Latest / Financial Planner Life Podcast / Risk Vs Reward, Career Lessons from Terry Smith CEO of Fundsmith

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Risk Vs Reward, Career Lessons from Terry Smith CEO of Fundsmith · Financial Planner Life Podcast

• 0:00
  Speaker 1: Welcome to a special edition of the Financial Planner Life podcast where today we interview a financial services legend and, we hope, the first of many.
• 0:10
  Speaker 1: Chris Ball, ceo of Hoxton Wealth, sits down with the CEO of Fundsmith, terry Smith, and we dig deep on his financial services career that, by the sounds of it, isn't slowing down.
• 0:24
  Speaker 1: We talk about risk versus reward in your career.
• 0:29
  Speaker 1: You see, terry was an early financial services disruptor.
• 0:33
  Speaker 1: He stuck by his own honesty, integrity and values to basically make himself unemployable, but it seemed to turn out all right for Terry in the end.
• 0:43
  Speaker 1: Terry shares to us today as well about how to build a strong leadership team and what he looks for in people that he surrounds himself with.
• 0:53
  Speaker 1: We look at his love for managing people and managing money, but what does he prefer?
• 1:01
  Speaker 1: He also has some excellent advice for the next generation of financial services professionals.
• 1:09
  Speaker 1: This is a wonderful episode and a great insight into a financial services legend.
• 1:15
  Speaker 1: Thanks so much for your time, terry.
• 1:17
  Speaker 1: You're going to love this episode.
• 1:27
  Speaker 2: Welcome and thanks, terry, for coming on.
• 1:30
  Speaker 2: It's great to be talking and great to have you here.
• 1:35
  Speaker 3: Yeah, good, let's hope you still think that at the end of the interview.
• 1:38
  Speaker 2: I'm sure we will do so.
• 1:41
  Speaker 2: Obviously, you've been telling me you've been to Dubai many a times.
• 1:44
  Speaker 2: How does it compare to Mauritius?
• 1:47
  Speaker 3: Well, there's a lot more concrete in Dubai than there is in Mauritius.
• 1:51
  Speaker 3: So Mauritius is due south of here, seven hours flight, roughly about 3,500 miles.
• 1:56
  Speaker 3: Tropical island 50 miles by 30.
• 1:59
  Speaker 3: Population of about 1.25 million.
• 2:01
  Speaker 3: Second largest coral reef in the world.
• 2:04
  Speaker 3: So it's got lagoons and tourism is the biggest industry, obviously, but it's got a.
• 2:09
  Speaker 3: I don't know what this word really means.
• 2:11
  Speaker 3: It's kind of real.
• 2:11
  Speaker 3: It's not just a sort of desert island.
• 2:13
  Speaker 3: It's definitely like there's mountains and there are industries there.
• 2:16
  Speaker 3: There's light engineering Probably your sunglasses were made there or your medical tubes might be made there and there's a financial services sector which I'm obviously part of there.
• 2:25
  Speaker 2: Yeah, have you seen?
• 2:26
  Speaker 2: Many people, obviously since the elections, say they're going to come out or more people come out from the UK.
• 2:33
  Speaker 3: It's been a fairly constant stream, to be honest with you, with people moving over time.
• 2:37
  Speaker 3: There's an expat community there which is French, south African English and a few other bits and pieces, because it was a French colony originally, then it was an English colony after the Napoleonic Wars when we took it, and obviously it's four hours flying time from South Africa, and various issues around those countries at various times produced an increased number of people.
• 2:58
  Speaker 3: We've seen quite a lot of the silver economies a big growth in people coming there to retire.
• 3:04
  Speaker 2: Climate's nice, it's safe, I mean, there's no great violence or racial tension or any of that sort of thing, and, uh, so yeah, we've seen quite a bit yeah I imagine you'll probably see a bit more as as I would think it's quite likely after the budget in october that we could see quite a few more people from the uk see the benefits of living somewhere else.
• 3:21
  Speaker 2: Yeah, yeah, interesting.
• 3:22
  Speaker 2: Yeah, we've seen quite an influx of people into dubai um, as you know, and a lot of inquiries coming in, as you know, as a nice place to live, low taxation, safe, um, maybe not as much of the silver economy as you said.
• 3:36
  Speaker 2: Yeah, um, but um, but yeah, we've definitely seen a, uh, an influx.
• 3:40
  Speaker 2: So what you know?
• 3:42
  Speaker 2: Where does your?
• 3:43
  Speaker 2: Where did you develop your passion for investing?
• 3:45
  Speaker 2: Because obviously you started off with barclays bank?
• 3:48
  Speaker 3: yeah, it's when I was with barclays.
• 3:50
  Speaker 3: Um, when I was barclays, I spent about four years doing all the training to be a bank manager basically, I wasn't bank manager, um, and then they took me out and put me through an mba course uh, for 18 months, um, and told me to take all the finance options, which I did, and then when I, when I came back, they made me their finance manager.
• 4:06
  Speaker 3: I was in a department reporting to the finance director, running the banks, or trying to run the bank's balance sheet acquisitions, disposals, currency hedging, bond issues, all that sort of thing and during the course of doing that then there was no investor relations industry what you now see in investor relations professionals in companies and so on.
• 4:23
  Speaker 3: It really didn't exist.
• 4:25
  Speaker 3: There wasn't one.
• 4:26
  Speaker 3: And so when brokers analysts who were following banks rang up, they would try and get hold of the finance director and my boss, the finance director, delegated an awful lot to me and he particularly didn't like dealing with bank brokers analysts.
• 4:39
  Speaker 3: So I got to talk to all of the brokers analysts on both sides of the Atlantic over that time and out of that developed that and my job at Barclays.
• 4:48
  Speaker 3: I started to develop an interest in investment and markets and how they worked.
• 4:55
  Speaker 2: A bit of a funny question and I can probably guess the answer.
• 4:57
  Speaker 2: But did you always want to be a bank manager?
• 4:59
  Speaker 2: Is that you know when you went from school?
• 5:01
  Speaker 3: No, definitely not, no, no no no, no, no.
• 5:04
  Speaker 3: I did a degree in history, yeah, and I was offered a fellowship to become a history lecturer in due course and turned it down for what my professor called vulgar commercial considerations.
• 5:18
  Speaker 3: I didn't have any money, so I sort of went off and did interviews with all of the companies that were out there at that time, and some of them are still out there, some of them aren't, which have passed.
• 5:25
  Speaker 3: I went to the Metal Box Company which became Carradine in packaging I don't know what it is now Marks Spencer, unilever, barclays Bank, the Midland Bank, the NatWest Bank and so on, and I'm just a bit like this.
• 5:39
  Speaker 3: I chose the one that gave me the toughest interview.
• 5:41
  Speaker 3: That was all that.
• 5:42
  Speaker 3: I based it on really nothing.
• 5:43
  Speaker 3: I didn't know whether working in making packaging or unilevering, consumer staples or marks and spencers and retail or banking was going to work, because I had no clue about any of it.
