YouSaid · the spoken record

Paul Johnson

lines on the record: 95
first: 2017-11-27
most recent: 2017-11-27
sittings or episodes: 1
sources: podcast

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“It's just money is not going to make you happy. So just find something that you really are passionate about and love doing and then just try and figure out how to make a reasonable living. So just try and be happy with what you got”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“twenty four percent. If you could be on the other side of that trade, you would every day. So why be on this side of the trade? That I would pound away. Watch the spending and watch credit card debt.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“One that I just keep coming back to, and that is the key to financial success is spending, not making. People that get in trouble, they don't control their spending. One of the things I talked to my students about at the end is we spent a whole course, and I keep pounding away you would never buy anything in the stock market. You didn't think was worth more. Either had an implied return that was better than the risk or that it was mispriced. You never would. And yet you spent money all the time on things that don't deliver more value than it costs you to get the money. So if I had known and really understood it, it's hard to understand. One thing, know it, is be careful spending money. The key to success really is, I think financial success is watching the spending more. The other side will take care of itself over time and not getting yourself this American dream that I have to have vacations and bobbles and art and big pools and stuff. And I think debt, something I often talk about visa credit cards charged.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, we think academic finance is bad. But that's another podcast. It's just a mess. It's a mess. Is very interested in human behavior, particularly at the collective, which would make sense.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“No. No, finance journals. Yeah, we think academic finance is bad. That's another podcast. The selection and then the packing. Oh, it's just a mess. So it's mainly journals of medical psychology, cognitive science. Paul's very interesting.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“I read journal papers most of the time now. I'd say that I probably read like a few hundred journal papers a year and there aren't very many good finance books that come out. So I haven't read a finance book in years.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“I can begin. When you read the Wall Street Journal and you read an article that you know a lot about, you follow the industry, you grow up in that business, your parents, whatever it is, you just know a lot. And you read the article and you're about halfway through, not even a third of the way through. You cringe because they say something and you're like, well, sort of true, but not really. Then you get halfway through and you're like, ah, all right. Fair point, but. And by the end, you're just frustrated. And you're like, some points were good, some points were just dead wrong. And then you read the next article about something that you know nothing about. At the end, you say, that's interesting. So as a rule, which shocks people, I stop reading newspapers. And what I do is I use all that time to read books. I want to learn to think rather than read the news. I read the headlines and I'm well aware and you can't be in the business and not be, but anytime allocation, I'd rather read books and I read books all over the. I'm a monger fan that way. I do think you need to know multidiscipline. You should know some engineering, some psychologists, some sociology.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“My favorite sports moment was in the mid 80s, and it was the Islanders and the Rangers for people that grew up in New York that used to have this incredible rivalry in the islanders were actually a good team. So it was the fifth islander Ranger game in the series. There were 30 seconds to go in the game, and the Islanders were down. And then Dennis Potvin tipped the puck in. And then they went into overtime and the crowd just exploded. Like I couldn't hear the whole day afterwards. And then they wound up winning in overtime.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think Paul's right, and my answer is sort of real walking away from what is a really cool career that they're going to employ a fair number of people over the next 20 or 30 years. You have a great career. I think that you should be attracted. But I do think you should only go into business if you absolutely love it. Because Paul and I, we both have been in this business forever, and we're not actively managing money anymore. We've changed our role a bit. But I think he manages money. He works in the business, but he's not a hedge fund manager anymore. But we think about this all the time. I mean, I read about it. We're always tired. We talk every day on the phone. These are the people in the business. You think about it a lot. You've been in the business a long time. You're thinking about it a lot. When you read articles, your mind is that way. Don't go into the business unless you have that passion.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“My answer is slightly different. It's a huge employment base on Wall Street. There's a lot of money still being managed actively. You're going to meet the smartest people you've ever met. You're going to be challenged in ways you've never imagined. You're going to get to meet CEOs and marketing people. You're going to see companies evolved. It's the coolest place. If you're smart and you want to work hard, it is an awesome place to work. So if the idea is that only the people that outperform for 40 years are allowed to play, I think Paul's right. If you're allowed to go and have a maybe slightly above normal salary in a business that you're going to be challenged in ways you never imagined, it's the coolest career. Yeah, but if you go.