Learning: is it really worth it?

[Lehrskov]

Hi everyone

 

Lately I've been thinking about how to become a better investor. Whether it's teachable and replicable. And so on. 

 

So I hope you'll try this thought experiment to kick things off:

 

- An investor you have solid respect for (say: Seth Klarman or Joel Greenblatt or whoever) offers to teach you one on one.

- He will charge you $5000 for a week, but he is busy so you'll have to come up with the curriculum yourself.

 

Question 1: Are you a buyer?

Question 2: If yes, what would you ask him to teach?

 

Thanks for playing  :)

/Ulrik

 

P.S.: I added the money element to get you to not just mindlessly say yes just because you want to hang out with a superstar. Approach it rationally: would a weeks worth of teaching really be WORTH that money to you?

P.P.S: I'll answer myself a little later, but I don't want to 'prime' the discussion with my own thinking up front.

 

[thelads]

1) Yes - absolutely

2) I would do about a week or two of work before sitting down with him. Would have 5-6 cases I want to look at with him, but first would ask him to tell me his biography. Take me through his 5 best and worst investments. What his process and focus was at the beginning of his career, the middle and now. How he would change the approach now if he were starting out. What area's offer the most promise. What mistakes he would avoid, what flaws he has seen that should be eliminated. I have so many questions....

[oddballstocks]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

[Jurgis]

1) No.

8)

 

 

But if I was in a different situation at a different point in my life, I would take this offer with pretty much the curriculum of me picking an investment and discussing it with them - how they would value it, what kind of info they'd gather, what questions would they ask management (if any), etc. - in essence learn process. Also letting them shred the investment - and vice versa - them picking an investment and me shredding it and getting a feedback. In longer term, assuming they agree to meet week-on-couple-weeks-off, discuss buy/sell decisions perhaps and ongoing portfolio management.

 

As aside, I would probably want this in my professional area. I also feel it's as unrealistic there as it is in investment area.  ::)

[ScottHall]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

 

This is such a great point and something SO MANY minor league hedge fund managers simply don't understand! Which is quite amusing, when you consider that they analyze opportunity cost for a living.

[John Hjorth]

Off topic:

 

Welcome Ulrik! : - )

 

- Now back to topic.

[Jurgis]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

 

This is such a great point and something SO MANY minor league hedge fund managers simply don't understand! Which is quite amusing, when you consider that they analyze opportunity cost for a living.

 

It's not that people don't understand it. It's that people don't want to do it. It's likely a lost opportunity, but you can't force people to do it. To pick on oddball ;), he doesn't do it either... where is his $10B fund?  8)  ;D

[ScottHall]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

 

This is such a great point and something SO MANY minor league hedge fund managers simply don't understand! Which is quite amusing, when you consider that they analyze opportunity cost for a living.

 

It's not that people don't understand it. It's that people don't want to do it. It's likely a lost opportunity, but you can't force people to do it. To pick on oddball ;), he doesn't do it either... where is his $10B fund?  8)  ;D

 

He is running a software co. and has more knowledge about marketing than most on the board. From what little understanding I have of his software business, it seems like he utilizes his marketing skills regularly while trying to sell his product.

 

A little different than a MINOR LEAGUER sitting in a dusty library hoping that their returns will bring the big bucks in.

[Ballinvarosig Investors]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

This sounds like a very cynical view, but unfortunately it's pretty accurate. One of the greatest investors ever, John Templeton, was only able to increase his AUM over 20 years from $7m to $13m despite out-performing the market by 3% annually. It wasn't until he got a salesman on-board that AUM really started to explode.

[thelads]

it's a very good point on marketing. A disturbing one. In a couple of places I have worked at, the main guy was spending upwards of 50% of all of his time on marketing. It makes a big difference. A competing fund with similar results, but that only got to 1/7th the scale, asked me why it was. The answer was just that the main guy was better at marketing. He came across as more impressive, though knowing them both he was the worse of the two risk takers. So it matters.

 

I'm not sure how much of this relates to TV time though. I refer to time spent pitching directly at investors. So the larger fund for example also had a professional IR staff, whose head was focused on new biz and very good at it. I may be wrong, but I don't think institutional investors are hugely swayed by stuff they see on TV. That strikes me as more retail and some high net worth. But marketing certainly matters.

 

However, network matters too. If you look at Tilden Park, for example, that's a former GS mortgage trader, and an excellent one at that. He is north of $3bn and I think at peak was over $5bn. He didn't do a ton of marketing. This came from GS alumnus and some very wealthy people he knew socially for a few years seeding him. Then it was word of mouth. So it can vary a lot. I don't think he spends the majority of his time marketing now either.

