:19
  Speaker 1: having quite a big interest in him. Well, let's think
• 55:24
  Speaker 1: about what we've been discussing. I think the real issue
• 55:28
  Speaker 1: in Europe is much more about scaling. You know, I
• 55:32
  Speaker 1: think there are plenty of decent companies, some outstanding companies.
• 55:37
  Speaker 1: You know. One of my worst miscalculation SINS have emissioned
• 55:40
  Speaker 1: over the years has been that I got very annoyed
• 55:44
  Speaker 1: by way back in time Morie Hennessey, the MH of LVMH,
• 55:51
  Speaker 1: buying the LV part because it was the LV part
• 55:54
  Speaker 1: that I admired, and I felt that that Monsieur Arno
• 55:58
  Speaker 1: would managed to, how we put it, rather aggressively take
• 56:01
  Speaker 1: over LV. And you know, plainly he's done a fantastic
• 56:05
  Speaker 1: job and his colleagues have done a fantastically job in LVMH.
• 56:09
  Speaker 1: And you know we've owned Caring and Ferrari from much
• 56:11
  Speaker 1: the same point of view. But I think the real
• 56:14
  Speaker 1: failure has come in consumer facing technology. I expressed my
• 56:19
  Speaker 1: admiration earlier for for for what air Smell is doing,
• 56:23
  Speaker 1: which is truly profoundly ment out there. And I think
• 56:27
  Speaker 1: it's about the inability scale that really matters here. And
• 56:32
  Speaker 1: I think this has got deep cultural roots, and to
• 56:35
  Speaker 1: be honest, and I think this is not how most
• 56:38
  Speaker 1: people think about it. It bothers me more in Britain
• 56:43
  Speaker 1: than it doesn't anywhere else. And it's not that we
• 56:46
  Speaker 1: don't have the ability in academia in science to generate companies.
• 56:53
  Speaker 1: It is that somehow, and I think the capital markets
• 56:57
  Speaker 1: have a lot to do with this. Britain does not
• 57:00
  Speaker 1: possess the ability to scale companies um and you know,
• 57:05
  Speaker 1: I think that is such a deep and serious problem
• 57:08
  Speaker 1: that there needs to be much more willingness to address it.
• 57:12
  Speaker 1: Give you a couple of quick examples on that's kind
• 57:14
  Speaker 1: of huge, very contemporary. One is ARM and you know
• 57:18
  Speaker 1: it may or may not be me that the video
• 57:21
  Speaker 1: giving up and taking them, but you know, when ARM
• 57:23
  Speaker 1: was first taken over by soft Bank, you know, we tried,
• 57:27
  Speaker 1: we were Arms speaking shohold as we tried to persuade
• 57:30
  Speaker 1: them they shouldn't be get selling out, that it was
• 57:33
  Speaker 1: important to have a critical mass world leading technology companies.
• 57:38
  Speaker 1: Now we got very little support from that at all levels,
• 57:41
  Speaker 1: and I think that is symbolic of the problems equally,
• 57:46
  Speaker 1: as you may know, we've been investors in Ilumina for
• 57:49
  Speaker 1: a very long period of time. Now. One of my
• 57:51
  Speaker 1: other directors on the board of Scottish Scottish Mortgage gentleman
• 57:55
  Speaker 1: called Patrick Maxwell, who's professor of physics at Cambridge lives
• 57:59
  Speaker 1: three or four doors down in Cambridge from the person
• 58:02
  Speaker 1: who actually invented the core net technology behind a lumna.
• 58:07
  Speaker 1: They invented it literally in a pub in Cambridge. But
• 58:10
  Speaker 1: you know, they couldn't commercialize that, they couldn't scale it.
• 58:14
  Speaker 1: And you know, I think the depth of the problem
• 58:16
  Speaker 1: in Britain is very much there. Come back to places
• 58:21
  Speaker 1: that might do better on this this score. Um. You know,
• 58:25
  Speaker 1: I am um and I have my biases here, but
• 58:28
  Speaker 1: I think that Scandinavia and particularly the environs of Stockholm
• 58:34
  Speaker 1: has more chance of doing this. You know, the record
• 58:37
  Speaker 1: of company creation, of long term company, of creation of
• 58:41
  Speaker 1: companies that can globalize, it's still being maintained in Sweden. Um.
• 58:47
  Speaker 1: You know, again a quick two countervating examples. Now, there
• 58:52
  Speaker 1: are plenty of challenges for it, but you know, Spotify
• 58:55
  Speaker 1: is genuinely the world leader in terms of podcasts as
• 59:00
  Speaker 1: well as audire um. And you know, I think that
• 59:03
  Speaker 1: has come about through having in Danielic somebody who thinks
• 59:08
  Speaker 1: in much the same individualistic and global terms that we've
• 59:11
  Speaker 1: been discussing in China and America equally, and perhaps this
• 59:15
  Speaker 1: is one looking forward, I think Europe needs to have
• 59:19
  Speaker 1: more self confidence in its different models. And we've been
• 59:23
  Speaker 1: backers of Norfolk, the major battery company UM in Scandinavia,
• 59:30
  Speaker 1: where the progress has been deeply encouraging. And I think
• 59:33
  Speaker 1: it's by focusing on those sort of individual strengths that
• 59:37
  Speaker 1: really matters. So I think you've got to build the
• 59:39
  Speaker 1: exceptional countries. One last point, and it's something that I
• 59:43
  Speaker 1: hope in the future to spend some time, some thought
• 59:45
  Speaker 1: process about some involvement on. You know, I think you
• 59:49
  Speaker 1: and I would say that in America and in China
• 59:53
  Speaker 1: there are networks of people who could act at scale UM,
• 1:00:00
  Speaker 1: and I don't think that really exists in Europe. Europe
• 1:00:03
  Speaker 1: is still way to atomize. There's not amos communication between
• 1:00:07
  Speaker 1: the truly exceptional in different countries on the industrial level,
• 1:00:12
  Speaker 1: on an entrepreneurial level, on a looking to the future level,
• 1:00:15
  Speaker 1: and I think we need to do a much better
• 1:00:18
  Speaker 1: job on that. And it's just impossible to have the
• 1:00:21
  Speaker 1: sort of scale that really Europe needs without those connections
• 1:00:25
  Speaker 1: being built much more in the future. There's a couple
• 1:00:28
  Speaker 1: of other places I want to ask you about in
• 1:00:31
  Speaker 1: the world, namely India, But before I get to that country,
• 1:00:37
  Speaker 1: are there any other regions, be they cities or nations
• 1:00:42
  Speaker 1: that are catching your eye as Hey, there's some really
• 1:00:45
  Speaker 1: interesting intellectual capital here and some fascinating things occurring. Yeah, um, well,
• 1:00:52
  Speaker 1: let's let's do an American one. And I don't think
• 1:00:55
  Speaker 1: I would have said this, um, three or five years ago.