• 5:51
  Speaker 3: So I just took the one where they gave me the toughest interview wow and I don't know.
• 5:56
  Speaker 3: I just thought, yeah, that's kind of interesting that they were not a pushover you like?
• 6:01
  Speaker 2: you like a challenge?
• 6:02
  Speaker 2: Yeah, I do.
• 6:03
  Speaker 2: Yeah, um, a lot of financial planners start their careers off in banks.
• 6:09
  Speaker 2: Banks have been notorious for you know, an amazing training ground.
• 6:13
  Speaker 2: Uh, give you a really good grounding.
• 6:15
  Speaker 2: You know lots of learning, great education, obviously big resources at the disposal for that kind of stuff.
• 6:21
  Speaker 2: Did you have you found things or lessons that you learn in the bank that you, you know, you kind of still carry with you today, or foundation?
• 6:29
  Speaker 3: yeah, look I.
• 6:30
  Speaker 3: What you describe is exactly how it was for me, which is I took every training course at the bank offered right.
• 6:35
  Speaker 3: Every time they said do you want to learn about law relating to banking?
• 6:38
  Speaker 3: Yes, accounting, yes, you know.
• 6:39
  Speaker 3: Whatever it was.
• 6:39
  Speaker 3: Yeah, and then they sent me to do an mba, paid for me to do an MBA, but there were lessons that I learned that do stay with you.
• 6:45
  Speaker 3: I always remember a thing this is slightly technical, but hopefully it'll answer your question there's a thing called a letter of credit they probably still get used I think they do in banking which is you're basically going to buy something to sell from China.
• 7:01
  Speaker 3: Someone in China is manufacturing it, you're going to import it and you're going to sell it in Dubai or England or wherever you're going to sell it.
• 7:05
  Speaker 3: And so there's a sort of standoff, if you like, between well, he's making the stuff.
• 7:09
  Speaker 3: Do you pay him in advance?
• 7:11
  Speaker 3: No, because it might not arrive or he might go bust.
• 7:13
  Speaker 3: Does he just send it to you and hope that you pay him?
• 7:15
  Speaker 3: No, he doesn't, because he doesn't know.
• 7:19
  Speaker 3: So there's a bill of lading showing that the stuff's been put in a container and shipped, and they are basically extending giving him the money, but of course you haven't got the money yet because you haven't sold the stuff.
• 7:31
  Speaker 3: So it's a form of credit to you.
• 7:32
  Speaker 3: They're basically advancing money to you to pay your exporter who's going to sell you the goods.
• 7:37
  Speaker 3: It's been used for a lot more things over the years, but that's the basis of the bill on London these things.
• 7:48
  Speaker 3: And there was a thing many years back when I was in banking called the Nigerian cement scandal, which is there was this big thing where they're building out sort of Nigeria after oil was discovered and there was this huge sort of gold rush to import cement into Nigeria and everybody was trying to sell the stuff to Nigeria.
• 8:00
  Speaker 3: It was a disaster.
• 8:01
  Speaker 3: There was a lot of corruption.
• 8:02
  Speaker 3: Most of it never got landed because there weren't the port facilities for it.
• 8:05
  Speaker 3: It sat in the ship holds while it was waiting off the port of Lagos, etc.
• 8:08
  Speaker 3: It was a disaster, but anyway, on the way to it being a disaster, when it wasn't yet recognised, I was working in banking and a guy came in, a customer whose company was called Transatlantic Commercial Express.
• 8:19
  Speaker 3: Now, a clue to what you were dealing with was he was running it from his front room in Hackney.
• 8:24
  Speaker 3: But anyway it's a great name.
• 8:24
  Speaker 3: And he came in and he said I've got a contract from someone in Nigeria I can't remember someone building a shopping mall or something like that to import X thousands of tonnes of cement.
• 8:35
  Speaker 3: And I've got a contract from a company in Germany, from Heidelberg or someone who are going to supply the 1,000 tonnes of cement.
• 8:42
  Speaker 3: So what I want is a back-to-back letter of credit.
• 8:46
  Speaker 3: I want one where I get one from the Nigerian guy saying when I produce the bill of lading he'll pay me, and then I want you to give one to the man in Heidelberg cement so that he'll ship the cement.
• 8:56
  Speaker 3: So it's called a back-to-back letter.
• 8:57
  Speaker 3: It's two letters of credit, one on either side right, because he wasn't importing the cement to use himself, he was flogging into somebody else.
• 9:03
  Speaker 3: So he said will you do a back-to-back letter of credit?
• 9:05
  Speaker 3: So I sort of wrote up a proposal and I went to see my boss who was the local director for the region.
• 9:09
  Speaker 3: He said no, we're not doing that.
• 9:10
  Speaker 3: I said why?
• 9:11
  Speaker 3: He said well, he said with letters of credit something is always wrong.
• 9:14
  Speaker 3: There's always something wrong with the documentation.
• 9:16
  Speaker 3: The insurance wasn't right, the invoice wasn't right, something he said.
• 9:20
  Speaker 3: So it's one of those things where they do get paid out mostly.
• 9:23
  Speaker 3: But if you're looking for an excuse not to pay, there's always one there.
• 9:26
  Speaker 3: And he said a back-to-back letter of credit.
• 9:28
  Speaker 3: He said you would only do such a thing for an undoubted customer, and an undoubted customer would never ask you.
• 9:37
  Speaker 3: Brilliant, I thought yes, that's a lesson that stayed with me.
• 9:40
  Speaker 3: There are some things which are really tricky, and you would only do them for somebody who is absolutely certain, and such a person would never ask you to do such a thing.
• 9:50
  Speaker 2: So that's that.
• 9:51
  Speaker 2: So you just don't do it.
• 9:51
  Speaker 2: Yeah, brilliant, and obviously you enjoyed your time at a bank.
• 9:53
  Speaker 2: Was it tough to leave?
• 9:54
  Speaker 2: Did you, you know, as you progressed, or was it just naturally?
• 9:58
  Speaker 3: no, it wasn't.
• 9:58
  Speaker 3: I mean, I um, I jumped ship from the bank into the broking community where I've been dealing with all the analysts.
• 10:03
  Speaker 3: Basically one of them eventually sort of uh, the bank, into the broking community where I've been dealing with all the analysts, basically One of them eventually, sort of the guy who was the number one analyst in the UK sat down and he said you're wasting your time.
• 10:11
  Speaker 3: He said, look, you really care about what you're doing.
• 10:12
  Speaker 3: You're very entrepreneurial.
• 10:14
  Speaker 3: I think You're wasting your time.
• 10:16
  Speaker 3: You're going to progress on this sort of escalator up to the board or whatever in the bank and it'll be OK.
• 10:21
  Speaker 3: But you're going to it's not really you.
• 10:24
  Speaker 3: You need to come out and try and do things in terms of building your own business and that sort of thing about coming to work with me.
• 10:29
  Speaker 3: And I said, yeah, ok, that was it, that was it.