 

Nonetheless, if you were offering me time with Klarman, Tepper, Mitch Julis, etc for 5k, and I could get a few hours, with unfettered ability to ask questions, analyse their former decisions, have them critique mine, and tell me where they see things going and how they feel things have changed, I would do it.

[oddballstocks]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

 

This is such a great point and something SO MANY minor league hedge fund managers simply don't understand! Which is quite amusing, when you consider that they analyze opportunity cost for a living.

 

It's not that people don't understand it. It's that people don't want to do it. It's likely a lost opportunity, but you can't force people to do it. To pick on oddball ;), he doesn't do it either... where is his $10B fund?  8)  ;D

 

Explored this route in 2013, spoke to a few PM's about what it takes to run a fund, what makes a strategy successful.  I was given the same advice I'm giving, strategy doesn't matter, but ability to raise funds and sell does.  I was told my strategy doesn't scale and won't sell, but no problem, adopt a new one that's scalable and I'd be golden.

 

To Scott's point understanding marketing and sales has taken me much further with my software business and my newsletter than I ever thought.  I have a book coming out in a few months.  The groundwork has been laid for that as well.  There's an email list that's received updates, I've posted about it, I've tweeted about it.  And as it gets closer a more dedicated post stream will appear.  This is simply marketing and sales for a new product.

 

Sales is 100% the lifeblood of ANY business.  You either understand sales and succeed, or you fail.  Sales is usually a one on one process, you are selling to a single customer at a time.  Marketing is selling to a lot of people at once.  Same function, different implementation.  If marketing isn't selling then marketing isn't working.

 

There are a few products, maybe a dozen or two that sell themselves.  They solve such a fundamental problem that everyone wants them.  For everything else you need marketing and sales.

[Poor Charlie]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

 

This is an interesting discussion topic.

 

 

There are investors I would literally pass up a dinner date with Heidi Klum to sit down with.  These people, however, would not be members of the marketing machine Oddball describes.

 

The people I admire are capitalists—people who’ve built up fortunes using their own balance sheet.  Guys like Jay Pritzker, Ian Cumming, Herb Allen Jr., Herb Siegel, Charles Koch, Sid Bass, George Ohrstrom Sr., Thomas Mellon Evans, George Baker, Byron Smith, Rales brothers, etc.  Because they had no need for outside capital, they never marketed.  Most of them, in fact, went out of their way to avoid publicity.  They built their fortunes by being very, very good capitalists (and maybe a little nepotism, too).

 

I tend to discount the New York 'value' money manager crowd.  Some of them are talented, but most of them are more marketing guru than investment guru. 

 

To give you an example of the marketing involved in professional money management, consider this.  A while ago we were selling a small business.  Most of the prospective buyers were private equity types, and they would all talk about their amazing records—20%- and 30%-range.  They were all impressive characters and had a wonderful pitch.  Yet when I looked up their audited numbers, very few of their funds had even managed to double.  These were 10-year funds that leveraged up a lot, and they couldn't even double their investors' money (a 7% compounded return)!  These people aren't skillful capitalists—they're salesman.

[Jurgis]

Oddball, I agree with you.  :)

 

What you say still does not contradict the fact that there are people who don't want to do marketing/sales. And I've already said that they might suffer for it. But possibly they suffer while knowing why they suffer.  ;)

 

 

 

[LC]

I lean towards Poor Charlie's comment. I won't be managing anyone else's money. I'd want to sit down with someone who is a damn good stock picker/businessman, pick their brain for a few hours. Analysis by contrast: what do they do that I don't? how does their thought process differ? etc.

[Ballinvarosig Investors]

Getting back to the original question, would a "superstar" investor be beneficial to investors? Honestly, I am not so sure. I will give you my own example. I started off in the market over 10 years ago now. When I look back at the first stocks I bought, I wince at just how naive I was. I bought Bank of Ireland based on a 20+ year record of growing earnings, excellent returns on capital/assets, high quality (relative to peers), and great dividends. Within three years, I lost most of the money I had in that stock. I owned GE, another company where investors gushed about how great management was, had Buffett has an admirer and a long outstanding track record. That also went into the pond and even today has still not recovered. I owned Marstons, a UK based hospitality business that had shown really positive earnings growth. Even after dividends it has delivered an awful capital return in 10 years. The funny thing in all this time was that I had a mentor who I would have spoken to about these trades. I asked him much later, why didn't you warn me off these value traps? He laughed and told me I should be grateful as he had taken similar lumps before for far greater sums. In hindsight, he was completely right, for me at least, no amount of teaching would replace the experience I learned from picking those losing stocks.