• 1:01:00
  Speaker 1: I thought that three or five years ago that both
• 1:01:05
  Speaker 1: innovation in biotechnology and healthcare in America was fairly limited,
• 1:01:11
  Speaker 1: and that where it was happening, it was emigrating under
• 1:01:15
  Speaker 1: the power of combination of genomics and machine learning to
• 1:01:20
  Speaker 1: be a West Coast phenomena. I think what's happened in
• 1:01:23
  Speaker 1: Boston since then is pretty awe inspiring and actually touches
• 1:01:28
  Speaker 1: back on some of the questions that we're talking about.
• 1:01:31
  Speaker 1: So UM, we've been shareholders in Maderna for some period
• 1:01:35
  Speaker 1: of time, UM, and both at the Maderna direct level
• 1:01:39
  Speaker 1: as well as the flagship one. We've done a lot
• 1:01:41
  Speaker 1: of talking with Stephan Manzell and New barth and about
• 1:01:45
  Speaker 1: you know, what can be done and what are the
• 1:01:47
  Speaker 1: advantages different places. And you know, one of the things
• 1:01:51
  Speaker 1: that stays with me is an article that Stephan Manzell
• 1:01:54
  Speaker 1: wrote for Figaro in France and the Figura about um,
• 1:02:00
  Speaker 1: I could happen in Boston rather than or in America
• 1:02:04
  Speaker 1: rather than in France. And a lot of that was
• 1:02:07
  Speaker 1: around the backing from a venture capital community. And I
• 1:02:12
  Speaker 1: think that's what some of the healthcare venture capitals have
• 1:02:15
  Speaker 1: done to add to that expertise by making it a
• 1:02:20
  Speaker 1: much more scale with much bigger resources, has been something
• 1:02:24
  Speaker 1: that's potentially going to enable serious development in healthcare and
• 1:02:29
  Speaker 1: healthcare plus technology companies over the coming years. So you know,
• 1:02:33
  Speaker 1: that's a revival that I think we ought to note. Verry,
• 1:02:38
  Speaker 1: I find India very difficult, um. You know, to me,
• 1:02:42
  Speaker 1: there are far too many companies that are reliant on
• 1:02:46
  Speaker 1: their connections, their political health, aft their wealth and a
• 1:02:52
  Speaker 1: far too short term run um from my real liking,
• 1:02:56
  Speaker 1: and it's become mentally quite a problem for me. So
• 1:03:00
  Speaker 1: what I've said to some of my younger colleagues is
• 1:03:02
  Speaker 1: to ignore me and to go on and see whether
• 1:03:06
  Speaker 1: there are companies that fit this, because you know, I
• 1:03:09
  Speaker 1: found it difficult historically. I don't think I'm necessarily wholly
• 1:03:13
  Speaker 1: been wrong, but I think it needs a more open
• 1:03:15
  Speaker 1: mind than I have at this juncture. So um, hopefully
• 1:03:19
  Speaker 1: youthful out in this case, that's really really intriguing. So
• 1:03:25
  Speaker 1: if the past decade or so, the U S stocks
• 1:03:28
  Speaker 1: have been really dominant, lately we're seeing signs at the
• 1:03:32
  Speaker 1: rest of the world is starting to on a relative
• 1:03:36
  Speaker 1: basis performed pretty well. What are the odds that the
• 1:03:41
  Speaker 1: U S streak of out performance is coming to uh
• 1:03:45
  Speaker 1: an end or at least uh cyclically this time and
• 1:03:49
  Speaker 1: we're gonna start to see the rest of the world
• 1:03:51
  Speaker 1: on a relative basis outperform what's taking place in the US. So,
• 1:03:58
  Speaker 1: um Berry, I could adventure some comments that may not
• 1:04:02
  Speaker 1: necessarily be wholly popular with your listeners, but I think
• 1:04:08
  Speaker 1: it's important to say, um, you know, absolutely America still
• 1:04:15
  Speaker 1: possesses the combination of the right individuals, often coming from
• 1:04:22
  Speaker 1: outside in the world. As some of the examples we've
• 1:04:25
  Speaker 1: been talking about the scale of the market, the scale
• 1:04:29
  Speaker 1: of the financial apparatus, that it will remain formidable. But
• 1:04:34
  Speaker 1: I have to say I've increasingly had some reservations. You know,
• 1:04:39
  Speaker 1: I'm not We were talking a few minutes ago about
• 1:04:44
  Speaker 1: Chinese regulation. I wonder whether the lack of regulation of
• 1:04:51
  Speaker 1: the American internet world and the complications even in healthcare,
• 1:04:57
  Speaker 1: which I was talking in an upbeating way, about a
• 1:04:59
  Speaker 1: few minutes ago. Um, mean that the ability of new
• 1:05:04
  Speaker 1: young companies to rise in America is more constrained than
• 1:05:08
  Speaker 1: it was. You know, we are effectively talking about entrenched
• 1:05:13
  Speaker 1: Dolly Apolis in many cases which were not necessarily helping
• 1:05:16
  Speaker 1: the up and comers, you know. To make the point, Firmer, Um,
• 1:05:20
  Speaker 1: what TikTok by Dance has done is much more interesting
• 1:05:25
  Speaker 1: in the social media world than what anybody in America
• 1:05:28
  Speaker 1: has accomplished, it would seemed to us, seemed to me
• 1:05:31
  Speaker 1: over the last few years. So I think there is
• 1:05:33
  Speaker 1: some erosion the course of the excess dominance of the
• 1:05:37
  Speaker 1: companies that we all grew to know in many cases
• 1:05:40
  Speaker 1: love over the past. Um the second one, which is
• 1:05:44
  Speaker 1: much much more controversial, but I think one cannot exclude.
• 1:05:49
  Speaker 1: I found it very difficult in the last two years
• 1:05:54
  Speaker 1: or so when people ask me, as indeed you did,
• 1:05:59
  Speaker 1: about are illegitimate anti democratic actions as they're perceived to
• 1:06:06
  Speaker 1: be in China. To wonder in all honesty whether America
• 1:06:10
  Speaker 1: will be a democracy in five years time appeared particularly
• 1:06:15
  Speaker 1: ironic session when on January the sixth, last year, I
• 1:06:18
  Speaker 1: was big asked about this type of action, even if
• 1:06:21
  Speaker 1: it was in early days of it in China, Um,
• 1:06:25
  Speaker 1: when what was going on in America was going on. Um,
• 1:06:29
  Speaker 1: you know, I I'm surprised the capital markets are not
• 1:06:32
  Speaker 1: more bothered by what's happening in American politics and society
• 1:06:37
  Speaker 1: than they are. And I think it's consistent to say,
• 1:06:41
  Speaker 1: given what I've been talking about, that it's rational in
• 1:06:44
  Speaker 1: terms of deep underlying movements to worry about a society
• 1:06:49
  Speaker 1: where life expectation is falling. And I believe him right
• 1:06:52
  Speaker 1: in saying that life expectancy in China is now above
• 1:06:54
  Speaker 1: that in America. You know, these are deep systemic problems
• 1:06:59
  Speaker 1: that you know, I do get concerned about when do
• 1:07:02
  Speaker 1: those start influencing the markets? That that's that's much more
• 1:07:06
  Speaker 1: difficult to say. But if I was sort of twenty
• 1:07:09
  Speaker 1: years earlier in my career, I think I would be
• 1:07:11
  Speaker 1: concerned about these issues. Well, a lot of us here
• 1:07:14
  Speaker 1: in the US are are similarly concerned about those issues,
• 1:07:18
  Speaker 1: especially the movement away from democracy and the movement towards
• 1:07:24
  Speaker 1: politicizing parts of the election that used to be a
• 1:07:29
  Speaker 1: political or nonpartisan, and that certainly is a deep concern.