• 10:32
  Speaker 3: That was it.
• 10:33
  Speaker 3: The bank was shocked because at the time when I did this, there was nil turnover in sort of senior management at the bank.
• 10:38
  Speaker 3: They were you can do what, and so they kind of I said I'm going off to do this and they said well what will you do if it goes wrong?
• 10:45
  Speaker 3: I said, well, call you up and ask for my job back.
• 10:46
  Speaker 1: I imagine.
• 10:47
  Speaker 3: And they said, well, what if it's filming?
• 10:49
  Speaker 3: I said, well, I'll ring Nat West.
• 10:50
  Speaker 3: And I said, for the same job?
• 10:51
  Speaker 3: I don't know.
• 10:56
  Speaker 2: I said I kind of think I'm capable of doing a job, so I don't think I'm going to starve to death.
• 11:00
  Speaker 2: If giving things a go and yeah, I.
• 11:01
  Speaker 3: I think the one thing that I, more than anything, more than I tried it and I failed, I, I I've got more fear of I never tried it and I wonder if it would have, what it would have been like and if it would have worked.
• 11:11
  Speaker 3: It's more about missing the chance to do things and experience them and feel what they would have been like.
• 11:16
  Speaker 2: That's is my main concern.
• 11:17
  Speaker 2: Sure, it's where you're missing out on an opportunity, saying no, isn't it?
• 11:20
  Speaker 2: So, yeah, awesome.
• 11:22
  Speaker 2: So you know, obviously you, you know you were, you were ahead of your time, um, when you were, when you started off as a broker, and you obviously you know what we would call now a financial services disruptor.
• 11:32
  Speaker 2: Um, you know, and you released your paper accounting for growth and obviously that was that was quite a big risk on your career and, from what it seems like a fairly new career at that point as well, and it doesn't seem like you know, you were kind of afraid to push against the grain uh no, I wrote the report and a book.
• 11:50
  Speaker 3: It was published as a book.
• 11:51
  Speaker 3: For what it's worth?
• 11:52
  Speaker 3: It's not worth very much, so it knocks stephen hawking's brief history of time off number one uh, I always say it's slightly less interesting.
• 11:58
  Speaker 3: Who am I to judge, um?
• 12:01
  Speaker 3: But yeah, I was head of research at ubs at the time.
• 12:04
  Speaker 3: It was a very big risk.
• 12:05
  Speaker 3: They fired me and sued me over it.
• 12:09
  Speaker 3: Clearly, an awful lot of companies I named in the book were very unhappy and they made their unhappiness known, and that was the outcome of it all, and it was really quite bad at the time, really bad at the time.
• 12:20
  Speaker 3: I had massive legal bills.
• 12:21
  Speaker 3: The outcome was uncertain.
• 12:23
  Speaker 3: I didn't have a job.
• 12:24
  Speaker 3: It made me make the leap from working for somebody else to work for myself, though Other than that, I would have been in a pretty comfortable job as head of research or something at an investment bank and I would have gone through that and life would have been absolutely fine, I'm sure, because after it had happened and I'd been fired, sued and everything else, I was kind of unemployable and so I went and joined a startup and that was it.
• 12:47
  Speaker 3: It made me make that.
• 12:48
  Speaker 3: It gave me the impetus to do that.
• 12:51
  Speaker 2: Did you feel at the time?
• 12:52
  Speaker 2: Obviously, it's kind of like a sliding doors moment, isn't it?
• 12:54
  Speaker 2: Like if I hadn't released it?
• 12:55
  Speaker 2: But as you were getting to release it, was there any ever doubt in your mind that you wouldn't?
• 13:01
  Speaker 2: No?
• 13:06
  Speaker 3: No, ever doubt in your mind that you wouldn't.
• 13:07
  Speaker 3: No, no, no, not really no.
• 13:07
  Speaker 3: I was told quite clearly by, you know, the most senior executive of ubs, what was going to happen that I was going to be fired and sued, and that was very worrying.
• 13:12
  Speaker 3: Yeah, triple a rated bank at the time, right and uh and so on, and I didn't have a job to go to um and I had a young family at that time as well, so yeah, but there was never any doubt about what I was going to do, because I just thought, you know, this is not going to work, is it?
• 13:25
  Speaker 3: I'm going to tell people I wrote this book, but we never published it.
• 13:28
  Speaker 3: Because, am I going to finish that sentence exactly?
• 13:31
  Speaker 2: Yeah.
• 13:32
  Speaker 3: And they're going to say, well, was it wrong and I'm going to go.
• 13:34
  Speaker 3: I can't comment.
• 13:35
  Speaker 3: I suppose it's kind of like you've lost your credibility at that point.
• 13:38
  Speaker 2: Yeah, and is that super important for you then?
• 13:41
  Speaker 3: Yeah, it is.
• 13:42
  Speaker 3: It's important to me that the people I deal with believe that I'm doing what I say I'm going to do and that I'm doing it in a pretty honest and straightforward manner.
• 13:52
  Speaker 3: I think that's an important consideration.
• 13:54
  Speaker 3: So honesty, integrity core values of yours.
• 13:57
  Speaker 3: Look, I'm a realist.
• 13:59
  Speaker 3: I work in the stock market, okay, I ran a money-broking business for a while, you know um.
• 14:03
  Speaker 3: You know, the wolf of wall street is a reasonably accurate depiction of events of that period, in my humble opinion.
• 14:09
  Speaker 3: So you know, I'm I'm not a monk, uh, and I'm not, I'm a capitalist, right yeah and I always say to people as much as it gives me a very warm feeling to do things right, make money for people, affect their lives very positive and so on I want to make money as well and um, so I'm not a sort of choir boy, okay, but it's important for me that you do what you say you're going to do.
• 14:29
  Speaker 3: When you say you're going to do it in in a good manner or try at least try to make an effort to try to.
• 14:34
  Speaker 2: Yeah, if you say you're going to do something, do it, do it yeah, I agree, which is actually what a lot of people don't do a lot of people talk the talk, very few.
• 14:41
  Speaker 2: Walk the walk yeah interesting so obviously they're gonna.
• 14:44
  Speaker 3: They're gonna encounter problems yeah, because you do and it's how you deal with them.
• 14:47
  Speaker 3: That really is the mark of of what you're going to do.
• 14:50
  Speaker 2: Yeah and then, so obviously, that was ubs, and then it was colin stewart, yeah, yeah, yeah, um.
• 14:55
  Speaker 2: And then you, you led a management buyout, yeah, and to do that you had to float the business, didn't you?
• 15:01
  Speaker 3: no, we floated it subsequently to pay off the debt.
• 15:03
  Speaker 3: So what happened was Colin Stewart was a joint venture between me and a small group of other people there, including Mr Collins and Mr Stewart.
• 15:11
  Speaker 3: We put their name on the firm and a bank Singer and Friedlander which was eventually bought by one of the Icelandic banks and disappeared as a result.
