What motivates me the most in business (and in other areas of life) is the continuous pursuit of self-improvement. I was once a runner (still am actually, just much older and slower). Competitive long distance running has a lot in common with investing. A top-tier competitive long-distance runner typically runs around 80-100 miles a week, meaning each day requires up to 15 miles of running. But at the end of any given day during this training cycle, there is no tangible evidence of improvement. Even after a great workout, your fitness level isn’t much different than the day before. Of course, over the course of many months, a big step-function gain can be identified, but the “feedback loop” between the daily work and the result of that work is very long. The same type of feedback loop exists in investing. It requires an enormous amount of focused effort on a daily basis, but the results of this effort sometimes take years to show up. So to achieve fulfillment in this type of endeavor, you need to enjoy the daily toil and be okay with the lengthy orbit between the input of work and the output of results.
Q3 2020 hedge fund letters, conferences and more
I’m writing these thoughts after coming across a note I sent out to clients a while back after reading a book called Bird by Bird. I thought I’d resend this note below for our new investors, with some additional comments on the value of writing. People who know me know that I love to write. Writing fits well with my appreciation for long feedback loops, but more importantly, writing has always been a crucial part of my investment process and I believe it’s been a big contributor to our results over time. For me, I’ve found it to be the most effective way to work through challenging investment problems I’m working on. Writing is a forcing mechanism. It will identify areas of a subject you aren’t clear on, and it makes you go back and sharpen your thinking. It’s hard work. It doesn’t let you off the hook. But I’ve found writing to be the most effective key to unlocking the door between superficial understanding and real clarity.
I don’t think you have to be a great writer to be a great investor, but I do think the process of writing at any given level is valuable, and since writing is such an integral part of my own investment process, it’s a skill that I try to continuously improve.
Bird by Bird is a book about getting better as a writer. About 85% of the book was designed to help fiction writers, and this had no real utility for me personally, but the other 15% was very useful. But the whole book was well-written and was actually funny and entertaining.
I found a couple passages that pertain to the investment management business (and fit with the long feedback loop concept I described above):
Do You Want to Write, or Do You Want to Get Published?
The author (Anne Lamott) teaches writing classes, and she often laments how her students enter her class with the expectation that they will learn how to find an agent and become a published author. The teacher tries to set better expectations and tries to get the students to focus more on the writing itself. Focus on becoming a better writer first, then worry about getting published.
But the students aren’t really interested:
My students stare at me for a moment. “How do I find an agent?” they ask.
I sigh. “When you are ready, there are books that list agents. You can select a few names and write to them and ask if they would like to take a look at your work. Mostly they will not want to. But if you are really good, and very persistent, someone will eventually read your material and take you on…. However, in the meantime, we are going to concentrate on writing itself, on how to become a better writer, because, for one thing, becoming a better writer is going to help you become a better reader, and that is the real payoff.“
But my students don’t believe me. They want agents, and to be published. And they also want refunds.
It’s the same in investing. Some investment managers just want to just skip to getting “published”. This might mean launching with seed capital from a major endowment, or growing a large base of assets under management with a “who’s who” of limited partners. It might mean being on CNBC or in the front pages of the Wall Street Journal as a sage of the hedge fund world.
Others just want to “write”. It’s about the process. They are passionate about the daily toil, the work itself. It’s about the game. It’s about getting better every day, and working to always be improving your craft.
I have noticed a similar pattern as I study businesses that I consider for investment. There are certain companies out there that have a mission statement that they actually believe. Their employees internalize that mission, and the firm’s collective effort is motivated by more than just money; more than just “getting published”.
When I listen to employees from Shopify speak about their workplace, it’s an entirely different tone from the conversations I have with people from most companies. Facebook engineers have a genuine desire to solve big problems that their platform has been challenged with. The management team at NVR places a real value (not just lip service) on the relationships it has not just with employees, but with its land development partners and suppliers. This podcast with an early NVR employee illustrates this. These are intangible qualities that also have long feedback loops. These companies are filled with people who care more about “writing” than “getting published”, and it’s a big part of what makes these companies special, and a big part of why they’ve done so well over time. I believe it pays to seek out these types of companies when looking for new investments, especially given the fact that so much more of a company’s value today is derived from its intangible assets (its human capital) as opposed to its physical assets.
Finding people who value “writing” over “getting published” is rare and valuable. But the vast majority of corporate America doesn’t work this way. And that’s because humans don’t typically work this way:
“The problem comes up over and over again is that these people want to be published. They kind of want to write, but they really want to be published. You’ll never get to where you want to be that way, I tell them. There is a door we all want to walk through, and writing can help you find it and open it.”
Most people want shortcuts. They don’t want to write, they want to get published. There is nothing inherently wrong about either motivation. It’s certainly possible to achieve success (especially in the short-term) by focusing on getting published. But the highest achievers in any field over the long run will come from those who are first focused on “writing” and only later will they think about “getting published”.
Practice Your Scales Every Day
“Almost every single thing you hope publication will do for you is a fantasy, a hologram — it’s the eagle on your credit card that only seems to soar. What’s real is that if you do your scales every day, if you slowly try harder and harder pieces, if you listen to great musicians play music you love, you’ll get better.”
The goal should be self-improvement. Work on improving your craft. A focus on the process and a love for the game itself is what ultimately leads to the greatest long-term results.
So focus on writing, not publication. If you’re an investment manager, this means focusing on becoming a better investor. Expand your circle of competence and try to more deeply understand the companies you follow. Track your reading and write down what you learned today.
Focus on producing the best results you can for the investors who have already trusted you with their hard-earned capital. Getting published might be a reward you look forward to, and maybe it will come in due course, but the greatest satisfaction comes from practicing the scales, from writing, and from a mission-driven focus on trying to get a little bit better every day.
John Huber is the founder of Saber Capital Management, LLC. Saber is the general partner and manager of an investment fund modeled after the original Buffett partnerships. Saber’s strategy is to make very carefully selected investments in undervalued stocks of great businesses.
John can be reached at [email protected].
