I came across a great quote on the subject from a Coursera course on Model Thinking by Scott E. Page. The subject under discussion was Solow Growth Model to understand growth of countries. I have edited it a little to set the context: “We can sort of work hard, but if we don’t invest in new technologies, in new innovation, if we don’t become sort of better at what we do, by possibly learning new models, learning new techniques, by developing new skills, we’re probably gonna level out. In fact, if you look at the data on what makes for really successful people, people who are very successful in their careers, one thing you find is they continue to learn. So, it’s almost like their own personal technology parameter (similar to investments in innovation and technology by countries). They keep upping and upping and upping. So continued growth depends on innovation and getting better. You can’t just sort of do more. At some point, the rate at which things fall off and the rate at which things increase are just gonna even out. Sustained growth requires innovation, becoming better at what you do. So just like countries have to invest in innovation, so should a person and that’s where personal growth and sort of personal success can come from.“
Arisaig’s Investment Philosophy
It is important to have a good investment process and I am constantly checking how other investors approach this. Arisaig is a consumer focused fund and I admire the in-depth work they do in understanding their companies. Below is how they summarize their investment process in their letters. I don’t agree with every point but most of what they say is very sensible.
What we look for in our stocks:
– Market leadership – dominant companies tend to do better;
– Scalability – large target markets;
– Strong “moats” – brands, distribution, innovation;
– Low capital intensity – high ROCE;
– Predictability – compounding growth;
– Access – management who welcome our involvement.
What our investors can expect from us:
– Alignment of interests – capped funds, no segregated portfolios, co‐investment;
– Transparency – holdings booklets, monthly portfolio summaries, examples of research reports;
– Coverage – 22 analysts; five research offices; 150 target stocks;
– Minimal trading – active management destroys value;
– Focus – consumer companies tend to out‐perform, so we won’t be doing anything else.