 

To be honest, I think there is far too much focus on "gurus" and "superstars". In the last few years especially there has been an explosion of books, quotes, podcasts, articles in the value investing universe. Honestly, I think much of it is regurgitated garbage. I say this as someone who used to buy about 20 investing books a year as well. As if the monetary cost of my folly wasn't bad enough, the time I lost reading these books was even more wasteful. I'd say 75% of the books I read delivered no value whatsoever, 15% maybe had a few useful crumbs, 10% at best would have been worth reading again. A much better investment of my time would have been to just read more annual reports.

 

In my opinion, if you want to be a better investor, stop reading all the books and listening to all the podcasts. If you're accounting isn't strong, then that's the first thing you need to look at it. If you have ok accounting, then just get stuck into reading annual reports. Once you're comfortable, you can start picking a few companies out. Either keep a virtual portfolio, or use SMALL sums. Keep a diary/spreadsheet of everything you buy/sell. Say why you invested, say what it's worth when you invest, say at what price you will get out. Always do post-mortems on your selling. This is the best way to get familiar with companies and industries, it's the best way to understand risks/opportunities of the business cycle. You will make lots of mistake to start with, but as time goes by, you will develop your own style of investing that works for you. Charlie Munger is right when he says to excel in investing, you need to be a learning machine. The thing a lot of people seem to miss is that you need to be learning the right things, ie the companies themselves.

[bonkers]

Poor Charlie:

 

Most of the prospective buyers were private equity types, and they would all talk about their amazing records—20%- and 30%-range...Yet when I looked up their audited numbers, very few of their funds had even managed to double.  These were 10-year funds that leveraged up a lot, and they couldn't even double their investors' money (a 7% compounded return)! 

 

So essentially they all lied about their track record? Did you ever follow up on that and ask them about the reason for the discrepancy?

 

- B

[oddballstocks]

1) Sure

2) Teach me marketing - All of these guys became wealthy from raising money and being asset managers.  They aren't wealthy from working a 9-5 and investing their savings.  They are all out there talking their book, raising money and earning fees.  Performance is secondary, they make fees in all markets.

 

The 'gurus' are gurus because they market themselves like crazy, not because they're better.  There are unknown investors with great track records who are wondering when they'll be discovered.  The gurus have let the world know about themselves.  This is why they're gurus, they understand the power of a brand and marketing.

 

This is an interesting discussion topic.

 

 

There are investors I would literally pass up a dinner date with Heidi Klum to sit down with.  These people, however, would not be members of the marketing machine Oddball describes.

 

The people I admire are capitalists—people who’ve built up fortunes using their own balance sheet.  Guys like Jay Pritzker, Ian Cumming, Herb Allen Jr., Herb Siegel, Charles Koch, Sid Bass, George Ohrstrom Sr., Thomas Mellon Evans, George Baker, Byron Smith, Rales brothers, etc.  Because they had no need for outside capital, they never marketed.  Most of them, in fact, went out of their way to avoid publicity.  They built their fortunes by being very, very good capitalists (and maybe a little nepotism, too).

 

I tend to discount the New York 'value' money manager crowd.  Some of them are talented, but most of them are more marketing guru than investment guru. 

 

To give you an example of the marketing involved in professional money management, consider this.  A while ago we were selling a small business.  Most of the prospective buyers were private equity types, and they would all talk about their amazing records—20%- and 30%-range.  They were all impressive characters and had a wonderful pitch.  Yet when I looked up their audited numbers, very few of their funds had even managed to double.  These were 10-year funds that leveraged up a lot, and they couldn't even double their investors' money (a 7% compounded return)!  These people aren't skillful capitalists—they're salesman.

 

I agree on your names, and while they didn't build themselves up sales/marketing was absolutely vital to the companies they ran.

 

In my experience successful people fall into two general buckets.  They either downplay their success as something that wasn't a big deal and gloss over important points.  Or they speak of themselves in god-like terms as if the world revolved around themselves.  I've found it very hard from these two archetypes.

 

I think the personality guru thing is a non-scalable business that carries a lot of risk.  If you hit a bad market patch you're in trouble, the business tanks and your reputation tanks.