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“See how many people have outperformed the market. Not in each year, but for a forty year period how many have outperformed. So maybe it's a dozen, a hundred, two hundred, and then you can't count all the people that just bought Berkshire stock because that's just Warren Buffett and they're just copying. So I don't know if it's 100 or 200 people. Then you look at the denominator. Managers in the United States now. And then you think about the analysts that are under them. And then all the people that are on Wall Street that want to be analysts in portfolio managers, you could be talking about a million people, so 100 over a million. That's not great odds. Now look forward. Over the next 40 years, if you're starting out, do you think the market is going to be more efficient in the next 40 years than in the previous 40 years?”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so for my son's birthday back in March, went up to take him out for dinner. He goes to SUNY Albany, and there's a professor there, David Smith, that teaches the Honors Finance program. So I gave a lecture to his class. And I think that the question that I would ask is, do you want to go into this business and do you expect to outperform? Okay, so if you expect to be managing money and outperform, let's look at how many people over there. So no one in their right mind is going to give you money to manage until you're in your early 30s. And most of these kids are like 21. And then if you retire in your mid-70s, which no one really does, that implies a 40-year career. So you're going to have a 40-year track record. So let's look over the past 40 years and”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, he says himself if I were born like in the Stone Age, like he'd be running away from lions saying, but I can allocate capital, I can allocate capital. Like, it's very dependent environment on your environment. And in the creativity literature, again, they talk about the fact that a big factor in creativity is the current context.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“With new schemas. You know, Buffett says it. I don't think anybody would challenge that Buffett has put up the numbers and he's incredibly talented. But he puts it in a slightly different perspective. We were joking about this last week, is if he had born 100 years earlier”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“You'll have a good three-year track record, and then you'll be able to generate, you know, you'll be able to attract a lot of capital, and then you'll have good five-year numbers and good seven-year numbers. And then all of a sudden, the market will change. You'll get wiped out. And then a new, but a huge people will come up.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then again, there have been people that started in June of 2008, June of 2007. There are people that started in June of 2010. So a certain amount of those people are going to do really, really well. So you're saying Buck.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the other problem that you have is that these people that are incredibly articulate but don't have very good performance is that so every single day people are starting new funds. So every month of every year people are starting new funds. So if you start your fund in June of 2009 And”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's what we did. And so I knew where my edge was just that. And we met a lot of people in the business really smart, really talented and terrible numbers. But I think they just funded some of my former friends, their engineers, make terrible investors. Not all engineers make, but my friends that were former engineers because they kept thinking it's an engineering problem. I said, no, it is potentially an engineering problem, but there's one more piece. Everybody else, unless you have a sense of what's going on in the crowd, you can't.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“It in the basket. Right, halfway through, you spin the ball. The other group you talked about that sound great or really smart, but don't have great performance. Market's hard. Second is it is about that edge. I was attracted to small cap socks because there were fewer people, at least when I started, there were fewer people there. Nothing more. It wasn't like I woke up and said, oh, I like small cap. I'd rather done big cap better liquidity. Access to trades, all that.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, right. And the allocators aren't good with that because they don't interview well and they don't like it. And I couldn't get the process. And I didn't like its compliance rules. Blah, blah, blah. Yet year in and year out, they seem to put up.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. So, you don't want to overpay for the growth, and growth is the trickiest thing to value. I think that's attention. You then talked about two different groups. The one that's easy is people with great performance and can articulate it. They have great schemas. They're disciplined, they have great schemas, not necessarily articulate. You want those. They're idiots and monsters to some degree.