• 1:07:34
  Speaker 1: I've similarly wrestled with the question, why hasn't the markets
• 1:07:40
  Speaker 1: considered this a potential threat. And I keep coming back
• 1:07:45
  Speaker 1: to U two alternative. THESS one is, well, it's unlikely
• 1:07:51
  Speaker 1: to happen in the market is discounting it. That's the
• 1:07:53
  Speaker 1: sort of sanguine approach. But the more frightening conclusion is
• 1:08:00
  Speaker 1: the markets have considered it, and you know, think that
• 1:08:03
  Speaker 1: people are still going to be buying iPhones and and
• 1:08:07
  Speaker 1: uh tesla's and so the market doesn't care. Yeah, well
• 1:08:11
  Speaker 1: I was. I was talking about John Kay earlier, and
• 1:08:14
  Speaker 1: you know, I remember one discussion we had. We're discussing
• 1:08:19
  Speaker 1: potential regulation of the major um social media and into
• 1:08:24
  Speaker 1: that companies in America. And instead of being said, you
• 1:08:27
  Speaker 1: don't seriously mean to tell me that you don't think
• 1:08:30
  Speaker 1: American companies don't already dominate American democracy, and I bust
• 1:08:34
  Speaker 1: confess it may be that as well. Then that that's
• 1:08:37
  Speaker 1: sort of effectively in the quiet where we are. But
• 1:08:40
  Speaker 1: you know, I still think preserving the forms of democracy
• 1:08:43
  Speaker 1: and hopefully some of the substance as well, does ultimately
• 1:08:46
  Speaker 1: matter an awful lot. I think you're absolutely right about that.
• 1:08:50
  Speaker 1: Let's talk a little bit about private markets. You pioneered
• 1:08:55
  Speaker 1: Bailey Gifford's moving towards a mix of public and private markets.
• 1:09:02
  Speaker 1: Tell us about that experience. What was that like. It's
• 1:09:05
  Speaker 1: been a scintillating experience, Verry um And you know, I
• 1:09:11
  Speaker 1: feel immensely privilege that we seem to have managed to
• 1:09:18
  Speaker 1: make the adaption from public markets to private markets much
• 1:09:24
  Speaker 1: more easily than I would expect it. You know, I
• 1:09:28
  Speaker 1: thought this would be a decades long project that we
• 1:09:32
  Speaker 1: were barely be getting started on at this juncture. But
• 1:09:36
  Speaker 1: in many parts of the world it's moved more quickly
• 1:09:39
  Speaker 1: and more um. I think helpfully and hopefully that I
• 1:09:45
  Speaker 1: would expect it, because you know, as we touched on earlier.
• 1:09:48
  Speaker 1: You know, I think we now live in a world
• 1:09:50
  Speaker 1: where it's very hard, and I think this was in
• 1:09:53
  Speaker 1: many ways part of the issue with TEDSLA. Are all
• 1:09:56
  Speaker 1: along very hard for public companies to do heavy in
• 1:10:00
  Speaker 1: estament over a long period of time in contentious ideas,
• 1:10:04
  Speaker 1: and I think it's much better done in private markets
• 1:10:07
  Speaker 1: are in some ways I think that we've been helped that.
• 1:10:13
  Speaker 1: To be honest, the process we have, the ten questions
• 1:10:16
  Speaker 1: we asked companies very much can be applied to the
• 1:10:19
  Speaker 1: set of companies that we've invested in private markets. And
• 1:10:25
  Speaker 1: that you know, we've got used to the style of
• 1:10:28
  Speaker 1: returns in public markets which are reliant on some extreme winners,
• 1:10:33
  Speaker 1: and accepting that there will be individual problems, so that
• 1:10:36
  Speaker 1: that helped. But you know, I think as well, UM
• 1:10:41
  Speaker 1: the fact that we we tried very hard not to interfere. UM. Yes,
• 1:10:48
  Speaker 1: we're absolutely taken interest, but I don't consider Tom and
• 1:10:53
  Speaker 1: I don't consider we can possibly run companies better than
• 1:10:58
  Speaker 1: their current incumbents, and we try and be supportive at
• 1:11:01
  Speaker 1: different times. It may ultimately be a good thing that
• 1:11:06
  Speaker 1: by and large, if and when companies do go public,
• 1:11:09
  Speaker 1: and we're not pressing them to do so. But on
• 1:11:11
  Speaker 1: the whole, unlike many traditional venture capitalists, we can usually
• 1:11:16
  Speaker 1: buy more stock rather than look to have an avenue
• 1:11:20
  Speaker 1: to sell out, and I think that's important in conceptualizing
• 1:11:24
  Speaker 1: our position. Really intriguing lately, private companies have been really
• 1:11:29
  Speaker 1: attracting a lot of attention from UM, both the professional
• 1:11:34
  Speaker 1: investing world and and the labors and the private sector.
• 1:11:40
  Speaker 1: At what point do private markets risk overheating? Oh? I think,
• 1:11:49
  Speaker 1: but I would probably argue that they started overheating in
• 1:11:54
  Speaker 1: December of what we're what we're talking about December January
• 1:11:59
  Speaker 1: February of twenty one, and I think that you know
• 1:12:02
  Speaker 1: the warning science once so at that point, um, you know,
• 1:12:06
  Speaker 1: one can talk about anything from the SPACs onwards to
• 1:12:08
  Speaker 1: individual valuations. UM. Quite serious. But I think I would
• 1:12:13
  Speaker 1: want to differentiate between the cyclical and the structural. And
• 1:12:20
  Speaker 1: for sure, what you're talking about means that you're even
• 1:12:23
  Speaker 1: more vulnerable to the cyclical. But I would be absolutely
• 1:12:28
  Speaker 1: amazed if, after some resetting of prices and expectations, if
• 1:12:35
  Speaker 1: this industry doesn't continue to grow and become more important.