 

On a larger point I think it's ironic that the most critical function of any business (sales) isn't understood and completely disregarded by supposed outside business experts (investors, analysts).  Investors/analysts want to move the pile of chips around, but successful business people realize it's sales and healthy margins that ultimately matter, now how the chips are placed once the sale is made.  Capital allocation can have a significant impact on a business, but if the business can't sell then all of the capital allocation in the world won't save the business.

 

I think most investors would do themselves an enormous favor and buy a few books on sales and marketing.  If this is the most important thing to the companies they're investing it then they should understand it themselves.

[thepupil]

Poor Charlie:

 

Most of the prospective buyers were private equity types, and they would all talk about their amazing records—20%- and 30%-range...Yet when I looked up their audited numbers, very few of their funds had even managed to double.  These were 10-year funds that leveraged up a lot, and they couldn't even double their investors' money (a 7% compounded return)! 

 

So essentially they all lied about their track record? Did you ever follow up on that and ask them about the reason for the discrepancy?

 

- B

 

It's probably that they had high IRR's and low multiples, though it would be tough to have 20-30% IRR's without a 2.0x multiple unless it was a very short duration fund / strategy.

 

You could have a gross IRR in the 20's and a net multiple below 2.0x, so that could be the discrepancy. Private equity guys speaking in gross IRR.

[rukawa]

1) Sure

 

I feel like your answer to 1) was just to strongly exaggerate the point. I don't think you need to spend anywhere close to $5000 to get this information. With a time, networking, research and calling I'm pretty sure you could get this info for free.

[Poor Charlie]

Poor Charlie:

 

Most of the prospective buyers were private equity types, and they would all talk about their amazing records—20%- and 30%-range...Yet when I looked up their audited numbers, very few of their funds had even managed to double.  These were 10-year funds that leveraged up a lot, and they couldn't even double their investors' money (a 7% compounded return)! 

 

So essentially they all lied about their track record? Did you ever follow up on that and ask them about the reason for the discrepancy?

 

- B

 

They were more half-truths.  What I found out was that most private equity IRRs are manufactured (for lack of a better word).

 

For instance: LPs would commit to a fund for 10 years, but they wouldn’t get a capital call until the buyouts were done (although they would still be charged a 1.5% management fee).  LPs would wire their money when a deal was signed; the sponsor would take control of the company, improve efficiency (a la 3G) and dress up the numbers; the company would be marketed soon after at a few turns higher (e.g., bought for 8x- and sold for 10x-EBITDA); and then the company would be sold and money wired back to investors or paid out in merger stock.  The IRRs would be measured over the life of the buyout, which was like 6 months to 2 years, not the life of the fund.  Put another way, this would be like someone giving me 10-year money and me doing 4 or 5 arb trades where I earned high IRRs over a few months but low overall cash-on-cash returns over the 10 years. 

 

My understanding is that it's a fairly common practice.

 

 

[thepupil]

Indeed

 

https://www.oaktreecapital.com/docs/default-source/memos/2006-07-12-you-cant-eat-irr.pdf

[Poor Charlie]

I agree on your names, and while they didn't build themselves up sales/marketing was absolutely vital to the companies they ran.

 

In my experience successful people fall into two general buckets.  They either downplay their success as something that wasn't a big deal and gloss over important points.  Or they speak of themselves in god-like terms as if the world revolved around themselves.  I've found it very hard from these two archetypes.

 

I think the personality guru thing is a non-scalable business that carries a lot of risk.  If you hit a bad market patch you're in trouble, the business tanks and your reputation tanks.

 

On a larger point I think it's ironic that the most critical function of any business (sales) isn't understood and completely disregarded by supposed outside business experts (investors, analysts).  Investors/analysts want to move the pile of chips around, but successful business people realize it's sales and healthy margins that ultimately matter, now how the chips are placed once the sale is made.  Capital allocation can have a significant impact on a business, but if the business can't sell then all of the capital allocation in the world won't save the business.

 

I think most investors would do themselves an enormous favor and buy a few books on sales and marketing.  If this is the most important thing to the companies they're investing it then they should understand it themselves.

 

I have a different point of view on this stuff than most: I think running money for other people is different from running an operating business.  It’s a fiduciary responsibility—like being a trustee in a reorganization or in a friend’s estate.  A person earns the right to be a fiduciary (i.e., a trustee of a friend’s estate), and you market for the position in the sense that you have a long track of being a responsible, ethical and capable person.  I don’t think it’s like selling Clorox bleach or something. 