• 15:19
  Speaker 3: But what we decided at one point was we thought well, we need to own the whole firm and the only way we were going to be able to do that was to do a leveraged buyout, because we had to give them north of £100 million for their half of the firm and if we went and raised equity for £100 million, then whoever gave us the £122 million was clearly going to own the majority of the firm.
• 15:42
  Speaker 3: Unless we put up £122 million, this isn't going to work.
• 15:45
  Speaker 3: It's a people business.
• 15:46
  Speaker 3: So what we did is we went out and borrowed £100 million and got £22 million off CVC private equity and we owned 55% of the firm.
• 15:56
  Speaker 3: I and my colleagues owned 55% of the firm for that, which was quite a big thing to do at the time.
• 16:01
  Speaker 3: And then we did the IPO three years later to pay off the debt and give the private equity guys an exit.
• 16:06
  Speaker 3: So you let your value build up.
• 16:08
  Speaker 2: Yeah, yeah.
• 16:11
  Speaker 3: We made time passes and this was over 20 years ago, but I think that our entry price in terms of the equity purchase was something like a ninth of a penny or tenth of a penny, and we floated at 350p.
• 16:23
  Speaker 3: So I mean the, the percentage return was enormous.
• 16:27
  Speaker 3: Yeah, absolutely enormous, which is what happens if you put a lot of leverage on something and get it right yeah, but you can also go yeah, it can go the other way exactly, well the good news is, if you get it the other way, it's not slow death, is it?
• 16:37
  Speaker 2: it's all over pretty quickly yeah, and it's always struck me as well, because a lot of people typically like one of two things.
• 16:48
  Speaker 2: So they either like doing the work or they like managing people.
• 16:52
  Speaker 2: And it seems that you quite like doing both.
• 16:54
  Speaker 2: So you like investing, clearly, and you're obviously very good at it.
• 16:57
  Speaker 2: But then it also seems from your, from your career thus far, um, that you also like building out big firms and managing groups of people.
• 17:05
  Speaker 2: Or maybe you might tell me that's not the case, but you know what is it?
• 17:08
  Speaker 2: Is it both, or is it is it one of?
• 17:10
  Speaker 2: The?
• 17:10
  Speaker 3: other.
• 17:10
  Speaker 3: That is actually an extremely unusually insightful question, I've got to tell you right you're absolutely right, and I think that I mean saying I'm there, I'm unique, is a bit of a but I'm not aware of.
• 17:22
  Speaker 3: I'm not aware of another fund manager, portfolio manager who's managed businesses and I'm not aware of anyone who's managed businesses who's translated to be a portfolio manager.
• 17:32
  Speaker 3: So combining the two is certainly very unusual and it might even be unique, and I like both.
• 17:39
  Speaker 3: Actually, I've enjoyed doing and still enjoy doing both.
• 17:42
  Speaker 3: So there's not one that I like more than the other, particularly, I wouldn't say, although, bear in mind, all of these are people, businesses, and the thing about people is they're capable of causing a problem every hour on the hour, so you have to bear that in mind.
• 17:53
  Speaker 3: In terms of the management of people and management of people isn't always glamorous I can remember when I was head of research at UBS, I had to deal with the fact that we had a very, very, very large water analyst lovely guy, Lachis Athanasiu, who used to break the toilet seats when he sat on them, and I used to have to deal with complaints about the broken toilet seats.
• 18:08
  Speaker 3: And that's what management's about.
• 18:10
  Speaker 1: It's not glamorous.
• 18:11
  Speaker 3: It's not a glamorous job, but I like both and I would suggest that I'm a better manager because I manage money for people and invest.
• 18:20
  Speaker 3: I think it makes me a better manager in terms of thinking about investing for the business and how we deploy capital and what we do and profit margins and cash flows and so on.
• 18:29
  Speaker 3: And I think I'm a better portfolio manager because I understand businesses, because I've run a couple of them.
• 18:34
  Speaker 3: I mean the story I always tell about running businesses is a very good friend of mine, sir Andrew Cook, who's got a steel castings business in the UK.
• 18:42
  Speaker 3: It was listed as now private and I defended him in a big takeover many 30 years ago and he always said about dealing with analysts.
• 18:49
  Speaker 3: He said, oh, analysts he talks about, oh, analysts.
• 18:52
  Speaker 3: He said they think that what happens is I come in in the morning and there's two buttons on the wall of my office, a green one and a red one, and I press the green one which is labelled make money, and then when I'm going home at night, just as I'm putting my jacket on, I think, oh, must remember to press the old red button on the way out.
• 19:04
  Speaker 3: He said it's not like that.
• 19:06
  Speaker 3: I've got to deal with molten metal and strikes and buyers who want to beat me up on price and competition.
• 19:13
  Speaker 3: And you know it's a messy old business running a business and I think you know an awful lot of analysts when they talk about guidance on companies and things.
• 19:24
  Speaker 3: What's the guidance for the next reporting period?
• 19:26
  Speaker 3: And of course, the honest answer in some cases is we haven't got a clue.
• 19:31
  Speaker 3: That's your job.
• 19:31
  Speaker 3: That's your job to come up with that.
• 19:35
  Speaker 2: No-transcript it's tough, isn't it?
• 19:37
  Speaker 2: Because we see a lot with financial planners that a lot of them like the thought of running their own business, but actually in practice it is like you said it's dealing with the real hard bits.
• 19:46
  Speaker 3: I'll tell you other stories about.
• 19:47
  Speaker 3: I mean, there was a guy I used to have templeton as a client the original templeton before.
• 19:51
  Speaker 3: I can frankly tell you.
• 19:52
  Speaker 3: I used to go to life of key in the bahamas to see them and the cio was a man called uh holoesco, mark Holowesco, and when I used to go up to him he was rather grumpy.
• 20:01
  Speaker 3: Anyway, he then set up his own business, holowesco.
• 20:04
  Speaker 3: Left Templeton and set up Holowesco.
• 20:07
  Speaker 3: And I went back to see him and I was then presenting my Quest model, which was an online model, in the very early days of being online.
• 20:11
  Speaker 3: So there was no Wi-Fi, you just plug in, right this.
• 20:14
  Speaker 3: There was a power cut.
• 20:15
  Speaker 3: I remember that.
• 20:16
  Speaker 3: A whole lot of ways to go.
• 20:17
  Speaker 3: And he said don't worry about it, get in the car.
• 20:19
  Speaker 3: Took me around to his house.
• 20:20
  Speaker 3: He said my son's 14.
• 20:21
  Speaker 3: He'll rig it up.
• 20:21
  Speaker 3: And we rigged it up and I did the presentation at his house and he said you want a coffee?
• 20:24
  Speaker 3: What do you want?
• 20:25
  Speaker 3: Why are you here?
• 20:34
  Speaker 3: And I said to him at the end of toilet tissue right, and I'm trying to make decisions to manage money.
• 20:40
  Speaker 3: He said I hated being a manager in a big business.
• 20:43
  Speaker 3: He said and I love doing this.