• 1:12:39
  Speaker 1: And I think a lot of that is because actually
• 1:12:44
  Speaker 1: it has generated the ability not just in America, but
• 1:12:48
  Speaker 1: in China and to a certain expense, in other countries
• 1:12:50
  Speaker 1: of the world, the ability to inculcate to help create
• 1:12:57
  Speaker 1: these great companies that we're talking about at SCARE. And
• 1:13:00
  Speaker 1: I don't think that's going away. I think it is
• 1:13:02
  Speaker 1: a better way of doing finance. Um. You know, I
• 1:13:06
  Speaker 1: always say I mentioned at the beginning that I was
• 1:13:09
  Speaker 1: semi trained as a historian. I think, um, And you know,
• 1:13:12
  Speaker 1: there was a British foreign secretary in the nineteenth century
• 1:13:15
  Speaker 1: who said that he had to create a new world
• 1:13:18
  Speaker 1: to re establish the balance of the old. And if
• 1:13:20
  Speaker 1: you know, we'll go back to our discussion about the
• 1:13:23
  Speaker 1: failings of public equity markets. I think we need private
• 1:13:27
  Speaker 1: equity markets to do what the nineteenth century would have
• 1:13:31
  Speaker 1: regarded as a critical element of creating companies. So yeah,
• 1:13:35
  Speaker 1: absolutely that can and will be setbacks and over exuberance.
• 1:13:39
  Speaker 1: But do I think it's going away. No, I don't
• 1:13:41
  Speaker 1: think it's going away at all. There are some quotes
• 1:13:44
  Speaker 1: of yours I want to throw your way because it's
• 1:13:47
  Speaker 1: really some of these are really quite fascinating. Let's start
• 1:13:51
  Speaker 1: with quote the secret to successful investing was understanding change,
• 1:13:56
  Speaker 1: how it happens, how much happens, and it's implications over
• 1:14:01
  Speaker 1: the long term. Now that sounds pretty simple, but I'm
• 1:14:04
  Speaker 1: going to assume it's a lot more challenging in execution
• 1:14:08
  Speaker 1: than conception. Yea, yeah, I absolutely think it is. But
• 1:14:16
  Speaker 1: you know, equally, I think that there are certain advantages
• 1:14:22
  Speaker 1: of doing this. Um. You know, I think the puzzle
• 1:14:26
  Speaker 1: to me of so much of finance, there's so much
• 1:14:32
  Speaker 1: of intellectual discourse about the economy has been that effectively
• 1:14:41
  Speaker 1: everybody is trying to think about as being an equilibrium
• 1:14:46
  Speaker 1: and the mild adjustments that you could have within that.
• 1:14:50
  Speaker 1: You know, whether it be in traditional value investing, whether
• 1:14:53
  Speaker 1: it be in the conception that the economy effectively always
• 1:14:57
  Speaker 1: mean reverted to the whole act demic professions at the
• 1:15:02
  Speaker 1: last thirty or forty years, and and their formulas for
• 1:15:05
  Speaker 1: doing this. I cited Santa Fe earlier. I just think
• 1:15:09
  Speaker 1: I'm probably gonna misquote, but I would cite you Ran
• 1:15:13
  Speaker 1: Arthur about this as saying, the most important element and
• 1:15:17
  Speaker 1: the most interesting time to invest is when there are
• 1:15:20
  Speaker 1: major disill ecqui liberals. And that's what happens when you
• 1:15:25
  Speaker 1: get this process of change that is so much more
• 1:15:28
  Speaker 1: dramatic than than we tend to think about. So I
• 1:15:33
  Speaker 1: think that you know, ones aided because we tend to
• 1:15:36
  Speaker 1: be very static. It's partly a time train problem, but
• 1:15:39
  Speaker 1: it's partly because that's the way we've been trained. And
• 1:15:42
  Speaker 1: thereby it's a lot less competitive to think about this
• 1:15:46
  Speaker 1: process of change, you know, as opposed to the hundred
• 1:15:49
  Speaker 1: and fifty different people who will be telling you what
• 1:15:51
  Speaker 1: the Feds gore to be doing next week. To try
• 1:15:53
  Speaker 1: and think of those ingredients in structural change and how
• 1:15:57
  Speaker 1: it can scale. Um is I think a field where
• 1:16:02
  Speaker 1: it's a little bit easier you know, to make a
• 1:16:04
  Speaker 1: different analogy, Um, it's it's pretty impossible to think that
• 1:16:10
  Speaker 1: Scotland would ever win a World championship at say soccer,
• 1:16:15
  Speaker 1: because everybody competes at it. But if, on the other hand,
• 1:16:18
  Speaker 1: we translates it to sort of British sports like darts
• 1:16:22
  Speaker 1: or um, snooker, then it's possible for Scots to be good.
• 1:16:27
  Speaker 1: You should compete in games where you know that there
• 1:16:29
  Speaker 1: isn't that much of a of an enduring competitive disadvantage
• 1:16:35
  Speaker 1: at any rate, and possibly where you know you're doing
• 1:16:38
  Speaker 1: something that not many other people are doing. So in
• 1:16:41
  Speaker 1: other words, UM, look for areas where there's less competition
• 1:16:45
  Speaker 1: and you have the ability to compete where others aren't.
• 1:16:49
  Speaker 1: Is that the thinking less competition? And also you know,
• 1:16:54
  Speaker 1: which I think comes back to something we touched on before,
• 1:16:57
  Speaker 1: where your probability of being right, um, and the impact
• 1:17:01
  Speaker 1: of being right has has had a greater both chance
• 1:17:04
  Speaker 1: and a greater degree of importance. Um. You know, I
• 1:17:09
  Speaker 1: think that's too much. The information we're dealing with in markets,
• 1:17:13
  Speaker 1: or what purports to the information is fundamentally unimportant. Um.
• 1:17:18
  Speaker 1: And you know I can imagine we might come back
• 1:17:20
  Speaker 1: to that too. Huh. Well, let's stay right there. What
• 1:17:24
  Speaker 1: do you think is fundamentally unimportant that others have a
• 1:17:28
  Speaker 1: great reliance upon. Oh, I genuinely do not believe that
• 1:17:38
  Speaker 1: it makes a great deal of difference to the long
• 1:17:43
  Speaker 1: run value of company as to whether earnings beaten or missed.
