The Numbers, the People, the History
After the TEDx talk I gave two years ago in California, someone from the audience walked up to me and asked me what got me into investing. I always really enjoy those impromptu questions. My speech was at a university, and it was no surprise that many attendees were students or recent graduates looking for guidance on their own career paths. I quickly said that I got into investing because of my passion for numbers, history, and people, and that’s what investing is really all about.
The numbers seem to be the most obvious piece of the puzzle. It’s the numbers that help grasp how well a business is doing, how well your investments are performing, and how risky your investment choices happen to be. With today’s technology, it’s easier than ever to slice, dice data, run all kinds of analytics, and quickly see what the numbers mean. The numbers can tell a story of success or failure and potential trouble or opportunities.
Over ten years ago, when I was asked to lead a rollout of new software at one of my previous employers, I remember when one of the more experienced investors there walked over to my humble cubicle. He had a serious question. He wanted to know what I can do with my computer and this new software that he couldn’t do with a legal pad and a pencil when he was my age. I knew right away; it was a friendly challenge. I said – probably not much more, but we can do it in a fraction of the time. He nodded, smiled, and walked away. Over the years, I further grew to appreciate the power of good software and a decent computer that can make investors’ work with numbers a lot easier and faster. I know that this saved time can be used well elsewhere: on a phone call with a client or with a history book in your hand.
It’s not just the numbers, though, that are useful to investors. It is essential to know the people: both the people running the businesses we own: the managements and our clients whose money we care for. The numbers tell you a story, and the qualitative side of our research reconciles the numbers with the narrative the management shares. Ideally, they align, but it’s a red flag worth exploring further if there is a disconnect between them. I sometimes share a story of a meeting I had with a particular CEO. I knew the numbers, I heard the story, but something didn’t add up. I came back, and I shared it with my colleagues. We dropped the idea.
Interestingly enough, I was even asked to comment about this company for a significant investment magazine at some point. The business faced some accounting trouble soon after, they had to restate several years of financials, and finally, they went bankrupt only recently. Even a major legendary investor with over half a century of experience found himself among disgruntled shareholders who overstayed their welcome, losing it all. Numbers tell you a lot, but not everything. It helps to know the people behind the numbers.
Our business is really all about people, not just the managements that run the companies we own, but most of all our clients. They are at the heart of what we do. Our ability to understand and know what they need and when they need it is key to our success as investment advisors. Given our focus on individuals, families, and entrepreneurs we have the opportunity to build lasting relationships that endure the ups and downs of the market and grow over many generations. That’s the aspect that I enjoy the most. I like to see how what we do helps our clients meet their life goals and aspirations, while keeping their worries at bay. It’s much more than buying the right stock that goes up; it’s what each investment decision and the big picture investment strategy really mean for our clients’ financial well-being.
Lastly, the third piece of the puzzle is history, crucial yet the most overlooked resource in investing. It gives us a proper perspective. The philosopher George Santayana was right when he said: “Those who cannot remember the past are condemned to repeat it.” I believe that I have learned more about investing by reading history books than accounting manuals. I feel that I’m always surrounded by history. I have had countless conversations with my partner and mentor François Sicart: from our first long chat in Paris almost sixteen years ago to a recent discussion about the 1970s and 1980s. I’m always curious to hear what we can learn from the past. You can find Mr. Sicart’s current thoughts in the article: “Hold the champagne,” highlighting the most important market events of the last 50 years and pointing out some interesting parallels between then and now.
What’s more, I have the great pleasure of talking regularly with my dear friend and mentor James (Jay) Hughes (who spent a remarkable career working with prominent families around the world in his role of a true homme de confiance). Every conversation with Mr. Hughes is a trip back in time and around the world. I especially enjoyed our discussions of the Revolutionary War and the Civil War, which brought to life the events that happened not far from where I spent a good part of the year — Georgia and Pennsylvania’s mountains.
If that wasn’t enough, there is always a history book in my Kindle reading roster at all times. Most recently, I’ve been slowly enjoying Ron Chernow 800-page Alexander Hamilton’s biography – a fascinating tale of an immigrant who made his way to New York City and left a lasting mark on his new homeland. I was first introduced to Hamilton and the Federalist Papers in my early twenties by a visiting Georgetown University professor. More recently, though, it was the famous Broadway musical that inspired me to rediscover his story and times.
It might have been my comfort with numbers and curiosity about history that got me into investing. Still, it is definitely the people that kept me inspired, intrigued, and engaged all those years. I always enjoy learning the founders’ stories, CEOs who turn our investments into a long-term success story. I have also dedicated many articles and a large part of my last book, “Money, Life, Family” to families and their stories tying investing back to its primary goal: keeping and growing fortunes over generations.
Every day, I’m reminded that our clients, their families, and their livelihood are at the very center of what we do. Sometimes we are responsible for a small portion of what they possess, and sometimes it’s everything they own. Either way, we always assume that the capital we take care of is money they can’t afford to lose. This mindset helps keep the course and make deliberate, calm decisions relying on our knowledge of numbers, people, and history.
This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.