• 20:44
  Speaker 3: I like managing money, I said, and it shows, and it shows.
• 20:47
  Speaker 3: But a lot of managers who run funds successfully want to run their own business.
• 20:52
  Speaker 3: But they don't realise that running their own business involves a myriad of other things dealing with suppliers, staff, regulators, it, it security every single day.
• 21:03
  Speaker 3: That's way beyond the management of money and they don't like it or they're not very good at it or they fail and it distracts them.
• 21:10
  Speaker 3: Yeah.
• 21:12
  Speaker 2: You've got to have a passion for both, I would imagine.
• 21:13
  Speaker 2: I guess yeah.
• 21:14
  Speaker 2: So obviously you floated the business done incredibly well, and then didn't you start Fundsmith up at a similar time to when you was just exiting?
• 21:26
  Speaker 3: Well, what happened was I ran Colin Stewart and then, after we IPO'd Colin Stewart, we bought a company called.
• 21:33
  Speaker 3: It was then called Tullet in Tokyo Tullet Prevost, now TPI Cap, the biggest money broker in the world and so I basically was running two businesses.
• 21:41
  Speaker 3: I was running Colin Stewart and Tullett Prebomb at that time.
• 21:44
  Speaker 3: So my contract was to be CEO of two businesses owned by the same holding company.
• 21:48
  Speaker 3: But I was CEO of two businesses and eventually Colin Stewart was, and when we bought Tullett and Tokyo, it had a pension fund with a big deficit.
• 21:56
  Speaker 3: We knew that right and I took over being the investment advisor to the fund.
• 22:00
  Speaker 3: The trustees very kindly agreed to me doing that and I used the strategy we used the strategy that we use for Fundsmith to turn that pension fund around.
• 22:07
  Speaker 3: We turned it from assets which are two-thirds of the fund into assets that were 150% of the fund's liabilities in a decade through the investment process, and that was a good testing ground for what we're doing.
• 22:19
  Speaker 3: But Colin Stewart got sold.
• 22:21
  Speaker 3: Canna, called the Canadian broking firm, bought Colin Stewart, and so there I was with A an interest in investment, b the experience of being investment advisor on this pension fund, and, c a contract which allowed me to use one third of my time for something other than running Talek Prebonds.
• 22:34
  Speaker 3: I said, oh, you know what I'm going to do.
• 22:36
  Speaker 3: I'm going to launch my own fund management business using that contract.
• 22:39
  Speaker 3: Um, uh, carve out that I had.
• 22:41
  Speaker 3: And so I set up fundsmith.
• 22:42
  Speaker 3: I wrote a check for the first uh investment in the fund and I wrote a check for most of the capital that we needed to start off, and I started up fundsmith I suppose that was good.
• 22:50
  Speaker 2: That was kind of on to my next question, which was um, how did you manage to business running two businesses, uh, simultaneously, but it sounds like you're already doing it before.
• 23:00
  Speaker 2: Yeah, I, I had a porcupines make love carefully, I hope, and out of all the businesses that you've run so far, I mean you know you might you I would imagine you probably say funsmith, but is is that the one that you have enjoyed running the most?
• 23:18
  Speaker 2: yeah, yeah, um, colin stewart was was huge fun, because on day one there are eight of us in an.
• 23:20
  Speaker 3: Is that the one that you have enjoyed running the most?
• 23:22
  Speaker 3: Yeah, Colin Stewart was huge fun because on day one there were eight of us in an office.
• 23:25
  Speaker 3: Yeah, and I don't know how many hundred of us there were by the day that we sold it to Canacord, but it had been this fantastically successful startup.
• 23:31
  Speaker 3: This leveraged buyout was nobody done with a broking firm before An IPO.
• 23:35
  Speaker 3: My partner in the business, who gradually people dropped out but Andy Stewart was the longest standing of the partners was just a huge fun guy.
• 23:44
  Speaker 3: I mean, I had some of the funniest and most entertaining times I've been in business with Andy.
• 23:49
  Speaker 3: He was just hilarious in terms of some of the stuff he would come up with, and so that was great fun.
• 23:54
  Speaker 3: And then Tulloch was interesting as well because it was a different thing.
• 23:57
  Speaker 3: It was 3,000 people in 23 countries.
• 23:59
  Speaker 3: It was quite a big business and so you know, it was genuinely a global big business to try and run.
• 24:07
  Speaker 3: That's a different kind of challenge, um, and it needed to be changed.
• 24:09
  Speaker 3: It had been run in a way where it wasn't as profitable as it should be and it was an industry it needed to be consolidated.
• 24:13
  Speaker 3: So I needed to either be bought or buy things, and we did.
• 24:15
  Speaker 3: We bought pre-bond, bought the number four competitor, so that was fun.
• 24:18
  Speaker 3: But, um, this, this, you know, the startups are fun if they work, obviously, um, and funsmith has, but it's really in the business area that I'm most I'm interested in yeah investment analysis and investment is really the thing that I find that I'm most interested in and do you use funsmith to run your own money as well?
• 24:37
  Speaker 3: yeah, yeah, yeah this is what I invest in.
• 24:39
  Speaker 3: I mean, if I, if I, if we didn't run outside people's money in fundsmith tomorrow, I would still be running my money exactly the same way.
• 24:45
  Speaker 3: It's what I do, is it's not just?
• 24:47
  Speaker 3: Oh well, I often think with an awful lot of fund managers that don't manage their money that way.
• 24:51
  Speaker 3: They, they, you know they're in a fund management business.
• 24:53
  Speaker 3: They've got funds doing large companies and small companies and international in the us and debt and commodities and everything like.
• 24:59
  Speaker 3: Do you put your money in here then?
• 25:00
  Speaker 3: oh no, no, I run it as best I can, money money over there and it's like, oh no, I actually invest in the fund.
• 25:06
  Speaker 3: Yes, I've never taken a single penny out and I've no intention of ever taking a single penny out.
• 25:11
  Speaker 3: Uh, and I would tell people in advance if I was thinking of taking a single penny out so they could decide what they wanted to do as a result.
• 25:18
  Speaker 2: Yeah, that, yeah, and what?
• 25:20
  Speaker 2: What drives you every day of it?
• 25:21
  Speaker 2: Because clearly you obviously don't have to work.
• 25:23
  Speaker 2: Um, so it must, you know, from outside, looking in, it must be, you know, you actually just really, really enjoy it yeah, it's what I do, I'm.
• 25:32
  Speaker 3: I think that, um, uh, most of us are defined by a few things.
• 25:36
  Speaker 3: I don't know what the few things are.
• 25:37
  Speaker 3: You know the guy drives a taxi, supports arsenal, uh, and likes drinking beer.
• 25:41
  Speaker 3: I don't know what the few things are.
• 25:42
  Speaker 3: You know the guy drives a taxi, supports arsenal and likes drinking beer, I don't know whatever.
• 25:44
  Speaker 3: Plays golf right, plays golf, watches arsenal, drives a taxi, and if you take away one of those things, it's problematic.