• 1:17:49
  Speaker 1: I genuinely don't believe it creates a lot of change
• 1:17:53
  Speaker 1: to your long run turns of investment that you could predict, um,
• 1:17:59
  Speaker 1: what what's going on in the minds of the Federal Reserve,
• 1:18:02
  Speaker 1: in the minds of what GDP growth will be. You know,
• 1:18:05
  Speaker 1: there is very little evidence to my mind that these
• 1:18:07
  Speaker 1: are either significant in the long run, UM, or that
• 1:18:13
  Speaker 1: they you you have a great margin of success, you
• 1:18:16
  Speaker 1: know in in in all of these, I think that
• 1:18:20
  Speaker 1: you are fighting a battle over it. It's the Catholic
• 1:18:26
  Speaker 1: Church's pre pre Reformation feeling of you know, counting the
• 1:18:31
  Speaker 1: angels on a pinhead. And I'm just not sure it's
• 1:18:34
  Speaker 1: either doable or worthwhile. UM, you know, to turn it round, Barry,
• 1:18:40
  Speaker 1: I I tend to think that, um and I had
• 1:18:48
  Speaker 1: a conversation with somebody. I think it's been a guest
• 1:18:50
  Speaker 1: of yours in the past, with Dennis Lynds much at
• 1:18:52
  Speaker 1: bar on this score about this sort of saying, if
• 1:18:55
  Speaker 1: I had just known in when I started in nineteen
• 1:19:00
  Speaker 1: eighty three that Moore's law was going to continue for
• 1:19:03
  Speaker 1: the rest of my career a ready effort, did I
• 1:19:07
  Speaker 1: need to know anything else? You know, I needed to
• 1:19:09
  Speaker 1: be able to translate that into the individual companies, And
• 1:19:12
  Speaker 1: you know, I might not have known that it was
• 1:19:15
  Speaker 1: the antebell rather than the Japanese, or that it was
• 1:19:17
  Speaker 1: Amazon rather than some of the others. But fundamentally, I
• 1:19:20
  Speaker 1: think if I had taken that seriously at that juncture,
• 1:19:24
  Speaker 1: I'm not, I'm you know, how much else would one
• 1:19:27
  Speaker 1: have needed to have known that computer is going to
• 1:19:30
  Speaker 1: we're going to be big one day, and and semiconductors
• 1:19:33
  Speaker 1: were going to continue to become increasingly powerful at at
• 1:19:38
  Speaker 1: a decreasing cost. I think even when people understood then intellectually,
• 1:19:44
  Speaker 1: they had a hard time first believing it that it
• 1:19:47
  Speaker 1: would last for as many decades as it has at second,
• 1:19:52
  Speaker 1: even with that knowledge, you know, are you are you
• 1:19:56
  Speaker 1: investing first level in the PC companies or even the
• 1:20:00
  Speaker 1: semiconductor companies, in the PC companies or the companies like
• 1:20:05
  Speaker 1: Google and others that figure out how best to use
• 1:20:10
  Speaker 1: it it really raises some fascinating questions. Oh totally. Um, well,
• 1:20:17
  Speaker 1: I would add in Barry, which I suspect you would
• 1:20:21
  Speaker 1: agree with that. I don't think the human mind is
• 1:20:25
  Speaker 1: very good at exponential change, for sure. You know I
• 1:20:27
  Speaker 1: talked about some different aspects. But you know this is this,
• 1:20:32
  Speaker 1: This is Jeffrey west in scale talking about the exponential chessboard,
• 1:20:36
  Speaker 1: isn't it? And way you get to us as you
• 1:20:39
  Speaker 1: add what are the group grades of rice or multiply
• 1:20:42
  Speaker 1: out at More's law? So you know, I think it's
• 1:20:45
  Speaker 1: partly that I think you could have got some degree
• 1:20:49
  Speaker 1: of confidence over the longevity of it. Again, to cite
• 1:20:54
  Speaker 1: a smol you know what they will tell you that
• 1:20:56
  Speaker 1: in fact More's law existed in it is just a
• 1:21:00
  Speaker 1: Gordon Molready wrote about in the nine. And you know
• 1:21:04
  Speaker 1: this doubling has continued. And also you know, to quote
• 1:21:08
  Speaker 1: something they said to my absolute amazement, I guessing three
• 1:21:10
  Speaker 1: or four years ago now, but it was when they
• 1:21:13
  Speaker 1: were finally thought the next generation of technologists was was there?
• 1:21:18
  Speaker 1: They said, neither you or nor I would claim that
• 1:21:22
  Speaker 1: it would have been so for us, But the next
• 1:21:24
  Speaker 1: ten or fifteen years would therefore be easy in inverted commerce.
• 1:21:28
  Speaker 1: Uh that's a direct quote. So you know, I could
• 1:21:31
  Speaker 1: you have come to a view I totally agree with
• 1:21:34
  Speaker 1: you about it then becomes but this is what I
• 1:21:37
  Speaker 1: could to spend all my time on thinking about the
• 1:21:40
  Speaker 1: second third round effects and how you get to the
• 1:21:43
  Speaker 1: companies that created Yeah, I I absolutely agree with that.
• 1:21:47
  Speaker 1: But you know, I think if you're arm with that
• 1:21:48
  Speaker 1: confidence that the process is going to again, whether you're
• 1:21:50
  Speaker 1: happy that all that stuff we talked about about Jeff
• 1:21:53
  Speaker 1: Bezos saying in the late nineties was was there, you know,
• 1:21:57
  Speaker 1: kept your mind open to all the exciting opportunities that
• 1:22:00
  Speaker 1: would happen and can still happen. Huh. Really interesting. One
• 1:22:04
  Speaker 1: of the quotes of yours that I found fascinating was
• 1:22:07
  Speaker 1: someone compared you to Warren Buffett and your response was
• 1:22:13
  Speaker 1: you think of yourself as more Monger than Buffett. Explain
• 1:22:16
  Speaker 1: that if you would, um hm, I to me, um,
• 1:22:27
  Speaker 1: jolly Boger benefits that extreme curiosity about everything, and it's
• 1:22:32
  Speaker 1: been very much and you know, I about to you
• 1:22:35
  Speaker 1: defer to your experience of this an essential part of
• 1:22:40
  Speaker 1: pushing Larren Buffett and Berkshire Hathaway into areas where they
• 1:22:48
  Speaker 1: might not have ventured otherwise. UM. And you know, I
• 1:22:51
  Speaker 1: think he has an astonishing ability to be honest about
• 1:22:54
  Speaker 1: some of the feelings. You know. For instance, his words
• 1:22:57
  Speaker 1: about how Google has this, I think he said the
• 1:23:01
  Speaker 1: greatest competitive of vartage out there, UM, and that I
• 1:23:08
  Speaker 1: therefore they ought to have understood it is I think
• 1:23:11
  Speaker 1: quite revealing of the whole process. I probably also slightly
• 1:23:16
  Speaker 1: empathize with. UM. I think Buffett is more, to my mind,
• 1:23:24
  Speaker 1: a creature who is comfortable with broad scale, popular and
• 1:23:28
  Speaker 1: media exposure. UM. I think Charlie Banger is rather less so,
• 1:23:33
  Speaker 1: and I probably feel more similar that that dec as well. Well. Well,
• 1:23:39
  Speaker 1: I could tell you from my personal experience researching and
• 1:23:43
  Speaker 1: prepping for this conversation. It's not like there was a
• 1:23:46
  Speaker 1: broad pool of public statements I had to work with.
• 1:23:51
  Speaker 1: You've been pretty behind the scenes for a long time.
• 1:23:55
  Speaker 1: I don't know if you're a co manager. Tom Slayer,
• 1:23:58
  Speaker 1: who's scheduled to take over after you retire, is going
• 1:24:02
  Speaker 1: to continue in that vein. Although I have to ask,
• 1:24:05
  Speaker 1: I love your comments. It's the fun manager's job to
• 1:24:10
  Speaker 1: remain accentric. How is Tom slaterter going to remain a
• 1:24:15
  Speaker 1: centric Yeah? Well, I think you know it's been. Firstly,
• 1:24:21
  Speaker 1: it's been a great joy to work with Tom. Um.
