Everyone compartmentalizes who they look up to for certain things. For investing, many look to Warren Buffett. For basketball some think of Michael Jordan, others will consider Lebron James or Steph Curry (take your pick). Well, I’m here to discuss Guy Spier, who is an investor I learned about roughly a year ago and is someone I look up to for investing and life advice. Since that time, I’ve read some of his annual letters, watched the videos of his student Q&A visits, listened to a podcast he has been on and read his book, The Education of a Value Investor. Guy Spier is the manager of the aquamarine fund, which has had exceptional returns, significantly outpacing the market. He also has a very decorated background. He received his MBA from Harvard Business School and also received a First Class degree in Politics, Philosophy and Economics from Oxford University. While Mr. Spier has proved himself to be an exceptional investor, what I have learned from him and look up to him for is not his investment success, but his life framework. I wanted to share a few insights from what I learned.
Moral Compass and the Folly’s of an Elite Education
Out of Harvard, Guy Spier worked for DH Blair, a boutique investment bank and brokerage firm. Guy quickly realized that the place was full of greedy and self-interested people. They would dress up sub-par companies to be shining stars and sell them to the public. He was continuously torn at doing well at his job for his senior bankers and doing what was right. The job held him back from having the success and clear-mind that he wanted to have. DH Blair ended up leaving a tarnished mark on Guy’s resume after the entire firm went down with securities fraud and other charges. Guy therefore had a lot of difficulty in finding a new job, because of DH Blair. He thought it was so interesting that coming from such a good educational background, that he and others would be pulled into going to firms like DH Blair. Why hadn’t Harvard (insert other Ivy League Schools) thwarted them from going to these kinds of institutions? On his quest toward finding his calling, he ended up reading a biography of Warren Buffett and the Intelligent Investor, which set him on the track toward becoming a value investor. It changed his career, but even more-so his life. Having a good school on your resume is helpful, but not essential. Guy’s quotes below show the folly’s he has had due to coming from such a strong academic background, as well as how important it is to maintain your moral compass and creating the best environment for yourself.
“But I think it’s important to discuss just how easy it is for any of us to get caught up in things that might seem unthinkable—to get sucked into the wrong environment and make moral compromises that can tarnish us terribly. We like to think that we change our environment, but the truth is that it changes us. So we have to be extraordinarily careful to choose the right environment—to work with, and even socialize with, the right people. Ideally, we should stick close to people who are better than us so that we can become more like them.”
“But Harvard also accentuated my hubris … and my glossy academic credentials reinforced my feeling that the world owed me a living in return for my general awesomeness.”
“The very institutions that we have established to teach us to think independently often close our minds in potentially damaging ways.”
What Would Warren Buffett Do?
Guy Spier is not afraid to say his role model his Warren Buffett. In fact, he and his friend, Monish Pabrai (another great value investor), bid and donated $650,100 each to have lunch with Warren (the money went to charity). Guy says that this dinner changed his life. The key thing he learned that day was that he needed to live by an “inner scorecard,” instead of worrying about how others think of you. The way Warren illustrated this was by asking: “Would you prefer to be considered the best lover in the world and know privately that you’re the worst—or would you prefer to know privately that you’re the best lover in the world, but be considered the worst?” It’s clear that Warren lives by an inner scorecard and lives his life and invests according to his personality.
But before ever meeting Warren, Guy attributes some of his success to asking himself “What would Warren Buffett do?” He acknowledges that some would see this as idolism, but this is a technique he learned from none other than Tony Robins. He called it “visualizing your heroes”. In any given situation, you can visualize what your hero would be doing and act just like they would to direct yourself to become better at the given task you are focusing on. The thing is, Guy learned that everyone does this. It’s the reason that Winston Churchill had a picture of Napoleon in his office. The cool thing about visualization is that your hero can be alive or dead, fiction or non-fiction. Jack Ma, the CEO of Alibaba is often quoted that Forrest Gump is his role model.The movie calmed him and gave him a drive to succeed. Visualization is good, and is something we all could do a bit more of to continue to improve.
“I was driven in large part by what Warren Buffett calls “the outer scorecard”—that need for public approval and recognition, which can so easily lead us in the wrong direction. This is a dangerous weakness for an investor, since the crowd is governed by irrational fear and greed rather than by calm analysis. I would argue that this kind of privileged academic environment is largely designed to measure people by an external scorecard: winning other people’s approval was what really counted.”
Blocking out the noise
Guy Spier started his money management career in New York City, what he calls “the New York vortex”. He was having a lot of success, but the success was catching up to him. He was becoming well known among the investment community. The media was calling him for interviews, investors were calling to invest in his fund, marketers were calling him to market his fund and raise more capital. People were telling him he should be managing billions, not the measly $50 million he was currently managing. Guy was in the same class of Bill Ackman (former manager of Gotham asset management and current manager of Pershing Square Capital Management) at Harvard business school. Bill manages billions, so people were lumping Guy into his cohort and pushing him to be “more like Bill.” The thing was, this was again punishing Guy’s moral compass. To get away from the noise, Guy decided to move his family and set up shop in Zurich where he could live and invest in an environment that was conducive to his personality and temperament. He mentioned he even thought about moving to Omaha to “be like Buffett,” but instead he decided to make Zurich his own version of Omaha.
Moving out of the U.S. was just part of his move toward blocking things out. He reduced the amount of information flow he is getting. There is so much information out there that it can be mind-numbing. He does this by 1. only checking his portfolio at most once per week, otherwise only a few times per month. 2. Moving his Bloomberg terminal to the other side of his office and having it being a “standing desk” so he can not be there for long. 3. He doesn’t go to management until he has a full understanding and opinion on the company he is analyzing. 4. Surrounding himself with people that bring you a positive environment
By taking steps to block out the noise, Guy said that he was very pleased with how he handled the financial crisis. His fund was cut in half, but he was able to maintain a clear head throughout the experience.
Other things I learned and Quotes from Guy Spier
Investing discipline: Guy has a rule that when he buys a stock, he immediately assumes that it will drop by 50% in value. He therefore has his gut ready for this type of reaction. If this indeed does happen, his rule is to NOT sell for at least two years. This rule is to maintain discipline in times of uncertainty.
Reading what you are skeptical of: Guy has gone to conferences and read several self-help, motivational and personal finance books. Being able to be open to new things is essential.
“Given my mental energy is a scarce resource, I want to direct it in more constructive ways.”
“A goal that seems impossible in one instant can become entirely possible in the next if you are only willing to devote every ounce of your mind, body and soul to reach it.”
“The paradox is that, as I became more authentic and discarded my agenda, people became more interested in investing in the fund. This was an unintended consequence of becoming less selfish and more honest about who I am.”
“People will always stop you doing the right thing if it’s unconventional.”
“Warren Buffett, quoting Henry Ford, often talks about the importance of keeping all your eggs in one basket, then watching that basket very carefully. One thing that appalled me and that I’d seen too many times was the Wall Street practice of having many eggs in many baskets. Even the most reputable mutual fund companies have a practice of selling multiple funds. The ones that do well are those that then get the marketing dollars and raise more money from investors. The ones that do poorly are either shut down or merged into the better-performing funds. In the process, the failures are buried as if they’d never existed while”