• 25:49
  Speaker 3: I think you should think very carefully about doing that in life.
• 25:52
  Speaker 3: That people who've got an interest, or and if it includes their career and what they do think very carefully before you give it up, particularly if you are in a position where you don't have to retire.
• 26:02
  Speaker 3: Thinking about giving that up is, I think, problematic.
• 26:05
  Speaker 3: My late father-in-law was a minor son.
• 26:08
  Speaker 3: A very intelligent guy ended up as a school headmaster from a generation where that wasn't normal and so on, and he took early retirement at 55.
• 26:16
  Speaker 3: And his interests were that and rugby basically, and it was difficult to have a conversation with him in later years because he'd slowed up so much and he was a really intelligent man and I thought you shouldn't have retired, really should you.
• 26:32
  Speaker 3: You should have kept going at least for another 10 years and kept doing that and you didn't.
• 26:36
  Speaker 3: But I think that's partly what I do.
• 26:40
  Speaker 3: I wake up in the morning, I read.
• 26:41
  Speaker 3: I think that's partly what I do.
• 26:42
  Speaker 3: I wake up in the morning, I read the overnight stuff that's come in.
• 26:44
  Speaker 3: I have a think about things.
• 26:45
  Speaker 3: I talk to Julian.
• 26:47
  Speaker 3: I've worked with Julian for 38 years.
• 26:48
  Speaker 3: I had a research.
• 26:49
  Speaker 3: I talk to him almost every day of my life.
• 26:51
  Speaker 3: It's part of what we do.
• 26:52
  Speaker 3: That's nice.
• 26:54
  Speaker 2: Yeah, and you've obviously got built a you know a really good leadership team around you.
• 26:59
  Speaker 2: You must have to grow.
• 27:01
  Speaker 2: How did you do that?
• 27:04
  Speaker 3: And what?
• 27:04
  Speaker 2: are the kind of traits you look for in your leadership team.
• 27:05
  Speaker 2: I mean, it's a balance.
• 27:07
  Speaker 3: I've got a small group of people who we've worked together for a long time.
• 27:10
  Speaker 3: I've got one of our directors I've worked with for 45 years.
• 27:12
  Speaker 3: This year he was my boss at Barclays, in fact.
• 27:16
  Speaker 3: Wow, I'll tell you a story about him if we have time.
• 27:23
  Speaker 3: Yeah, um and uh.
• 27:24
  Speaker 3: Well, yeah, I'm julian, it's 38 years, you know, and so on.
• 27:25
  Speaker 3: I've got a couple of guys who are in the 25 years grev marks, probably 30 years on.
• 27:28
  Speaker 3: But you can't just rely on that.
• 27:29
  Speaker 3: I've also got new colleagues who come in, who become partners, who are part of it.
• 27:33
  Speaker 3: If it's just well, we're just this bunch of old farts who just run this business together.
• 27:36
  Speaker 3: I think I know what the end is.
• 27:38
  Speaker 3: I can write the end of that movie.
• 27:39
  Speaker 3: You need to have new people coming in.
• 27:41
  Speaker 1: And we have.
• 27:42
  Speaker 3: We've got new people like Hugo and Peter and so on, who've come in, who've become partners with us and I'm very pleased.
• 27:47
  Speaker 3: They have to renew the business and I'm a believer in delegation.
• 27:50
  Speaker 3: I always tell the story about Tulloch, which people and I'm trying to illustrate that we had a problem in Tokyo.
• 27:56
  Speaker 3: Where the guy was managing it.
• 27:57
  Speaker 3: It wasn't going right.
• 27:57
  Speaker 3: Where the guy was managing it, it wasn't going right and he'd screwed up, basically, and we were run out of Singapore.
• 28:02
  Speaker 3: That was our Asia hub.
• 28:04
  Speaker 3: And so I rang the guy who ran Singapore and said I'm sorry, you're going to have to go to Tokyo and fire this guy and replace him, and he said I can't do that.
• 28:12
  Speaker 3: I said why?
• 28:13
  Speaker 3: He said well, I've worked with him for 30 years and he's my friend.
• 28:16
  Speaker 3: And I said, oh, that's problematic.
• 28:17
  Speaker 3: I said okay.
• 28:17
  Speaker 3: I said what I'm going to do is I'm going to fire Tokyo and fire them.
• 28:20
  Speaker 3: Then I'm coming to Singapore to fire you.
• 28:21
  Speaker 3: I said because I don't keep my dog barking myself.
• 28:25
  Speaker 3: Yeah, right, I said I've fired people who are my friends in business.
• 28:29
  Speaker 3: I have and they say, well, how will our friendship go?
• 28:31
  Speaker 3: I said that's up to you, but if you don't, I'll see you down the pub.
• 28:40
  Speaker 2: Yeah.
• 28:40
  Speaker 3: Right I said so.
• 28:42
  Speaker 3: You've got to be able to handle this, otherwise you're not a manager.
• 28:44
  Speaker 3: You're something else Right, and so I think renewing with people, having a core of people whom you can trust, but building a new core of people you can trust over time yeah, that's part of it, and part of it is really delegating to people and, by the way, that does mean they're going to do things you don't like from time to time and get things wrong from time to time, and you have to be willing to tolerate a degree of that.
• 29:06
  Speaker 3: How do you?
• 29:08
  Speaker 2: do that, do you have like.
• 29:08
  Speaker 3: With great difficulty yeah.
• 29:12
  Speaker 2: I was about to say, are you kind of very understanding with it or what's your style with it?
• 29:18
  Speaker 3: You know, I would say you really should ask my colleagues about that rather than me.
• 29:21
  Speaker 3: I think I'm better with big disasters than small ones.
• 29:24
  Speaker 3: I get really, really hacked off with small things, like the meeting schedule was wrong and somebody didn't do what they should have done, and so on, whereas somebody comes in and says, oh my God, we lost £10 million.
• 29:34
  Speaker 3: I go, it's okay, it's all right, it's just money, we'll survive.
• 29:38
  Speaker 1: They go what?
• 29:38
  Speaker 3: Because when you get a big disaster, I don't see any point in shouting.
• 29:41
  Speaker 3: Really.
• 29:42
  Speaker 3: You know, I don't think it to some degree, my feelings and so on.
• 29:52
  Speaker 3: When we get to the blimey, that's a big problem.
• 29:54
  Speaker 2: Yeah, I've actually got to get my thinking cap on.
• 29:56
  Speaker 3: Yeah, well, I've got to do something constructive about this, otherwise, I'm going to take it from being, you know, sort of a problem into a crisis or a disaster.
• 30:07
  Speaker 3: Yeah, awesome.
• 30:12
  Speaker 2: And if you were starting out again now, what would be one thing that you would do differently?
• 30:18
  Speaker 2: Start earlier, start earlier, yeah.
• 30:20
  Speaker 2: And is there one piece of advice that you give financial planners or fund managers that are looking to get into the profession?