• 1:24:25
  Speaker 1: We often are You probably know or recall that Tom
• 1:24:29
  Speaker 1: has a more mathematical background than I do, but very
• 1:24:33
  Speaker 1: often we leave each other the chance to come to
• 1:24:36
  Speaker 1: a view, and it's quite interesting how often we agree,
• 1:24:40
  Speaker 1: but for different reasons. And you know, I found that
• 1:24:43
  Speaker 1: particularly delightful over the years. Um, I think Tommy is
• 1:24:47
  Speaker 1: a hundred percent committed to the idea that we need
• 1:24:49
  Speaker 1: to keep evolving. He might not have used the word eccentric,
• 1:24:53
  Speaker 1: but I think the desire to keep pushing on Tom
• 1:24:56
  Speaker 1: and indeed Uh the next next um Uh as next
• 1:25:01
  Speaker 1: likely assistant, Lawrence Burns, share that view. I think, you know,
• 1:25:06
  Speaker 1: if there is a word of caution here, I think
• 1:25:10
  Speaker 1: that it's very important that Baby Gifford as an organization
• 1:25:15
  Speaker 1: allows Tom to have this freedom of course, you know,
• 1:25:20
  Speaker 1: and perhaps this is back to among the things I
• 1:25:22
  Speaker 1: think you need the ability to stand out from the ordinary,
• 1:25:27
  Speaker 1: to occasionally annoy your colleagues quite a lot in doing
• 1:25:31
  Speaker 1: all this, and I think it's quite important that Tom
• 1:25:34
  Speaker 1: has given supporting patients to to do that really quite interesting.
• 1:25:39
  Speaker 1: Before we get to our favorite questions that we ask
• 1:25:41
  Speaker 1: all of our guests. I have to throw a curveball
• 1:25:45
  Speaker 1: question at you. You're a well known fan and contributor
• 1:25:49
  Speaker 1: to Edinburgh's Heart of mid Lothian football club. What are
• 1:25:54
  Speaker 1: your thoughts on private equity and sporting clubs? This seems
• 1:25:58
  Speaker 1: to have become quite a hobby horse for a lot
• 1:26:03
  Speaker 1: of people in Pe. What what do you think of
• 1:26:05
  Speaker 1: what's going on in football these days? Uh? To be honest, Berry,
• 1:26:10
  Speaker 1: I'm perfectly happy to talk about it, but mentally and
• 1:26:15
  Speaker 1: practically I separate the two fields a lot. I feel
• 1:26:20
  Speaker 1: very uncomfortable with not just the private equity, but still
• 1:26:25
  Speaker 1: more the greenwashing of various unpleasant states that it's done
• 1:26:31
  Speaker 1: through sport, and particularly through soccer in Europe. Explain what
• 1:26:35
  Speaker 1: do you mean by when I hear greenwashing? I usually
• 1:26:38
  Speaker 1: think of companies pretending to do e s g. Environmental
• 1:26:43
  Speaker 1: social government investing when it's really just a press release
• 1:26:46
  Speaker 1: and no follow through. What what's the greenwashing in British peoples?
• 1:26:52
  Speaker 1: I am I am spending it, but more broadly, but
• 1:26:56
  Speaker 1: um the most prominent and most successful for clubs, and
• 1:27:00
  Speaker 1: this is much more England than Scotland m are effectively
• 1:27:05
  Speaker 1: owned either by Russians or by Middle Eastern states with
• 1:27:11
  Speaker 1: questionable human rights records UM, and I think that they
• 1:27:15
  Speaker 1: are effectively doing the functional equivalent of what you're talking
• 1:27:19
  Speaker 1: about there with the s g U in trying to
• 1:27:23
  Speaker 1: make themselves cuddly and approachable by spending hundreds of millions
• 1:27:27
  Speaker 1: on football clubs rather than anything else. But you know
• 1:27:31
  Speaker 1: my take on football and I would not the same level.
• 1:27:34
  Speaker 1: But I worry about the financial imperatives of many of
• 1:27:38
  Speaker 1: the American sort of private equity drived owners as well.
• 1:27:42
  Speaker 1: My belief is that soccer football is an intensely important
• 1:27:47
  Speaker 1: part of local communities and of the increasingly rare ability
• 1:27:57
  Speaker 1: of an activity to go through all the different um groups, classes,
• 1:28:05
  Speaker 1: income levels of society and to attract everything from recent
• 1:28:09
  Speaker 1: immigrants to people very badly down on their luck. I
• 1:28:13
  Speaker 1: have no interest in trying to make money out of it,
• 1:28:16
  Speaker 1: and indeed I've structured, as regards hearts, my activities as
• 1:28:20
  Speaker 1: donations rather than any way wanting to have ownership. And
• 1:28:25
  Speaker 1: you know, it's something that I believe should be done
• 1:28:28
  Speaker 1: more broadly. You know, I've done this with to no
• 1:28:31
  Speaker 1: particular but all particular clubs in Scotland by making donations
• 1:28:35
  Speaker 1: of that level at the lower level. Um, my wife
• 1:28:38
  Speaker 1: and daughter are both on the boards or the board
• 1:28:42
  Speaker 1: of Scotland's most successful female football clubs. So it's it's
• 1:28:46
  Speaker 1: much more about the societal centrality of it than it
• 1:28:50
  Speaker 1: is about the financial parts, which I feel uneasy about,
• 1:28:53
  Speaker 1: to be frank, really intriguing answer, and I was not
• 1:28:58
  Speaker 1: expecting to go in that direction. All right, I know
• 1:29:01
  Speaker 1: I only have the studio for another ten minutes or so,
• 1:29:04
  Speaker 1: so let me jump. Let me jump to my favorite
• 1:29:07
  Speaker 1: question that we ask all of our guests, starting with
• 1:29:12
  Speaker 1: what was keeping you entertained during the lockdown? Any any
• 1:29:16
  Speaker 1: favorite Netflix or Amazon streams or any podcast? What what
• 1:29:21
  Speaker 1: kept you entertained when we were all stuck at home? Yes? Yes,
• 1:29:25
  Speaker 1: well it's continuing to be a battle, isn't it? Ok? Really,
• 1:29:30
  Speaker 1: oh gosh. The two most recent Netflix productions we've been
• 1:29:36
  Speaker 1: we've watched actually both films. Um, we were watching the
• 1:29:41
  Speaker 1: The Abandoned Daughter, the film of the Elena for Anti book,
• 1:29:45
  Speaker 1: which deeply annoyed me. Fantastic acting, but why did it
• 1:29:50
  Speaker 1: need to be made into the story of an American
• 1:29:52
  Speaker 1: academic or off the middle class um individual from Naples
• 1:29:57
  Speaker 1: to Bude? Everything? From my point of view, and I
• 1:29:59
  Speaker 1: think just just how far you know, there are still
• 1:30:02
  Speaker 1: for all the thoughts that Netflix and Amazon could provide
• 1:30:05
  Speaker 1: international insights, there are biased of that. And the other
• 1:30:08
  Speaker 1: film we watched this score, oddly enough, was The Hand
• 1:30:11
  Speaker 1: of God, the Sorrantino version, which is about Naples, and
• 1:30:14
  Speaker 1: thereby we much much much improved it. UM, if I
• 1:30:18
  Speaker 1: may risk a local one, UM the documentary, the documentary
• 1:30:23
  Speaker 1: on Amazon about Andy Murray is a tennis player. UM,
• 1:30:27
  Speaker 1: Resurfacing is I think a fantastic description of just how hard,
• 1:30:33
  Speaker 1: how competitive that sport, at individual sport could be. And
• 1:30:38
  Speaker 1: you know, I think it is, you know, gives me
• 1:30:41
  Speaker 1: pause for thought when we think we're struggling markets any
• 1:30:43
  Speaker 1: one day or anything like that. What what these people
• 1:30:46
  Speaker 1: put themselves through is truly remarkable. As a podcast. Last one,
• 1:30:51
  Speaker 1: I suspect it's been cited to you before, but I
• 1:30:53
  Speaker 1: haven't come across it. UM. I'm a great fan of
• 1:30:57
  Speaker 1: what the Long Now Foundation do, and I think they're
• 1:31:02
  Speaker 1: seminars on long term thinking and the podcast is on
• 1:31:05
  Speaker 1: that are just absolutely top class and have been for years,
• 1:31:09
  Speaker 1: both before the pandemic and during it. You know, you know,
• 1:31:13
  Speaker 1: it's funny you mentioned the Netflix film that they decided
• 1:31:18
  Speaker 1: to move locations from Middle Plus UK to the US.