 

This is not to diminish the role of marketing at an operating business—I agree with you 100% that it’s an essential function.

 

[Jurgis]

I think most investors would do themselves an enormous favor and buy a few books on sales and marketing.  If this is the most important thing to the companies they're investing it then they should understand it themselves.

 

I think we are risking to derail this thread but I'll post a bit more and if we get into long discussion perhaps we should split thread.

 

OK, I agree with this claim (somewhat  8) ).

 

E.g. I agree that Google was not a slam dunk because they had best search engine - although they did - but because someone was genius enough to create AdWords and integrate that into the whole system.

 

But I have somewhat of an issue with your claim above. IMO sales and marketing - and their effectiveness - and you most likely mean more than just superficial sales/marketing but also brand promotion/support/etc. - seems to be very hard to evaluate from outside the company. E.g. let's go with Google - or Coke - or Amex - or whatever company/brand you prefer to choose. Assume I learn a lot about sales/marketing. How will that help me to decide if KO or AXP is a buy or not? Do you really see specific issues with these companies in terms of sales/marketing that yell "buy" or "avoid" or "sell"? I guess it's easy to bash Sears or JCP Ackman/Ron Johnson restructuring as not paying enough attention to sales/marketing. But these are obvious targets (perhaps). Can you really get deeper insight for not so obvious companies? Maybe you can give some examples...

 

Take care

[bonkers]

Concerning managing money as a business, I've read/heard several PMs say that:

- Basically no-one (outside people who know you) will invest with a starting manager unless you have a track record

- What track record is long enough? Buffett used to say at minimum 3 yrs (even if it's not predictive), Li Lu says closer to 15 yrs (but I guess few people will wait that long)

 

In my own experience, most clients seem to be happy with 4-5 yr track if the outperformance is decent. > 90 % of clients don't care about process/methodology at all (as long as it's somehow credible), they just want to invest with a manager that has (recently) outperformed, the more the better. Having a great process does not help if you have only modest outperformance (esp. if there's any kind of volatility), clients just can't see the differences.

 

However, even without an established brand, clientele and marketing budget, an extraordinary sales person can sometimes sell managers/strategies with shorter and lackluster track records, but mainly to the kind of clients you probably don't want to have. And these kind of sales people are hard to find.

 

Some people also talk about pitching individual ideas to clients. The little I have tried this the clients have not understood the ideas at all.

 

But interestingly, once you have a track record, opinions seem to differ greatly:

 

Here some say that you need to sell all the time, even if you're Klarman or Greenblatt. But some others say that if you perform, clients will find you by word-of-mouth, and eventually you will attract too much money. Pabrai and even Buffett have said this. So what's the truth?

[oddballstocks]

The conversation is off the rails, let's keep going, this is fascinating.

 

rukawa - I agree and disagree.  In terms of actual learning material, yes, I feel you could network, learn etc and never need to spend $5k.  BUT... spending $5k to say that "xyz guru taught you" is invaluable.  This is why Pabrai and Spier spend the $1m on that lunch.  It wasn't because they were trying to learn to be better investors, Pabrai had already written a book and had a good record.  It was the association and opening the door that was worth the cost.

 

Jurgis - I had a light bulb moment about this probably 6-8mo ago.  I had always wondered how people were finding these 5x-10x-50x growth stocks that had zero revenue.  There are a few people that can do this.  As I mulled it over I realized that the people doing it had sales backgrounds, and they were effectively sizing up the selling strategy and methods.  This is why you meet with management.  Not to hear how they allocate capital when there isn't revenue, it's to talk in a private room about how they sell.  My feeling on this is you'd find a lot of bad companies but eventually find one with a solid process that you know will work with time and effort.  At that point it's simply a waiting game.

 

Thinking this way changed how I looked at small companies.  I love asset bargains, and love barely profitable companies.  One rule I'd always held myself to was a company needed to be cash flow positive, unless they were in the process of unlocking value.  I was stumbling upon this idea but didn't realize it.  Once this crystalized I started to look at falling sales differently.  If a company's sales were falling then either their process stopped working, or the value proposition for the product has changed.  Correcting that is extremely difficult, and unless they've shifted products and worked with something like that in the past it will be hard to recover.

 

At the same time a company who's sales fall off due to structural demand (recession) is in much better shape.  An example of this would be an oil services company.  The industry is hurting so people aren't buying as many rigs, when things recover sales will recover too.  This is a better purchase as long as the company can stay alive until the recovery.