• 30:35
  Speaker 3: Yeah, I mean it's a very good profession and it's very positive to think about that.
• 30:39
  Speaker 3: Don't rush.
• 30:41
  Speaker 3: Take your time, gain experience, take training and so on.
• 30:45
  Speaker 3: I see people who start businesses in this area and fail, and it's not because they're not capable of doing it, it's because they've gone too soon.
• 30:53
  Speaker 3: Go and work for somebody else.
• 30:54
  Speaker 3: Go and take whatever job they offer.
• 30:56
  Speaker 3: Go and accept whatever training they offer.
• 30:59
  Speaker 3: Always be willing to do anything.
• 31:01
  Speaker 3: You know.
• 31:01
  Speaker 3: They say do the photocopying, do the photocopying right.
• 31:03
  Speaker 3: Just, I mean, we've got one partner who literally came in and did the photocopying and things like that and like this guy was pretty good and and he's.
• 31:11
  Speaker 3: Rather, there's um.
• 31:13
  Speaker 3: Lucy kelloway used to write for the ft, used to do a um I think it was called on work or something.
• 31:17
  Speaker 3: She did a column which was about the nature of working in an office and so on.
• 31:21
  Speaker 3: It was kind of light-hearted, but somewhere within that light-heartedness there were these kind of kernels of yeah, you're trying to tell us something important here, aren't you?
• 31:29
  Speaker 3: I don't know if I could find it if I look for it.
• 31:31
  Speaker 3: She did an article which said that the digital age has done a disservice to young people because it's convinced them all that they can be their own boss and found a business, and they can't.
• 31:40
  Speaker 3: They should go take a job.
• 31:42
  Speaker 3: Some of them may progress through that in due course to being able to found and run a business.
• 31:46
  Speaker 3: Most of them won't.
• 31:48
  Speaker 3: And she said I think it's done a great disservice to people because even the ones who are capable of doing it probably have such a bad experience from going too soon that it's a disaster for them.
• 31:58
  Speaker 3: I mean, I know somebody who's a son of a colleague and friend of mine who started a fund which I backed him in a very small way just to get him going and it's not worked.
• 32:08
  Speaker 3: And I think the reason it's not worked is simply because he went too soon.
• 32:10
  Speaker 3: Yeah, he should have gone and worked in another fund management business not ours, because we don't do that somebody else's fund management business and got some experience.
• 32:18
  Speaker 2: Yeah, we see that a lot actually in financial planning too, where a lot of people are always in a big hurry to get going, which is great.
• 32:25
  Speaker 2: I mean, obviously, you know, speed is good.
• 32:27
  Speaker 2: You don't want to be a complete plodder, but they miss that whole experience gap and they don't want to learn from other people and it's.
• 32:35
  Speaker 2: It's a tough skill because in an age where everything is quick and you're used to everything happening quickly, to have that patience and that virtue to step back and say actually, um, you know, I, I can afford to take five years, ten years, whatever it is to learn.
• 32:49
  Speaker 3: I mean the average male life expectancy in the developed world now has climbed into the mid-80s.
• 32:53
  Speaker 3: You can be doing this for a long time, right, if you want.
• 32:56
  Speaker 3: You know, one of the great things about managing money is it's something you can do as Warren Buffett and Charlie Munger have demonstrated into old age and do it better.
• 33:05
  Speaker 3: Yeah, there ain't a rush, and the trouble is, once you've screwed up in terms of going too early, it's more difficult to come back than it is to go the right route in the first place.
• 33:14
  Speaker 3: I think.
• 33:14
  Speaker 1: So it is yeah, I think that happens.
• 33:15
  Speaker 3: I told a story this morning.
• 33:16
  Speaker 3: Somebody said it goes back to going to Lyford Quay in the Bahamas to present to Templeton.
• 33:21
  Speaker 3: And of course back in those days it was Sir John Templeton, not just Mark Olwoska, and he had this thing way, way, way before the internet age.
• 33:28
  Speaker 3: That, he said, one of his advantages was because he was a real long-term investor thinker about things.
• 33:33
  Speaker 3: He said that there in those days the newspaper the Wall Street Journal used to arrive a day after and so when there was some bad news, it was too late to panic.
• 33:42
  Speaker 3: He said I don't know what the news is until the day after.
• 33:48
  Speaker 2: It didn't seem to do him a lot of harm funnily enough, you know, and how do you feel about all these people?
• 33:54
  Speaker 2: You know, just just on that, you know this day trading mentality, people trying to jump in, jump out, because obviously I know that you're a much longer term, yeah, investor well, there's more than one way up the mountain of investment.
• 34:03
  Speaker 3: The way that we manage money is not unique.
• 34:04
  Speaker 3: Yeah, um, we didn't invent it.
• 34:06
  Speaker 3: Um, and it's not the only way of doing it, okay, but if you're going to do it one of the other ways be it day trading or momentum trading or value investing or so on that's fine.
• 34:17
  Speaker 3: But I'm going to say a couple of things about it.
• 34:20
  Speaker 3: One of them is on average, you'll fail.
• 34:22
  Speaker 3: Yeah, okay, because day trading or any of those very high, you know, sort of frequency trading things are very much like going down to the casino, right, the more you play at the casino, the more money you will lose.
• 34:36
  Speaker 3: Have you seen the movie Casino?
• 34:37
  Speaker 1: Yes.
• 34:39
  Speaker 3: The guy who's the punter, who's won big from them, and they put a fault on his private jet to stop him getting back in Get him playing right On average, you are going to lose.
• 34:48
  Speaker 3: That's the first thing to say about it.
• 34:50
  Speaker 3: The second thing is you really, really, really need to stick to whatever your discipline is.
• 34:55
  Speaker 3: So don't be a day trader or a momentum trader and say oh, I really think I should own NVIDIA because NVIDIA's got GPU chips and it's going to lead the AI revolution.
• 35:03
  Speaker 3: No, no, no, no, that's not what you do.
• 35:04
  Speaker 3: You own NVIDIA because it's going up.
• 35:06
  Speaker 3: The minute it stops going up, stop owning it.
• 35:09
  Speaker 3: Don't try and tell me you now understand something about it because you've made some money momentum trading, don't hop from one to the other.
• 35:14
  Speaker 3: It's like me saying I'm a long-term investor.
• 35:17
  Speaker 3: I analyze companies and the markets they're in.
• 35:20
  Speaker 3: I try and find the good companies with great returns and all this sort of thing.
• 35:23
  Speaker 2: And then, yeah, but I think Nvidia's going up so I add, be great, but it's kind of I'm outside of my discipline at that point and that's probably not going to end well.
• 35:38
  Speaker 3: and what areas are you investing in at the moment?
• 35:38
  Speaker 3: What areas do you see of interest?
• 35:39
  Speaker 3: Because we always invest in the same areas.
• 35:39
  Speaker 3: I mean, if you look at our portfolio, you'll find the three big things that we invest in over time we have done, we'll probably continue to do, is consumer items, so your everyday necessities and luxuries, uh, you know, when you have a drink, when you eat something, when you go to the bathroom, when you clean the kitchen, when you feed the pets, etc.