• 1:31:23
  Speaker 1: There was actually a hilariously filthy series some years ago
• 1:31:27
  Speaker 1: called Episodes about two British comedy writers who had this
• 1:31:33
  Speaker 1: you know, very thoughtful, um sort of merchant ivory like
• 1:31:39
  Speaker 1: series in the UK. Within this series and the show
• 1:31:44
  Speaker 1: is about them relocating to Hollywood and trying to retain
• 1:31:48
  Speaker 1: some shred of their original um work and dignity in
• 1:31:54
  Speaker 1: face of all of the just you know, aggressively horrific
• 1:31:59
  Speaker 1: Hollywood e chase. And it's surprisingly funny and just absolutely filthy.
• 1:32:05
  Speaker 1: I don't know if you're familiar with it, but if
• 1:32:07
  Speaker 1: your tastes run in that direction, it's really entertaining. Um,
• 1:32:12
  Speaker 1: thank you, because I actually the lack of a long
• 1:32:15
  Speaker 1: tail as a board. Sorry to let you get on. Well, no,
• 1:32:18
  Speaker 1: it's a perfect example of one of those things that
• 1:32:22
  Speaker 1: just about any plot concept or idea there's going to
• 1:32:25
  Speaker 1: be a variation of it somewhere that either does or
• 1:32:28
  Speaker 1: doesn't work, or does or doesn't appeal to it to
• 1:32:32
  Speaker 1: a specific set of tastes. Um, And the challenge is
• 1:32:35
  Speaker 1: always in identifying what what works for you. Let me
• 1:32:38
  Speaker 1: go onto my next question, which is who are some
• 1:32:41
  Speaker 1: of your early mentors who helped to shape your career. Well.
• 1:32:48
  Speaker 1: I I mentioned Barry max Ward earlier internally, who's been fantastic.
• 1:32:54
  Speaker 1: Um there was a chairman of the board of Scottishavortgage
• 1:32:57
  Speaker 1: called Donald Mackay, who was a Scottishcolomys who correct day
• 1:33:03
  Speaker 1: to be saying it he absolutely tried, in the spirit
• 1:33:07
  Speaker 1: of what he quoted frequently Robert Burns the like, in
• 1:33:10
  Speaker 1: the way I couldn't as to try and raise our
• 1:33:12
  Speaker 1: horizons from the local and the index plus to the world.
• 1:33:16
  Speaker 1: And incredibly grateful that the last one I would mention,
• 1:33:19
  Speaker 1: because you know we've been focusing on Scottish mortgage etcetera,
• 1:33:22
  Speaker 1: that it's not not not not a problem, but another
• 1:33:26
  Speaker 1: part of my career that's been you know, really really
• 1:33:31
  Speaker 1: beneficial to me which I've enjoyed immensely is we run
• 1:33:34
  Speaker 1: money for Vanguard in the International Growth Fund as one
• 1:33:37
  Speaker 1: of the managers. And the first year we went to
• 1:33:41
  Speaker 1: see Vantangard close to twenty years ago after having been appointed,
• 1:33:44
  Speaker 1: we're done really badly in the performance terms, and the
• 1:33:48
  Speaker 1: then boss of that Guard set us down in a
• 1:33:51
  Speaker 1: big formal room with all his colleagues and said, I've
• 1:33:55
  Speaker 1: got something to say seriously to you. And I looked
• 1:33:58
  Speaker 1: at my colleague and colleague look to me, and we
• 1:34:00
  Speaker 1: both thought we were about to be reprimanded or even
• 1:34:03
  Speaker 1: sat and he paused and said, we're really pleased with you.
• 1:34:07
  Speaker 1: Of course you did exactly what you said you would do.
• 1:34:11
  Speaker 1: It just wasn't working at the market so over that
• 1:34:13
  Speaker 1: period of die and you know, as a piece of
• 1:34:17
  Speaker 1: help from a client, that was an enormously important moment
• 1:34:22
  Speaker 1: to me that you know, you could go back and say, look,
• 1:34:25
  Speaker 1: they believe in what we're doing. They're going to have
• 1:34:27
  Speaker 1: confidence in the long term. They know that ups and
• 1:34:30
  Speaker 1: down happened, and I am so grateful for for that.
• 1:34:35
  Speaker 1: You've mentioned a few books along our conversation. Tell us
• 1:34:39
  Speaker 1: some of your favorites, and what are you reading right now.
• 1:34:43
  Speaker 1: Some of the favorites are I think consistent with what
• 1:34:46
  Speaker 1: we've been talking about. So you know, I mentioned Scale
• 1:34:50
  Speaker 1: by Jeffrey West. I think it's a fantastic book. Um.