 

Bonkers - If you live by performance you die by performance.  If  your clients are only with you because of performance what happens when you hit an underperforming stretch of time?  While you're outperforming try to develop a unique selling proposition or a niche and pitch that to them.  You're right that investors don't invest for the actual ideas, but it's because you're probably likeable and your performance is good.

 

You're framing the story wrong.  You don't need extraordinary sales to pitch a bad record, you skip the record.  You sell why you're unique and why they need you regardless of track record.

 

Speaking from experience, I have met investors with excellent track records, money doesn't come flowing in the door.  You always need to sell, you always need to market.  Selling and marketing are simply letting the world know about your product.  A great first step is sharing annual letters. Second step is asking your current clients if they know people who might be interested.  Then call those people.  If you do that you just sold, and selling to existing customers and getting referrals from existing customers is the most powerful method of selling.  It's also the easiest.  You did the hard work of getting it started.  Now just reach into your client network and grow it.

 

Poor Charlie - Yes running money is regulated, but at the end of the day its still a business.  I have a younger brother who was a professional bass player for a while.  He claimed that "music is different" that "sales doesn't work" and that I didn't understand music.  Long story short, one person in the band's father understood it wasn't, and that person hired a manager for the band.  The manager get them into everything by simple selling.  They toured the US, Europe, played on Letterman etc.  So fairly successful.  My brother has since moved onto being a computer programmer (crazy story itself, guy is insanely smart, talked his way into the job...oh he'd done sales in the past..wonder if there's a connection?..) but he told me last year "Nate, you were right, music is just a business like everything else."

 

You have a fiduciary duty to clients.  I have clients who've signed contracts where the penalties would probably make a fiduciary blush.  The difference is investors expect to lose money or possibly expect it.  Clients don't expect failure, but if failure does happen there are contractual consequences, and they can be significant.

 

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Look, Buffett gets this.  The guy is a sales machine.  He could have retired and stayed in the dark spending his money on model trains.  Instead he has been in the news constantly since the 1960s and 1970s.  He let myths grow about him.  Now you might ask "why?"  Berkshire's investment performance doesn't hinge on how investors perceive him, he's a public company.  But he's marketing FOR his company.  He's working to attract deals to himself, and it works.  He worked himself to a place where investors call him with opportunities.  When you have a lot of money this is where you want to be.  His visibility also helps his own companies.  People associate Geico with Buffett, and Berkshire RE with him.  He is successful and when you think of these subsidiary companies you associate them with someone successful.  It's no coincidence.  Notice that he talks up BRK's investments and cash, but never the $1b in personal wealth or investments he has.  He doesn't need to bring visibility to those, there's no purpose.

 

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I'm not an expert in this, but a quick jaunt down sales lane.  Sales is a process of qualifying prospects, discovering their pain point and showing you have a solution for that.  It isn't selling ice to Eskimos.

 

In sales you want to find out as quick as possible that a person isn't a qualified prospect.  This scares a lot of people.  But you want to find out quickly that a product isn't for someone.  That way you don't waste your time.  This is the same as how I conduct investment research, disqualify an investment quickly and move on.

 

Once someone is qualified, that means they have the problem even if they don't realize it, and they have a budget to pay for a solution you talk to them about the problem.  Maybe they recognize they have a problem but it isn't a big deal at this time.  Move on.  Or maybe they have dealt with this problem but never spent any time trying to solve it.  You explain your solution, how it will solve it, the money it will make/save etc.  Then you ask if they want to buy.  That's it.  Now granted sometimes this process might take 6mo-18mo, but that's the high level. 

 

If someone is looking to buy something you're selling:

1) Return phone calls and emails

2) Continue to follow-up with them.  What is important to you isn't important to them, it's up to you to keep things moving

3) If they're qualified, if they have a pain, if you solve that pain, if they have a budget ask for the deal.  Clients rarely buy on their own, especially high dollar items (thousands to millions).  You need to ask.

 

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With all of this you can do it in person OR you can do it in writing.  If you do it in writing you're in ScottHall's ring.  This is what Scott excels at.  He can write a letter that qualifies a prospect, that unearths their pain, and then asks them to buy all at once. There is a skill to this, and most copy sucks, but good copy sells like crazy.

 

So if you've made it this far then I have a seminar you can sign up for on sales for.... I kid, but that's the next logical step for something like this.  If you wrote something long, and someone read the entire thing then they have interest.  You'd take them to the next level whatever that is.  My advice is free, hopefully someone can glean something and use this.  I learned by asking and reading myself.