• 35:54
  Speaker 3: So anything in the consumer area is of interest to us.
• 35:57
  Speaker 3: Basically, medical technology is of interest to us, people who make things that go into bodies, tubes, catheters, artificial knees, robotic surgery equipment, drugs in one case, in terms of the weight loss drug manufacturer, novo neuros and Nouros and technology.
• 36:13
  Speaker 3: But when I say technology, you've got to be careful, because people think technology just means one thing it's a broad church technology.
• 36:19
  Speaker 3: So we own automatic data processing, adp.
• 36:22
  Speaker 3: It certainly sounds like a technology company, doesn't it?
• 36:24
  Speaker 3: And it is.
• 36:24
  Speaker 3: It does payroll processing.
• 36:26
  Speaker 3: We own Amadeus, which uses technology to do airline reservations.
• 36:30
  Speaker 3: We own Meta, the old Facebook, which does communications and online advertising.
• 36:35
  Speaker 3: We own Alphabet, the old Google, which does search and online advertising.
• 36:39
  Speaker 3: We own Microsoft, which does operating systems and distributed computing, and we own Apple, which does mobile devices.
• 36:48
  Speaker 3: They're all technology companies, but they've all got quite different drivers, haven't they?
• 36:52
  Speaker 3: The markets they operate in are very, very different.
• 36:54
  Speaker 3: So, you know and we own a couple of other companies out there as well I mean, we own Visa.
• 36:59
  Speaker 3: Visa's a technology company.
• 37:00
  Speaker 3: I know people say it's a credit card company.
• 37:02
  Speaker 3: Do you know how much money Visa has lent in its entire history to people?
• 37:05
  Speaker 3: Not one single cent, that's what the banks do.
• 37:09
  Speaker 3: Visa operates the payment system right.
• 37:11
  Speaker 3: It's a technology business.
• 37:12
  Speaker 3: So technology people use it as if they're all the same.
• 37:16
  Speaker 3: No, they're very, very different.
• 37:18
  Speaker 3: And then we have a tale of things outside of consumer, as in the industrial area, typically companies.
• 37:26
  Speaker 3: They've got an installed base of equipment that they sell to people, which gives them a tame market to sell service, spares and upgrades and things too.
• 37:35
  Speaker 3: So elevator and escalator companies you put an elevator in here.
• 37:38
  Speaker 3: From who's this elevator?
• 37:39
  Speaker 3: Fuji Tech, this one, fuji?
• 37:42
  Speaker 3: There's a 75% chance that you've signed a maintenance contract or a building signed it on your behalf.
• 37:46
  Speaker 3: By the way, they're spending your money.
• 37:48
  Speaker 3: It's even better to maintain it.
• 37:50
  Speaker 3: By the way, it's a legal requirement to maintain it.
• 37:52
  Speaker 3: It's not just I'll do it when it goes wrong, no, you have to have a nice certificate on it which says it's been maintained.
• 37:56
  Speaker 3: That's where the money is made in this, and there are lots of examples of people who supply things like that testing equipment, elevators, compressors, generators where once they've supplied the equipment, the money is really made from selling you spares, service upgrades, software, et cetera, et cetera like your car.
• 38:19
  Speaker 2: Your car making the car doesn't make any money, it's the servicing, it's everything that comes after it.
• 38:23
  Speaker 2: And when you started the business, did you or Funsmith, did you ever expect it to become what it is today?
• 38:31
  Speaker 3: Because obviously it's huge.
• 38:33
  Speaker 3: I'm not sure is the answer to that.
• 38:35
  Speaker 3: I realised it could become what it is today because people say you've got 37 billion pounds.
• 38:39
  Speaker 3: That sounds like quite a lot of money, doesn't it?
• 38:42
  Speaker 3: But you know in global terms it's minuscule.
• 38:44
  Speaker 3: It's because we all have this kind of bias of where we're from or where we live.
• 38:48
  Speaker 3: We're not in the top 10 funds in America.
• 38:50
  Speaker 3: Wow, it's a big world out there.
• 38:53
  Speaker 3: It's a big world.
• 38:53
  Speaker 3: I could take the entirety of our fund and invest the whole lot in Microsoft and not have a disclosable stake.
• 39:00
  Speaker 3: Wow.
• 39:01
  Speaker 2: Right.
• 39:01
  Speaker 3: How about that?
• 39:02
  Speaker 2: It's crazy isn't it?
• 39:03
  Speaker 3: It's a big old world out there, right?
• 39:04
  Speaker 3: So I knew it was capable of doing this.
• 39:06
  Speaker 3: But then to do it you need a number of things.
• 39:09
  Speaker 3: You need a good strategy, you need hard work and then you need the final ingredient, which you must never write off luck.
• 39:16
  Speaker 3: So there are other people with good ideas and good strategies who work hard and fail.
• 39:21
  Speaker 3: Actually, you just need the bounce of the ball to come your way sometimes as well.
• 39:25
  Speaker 2: Have you found it harder to invest the money as the fund has got bigger?
• 39:29
  Speaker 2: Because I know that's what Buffett says a lot, doesn't he?
• 39:31
  Speaker 2: You know, like the more money you have to deploy the more difficult it becomes.
• 39:34
  Speaker 3: We can't really buy any companies under about $10 billion of worth, because, if you think about it, our average position size, given that we've got that amount of money, is probably around about a billion.
• 39:42
  Speaker 3: Which means on a $10 billion company, we've got to own it quite a lot because selling that's going to be quite problematic, isn't it?
• 39:51
  Speaker 3: Because the day we start selling it, everybody will know.
• 39:54
  Speaker 3: Yes, and so you know there's a large swathe of the world and some of that swathe of the world that's cut off from us is good, but we can't own it.
• 40:03
  Speaker 3: Basically, you know, people have destruction tested using daily dealing open-ended funds, which is what we are.
• 40:08
  Speaker 3: Any liquid security, it can only end badly.
• 40:11
  Speaker 3: Yeah, we've seen that, haven't we?
• 40:12
  Speaker 3: Yeah?
• 40:12
  Speaker 2: it can only end badly.
• 40:13
  Speaker 2: Yeah, awesome.
• 40:14
  Speaker 2: Well, look on that note.
• 40:15
  Speaker 2: I know it's been.
• 40:16
  Speaker 2: You know you've got a busy day ahead of you as well, so we really appreciate you taking the time.
• 40:21
  Speaker 3: You've missed out my favourite movie quote, which was the Vinnie Jones one, the one off hammersmith bridge, the two shotguns he's given them a catalogue to show that they're holland and hollands or purdies are worth a fortune, worth hundreds of thousands of pounds, and leaves it there.
• 40:44
  Speaker 3: But he turns as he leaves the pub and he says it's been emotional, but emotional and on that note, we'll leave it there.
• 40:51
  Speaker 2: Thank you very much.