• 1:34:54
  Speaker 1: I I do think though that one uh that his
• 1:34:59
  Speaker 1: underestimate he's hugely in this score is the late great
• 1:35:04
  Speaker 1: Hans Rosling, who was another person we talked to a
• 1:35:06
  Speaker 1: lot um. He's factfulness as opposed to you know what
• 1:35:13
  Speaker 1: we all perceived to be going onto the world, which
• 1:35:17
  Speaker 1: he wrote as he was dying, is a book which
• 1:35:19
  Speaker 1: I think is incredibly valuable and important in investing in
• 1:35:23
  Speaker 1: thinking about the world. Um. You know what he says
• 1:35:26
  Speaker 1: phrase it stays with me. The secret, silent miracle of
• 1:35:29
  Speaker 1: human progress and how we've actually been advancing on this
• 1:35:32
  Speaker 1: score is I think very very important. There's an as
• 1:35:36
  Speaker 1: the last one, a category of people, whether in books
• 1:35:40
  Speaker 1: or podcasts or blogs or whatever, who we found really
• 1:35:43
  Speaker 1: interesting in recent times, which is, if you like left
• 1:35:47
  Speaker 1: wing commentators on what's going on in the world and
• 1:35:51
  Speaker 1: going on in China and Russia, are people like Adam
• 1:35:54
  Speaker 1: two Sa Branko Milanovich. I think they bring the depth
• 1:35:58
  Speaker 1: of commentary, a debt of understanding to some of the
• 1:36:01
  Speaker 1: issues that you know, I think we could all do
• 1:36:03
  Speaker 1: with more of and a deeply interesting people. But if
• 1:36:07
  Speaker 1: you ask me what I've been reading, um, you know,
• 1:36:10
  Speaker 1: in a way it's connected with all this. Um. I
• 1:36:14
  Speaker 1: was mentioning that we've been trying to go to various
• 1:36:16
  Speaker 1: citiespend time, and we were we were about to spend
• 1:36:18
  Speaker 1: time in Paris and I've become rather addicted to the
• 1:36:23
  Speaker 1: works of nineteenth century French novelists, particularly a Zola, And
• 1:36:28
  Speaker 1: you know, I think they make our only seem so pathetic. Um.
• 1:36:33
  Speaker 1: You know, the dramas, the tragedies, the triumphs were so
• 1:36:38
  Speaker 1: much more ethical than our own. Um. And I think that,
• 1:36:42
  Speaker 1: you know, I find it fascinated a contrast with the
• 1:36:44
  Speaker 1: UK novelists of the same era, who you know, everything
• 1:36:47
  Speaker 1: always ends up happily, or they joined the middle classes,
• 1:36:50
  Speaker 1: or you know, it's just minor social inconveniences. Um. And
• 1:36:54
  Speaker 1: you know, I'd love to see something, you know, the
• 1:36:58
  Speaker 1: novel of America or Britain today being written. I don't
• 1:37:04
  Speaker 1: see much of that. You know, we could do with
• 1:37:06
  Speaker 1: the tom Wolf for gour Vidal. These days there are
• 1:37:10
  Speaker 1: going back to the nineteenth century versions of it. So
• 1:37:13
  Speaker 1: when you you're referring to Amila Emily Zola, things like
• 1:37:18
  Speaker 1: The Masterpiece or The Ladies Paradise or A Belly of Paradise,
• 1:37:23
  Speaker 1: A Belly of Paris. Yeah, the Ladies Paradise is I
• 1:37:26
  Speaker 1: think a fantastic example of that. You know, it is
• 1:37:30
  Speaker 1: about creating the Amazon of its day, and I think
• 1:37:33
  Speaker 1: it's ability to tell the story is wondrous on this,
• 1:37:36
  Speaker 1: but then at the other end you have something like, uh,
• 1:37:40
  Speaker 1: the kill or which is you know about the deep
• 1:37:44
  Speaker 1: tragedies involved in this and germaniw which you know how
• 1:37:49
  Speaker 1: terrible the existency was? And you know, I think this
• 1:37:52
  Speaker 1: telling of a story of the whole society is something
• 1:37:55
  Speaker 1: that are novels today lack, and I'm not quite sure
• 1:37:57
  Speaker 1: that they need to lack. Huh really quite quite quite fascinating. Uh,
• 1:38:02
  Speaker 1: we're down to our last two questions. What sort of
• 1:38:05
  Speaker 1: advice would you give to a recent college grad who
• 1:38:08
  Speaker 1: was interested in a career in fund management? Uh, it's
• 1:38:14
  Speaker 1: precisely that I think is absolutely essential that they're interested
• 1:38:18
  Speaker 1: in the task, the curiosity, and it's not about the
• 1:38:22
  Speaker 1: financial rewards. I've seen far too many people are doing
• 1:38:25
  Speaker 1: it and get stuck at it because it's a good job.
• 1:38:29
  Speaker 1: In inverted comments that it provides rewards and status of
• 1:38:32
  Speaker 1: the like, you have to be obsessed about the fund
• 1:38:35
  Speaker 1: management path of it. So I'd asked them to examine
• 1:38:38
  Speaker 1: their conscience about where they were, not give them five
• 1:38:40
  Speaker 1: years to decide. That really interesting and our final question,
• 1:38:45
  Speaker 1: what do you know about the world of investing today
• 1:38:47
  Speaker 1: that you wish you knew forty or so years ago
• 1:38:50
  Speaker 1: when you first got started in the field. It's about extremes, um.
• 1:38:58
  Speaker 1: And you know the a conventional will not work over
• 1:39:02
  Speaker 1: the course of time. UM. And you know, I think,
• 1:39:05
  Speaker 1: as we've discussed very in depth, you sometimes don't know
• 1:39:10
  Speaker 1: what the extreme will be. You've got to have that
• 1:39:12
  Speaker 1: consciousness that it is about the extreme, either about information
• 1:39:16
  Speaker 1: or about companies or about individual teams. And I think
• 1:39:20
  Speaker 1: it's it's embracing those extremes that it's central. And I
• 1:39:24
  Speaker 1: really didn't realize that at all when I started. Huh,
• 1:39:28
  Speaker 1: really quite fascinating. We have been speaking with James Anderson,
• 1:39:32
  Speaker 1: partner at Bailey Gifford soon to be departing co manager
• 1:39:36
  Speaker 1: of the Scottage Mortgage Investment Trust. If you enjoy this conversation,
• 1:39:42
  Speaker 1: well be sure and look at any of our previous
• 1:39:44
  Speaker 1: nearly four hundred prior discussions. You can find those at iTunes, Spotify,
• 1:39:50
  Speaker 1: wherever you find your favorite podcasts. We love your comments,
• 1:39:55
  Speaker 1: feedback in suggestions right to us at m IB podcast
• 1:39:58
  Speaker 1: at Bloomberg dot net. Sign up for my daily reading
• 1:40:01
  Speaker 1: list at Ritoltz dot com. Follow me on Twitter at Ridolts.
• 1:40:05
  Speaker 1: I would be remiss if I did not thank the
• 1:40:07
  Speaker 1: crack team that helps you put these conversations together each week.
• 1:40:12
  Speaker 1: Jared James is my audio engineer. Atika Valbrund is our
• 1:40:18
  Speaker 1: project manager. Michael Batnick is my head of research. Harris
• 1:40:23
  Speaker 1: Woald is my producer. I'm Barry Ridolts. You've been listening
• 1:40:28
  Speaker 1: to Masters in Business on Bloomberg Radio