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it morphs. I'm an expert. I was a growth guy for a long time before I became a value guy. I teach value investment in Columbia Business School. I teach a great segment on growth investing because I think it applies perfectly. And growth investing is nothing more. It's that third component of cash flow, if you will, could argue the fourth one, but third or fourth one you have to consider. The stocks can be mispriced because guess what? The growth is going to be higher or longer than the market thinks.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think you can better articulate the mispricings and the catalysts and things of that nature. You know, you can explain it a lot easier, like, okay, the intrinsic value is $10, and it's trading at $5, and this is why it's trading at $5, and this is what's going to have to happen for it to trade back up to $10.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things that I've always found incredibly tricky is that value investing lends itself to the clear articulation of schemas, of idea generation, of discussion within a team. And yet there are a lot of people you could talk to, particularly in different styles of investing, even if it's outside of equities, that seem incredibly knowledgeable and don't have great results, or they don't come across as extremely knowledgeable, but they have spectacular results.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, where Jeff Hallis is the same way. Or a lot of these guys that have put up these phenomenal returns that I've incredible amounts of respect for, they're very, very disciplined, but they have more open charters.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“The other problem that we kind of see with allocators is that they're looking, well, and you can opine on this more than I can, is that they're looking for specialization. And if you look at the people that have really outperformed over long periods of time, they haven't had as much specialization as you would think. So if you look at one of the greats, like my hero Seth Claran, so he has a very nuanced structured schema about”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then there has to be a consistency of the edge. The edge has to be consistent with their strategy, has to scale as they take on more all the stuff you would normally ask. We think we just add this piece to it, which is, here's your edge. There are a lot of guys that were great at 500 million and not very good at 5 billion. No, market's gotten tougher, but that, I think, is using the book. So we think there's some off-label capabilities.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“But we do think it's as simple as whoever you're potentially giving capital to, they've got to be able to explain their process in a way that makes sense. This is where we get our only...”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“And some of that is probably good, and some of that may be biased. Meaning that you may just have a bias. I like people that went to Ivy League schools. And you don't want to state it, or you haven't fully recognized it. It's a bias. Other of it can be experienced.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's kind of the subjective, and it's that criteria that they can't really articulate. Now, if you can't articulate it, and if you say, well, I just get a feeling or I just know it, I think that that means that you just really haven't defined it. So what we're working on.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is a schema now, but that isn't good enough because if you say, okay, if they fit this criteria, will you allocate capital? Yeah, so that's your objective criteria. So then they'll say, and I was talking to like, you know, one of the legends, Budge Collins.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it becomes like a little counterintuitive, but we think the trouble with the allocators is that a lot of allocators, they have a checklist, whether it's a mental checklist or a checklist that's written out and whether it's formal or not formal.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“You can imagine the interview process, you've got somebody who's awkward and difficult and no eye contact. And they work on the meeting, they say, ah, I'm not going to hire anybody with no eye contact. No, no, no. The whole process is, if that's your goal, the process is somewhat messed up.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Descriptively like that. And yet, now, let's take it one more step. Let's take this to your credibility question a moment ago. If I want creativity, I want novel, new, different, non-consensus, and yet I'm really attracted to the convention 62, alpha male, Ivy League. I'm attracted to this, and yet the portfolio manager has none of those skills. So in the interview process.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stuff on wisdom in the crowds Now, the punchline with the creativity stuff, and I won't take long on this, is that the people that are in the most creative, if you look at, again, this 90 years of literature, they tend to many times above the population, they have mood disorders, depression, anxiety, attention deficit disorder, Asperger's, OCD, Asperger's, when Asperger wrote his stuff in the 40s, he was looking at these highly intelligent kids that weren't socially with it, and he called them his little professors. So Asperger's was a label for people that were very small and just a little socially awkward. Now, how many portfolio managers do you know on Wall Street that are”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Need it. There's stuff on wisdom in the crowds if you then apply that wisdom in the crowds and say that's how the market works. And that's the group we have to be. I'd rather join them than not. And so what I want is a team of cognitive diversity as much as possible. I want creative people. I want an environment that encourages that creativity. And we're always crazy. Dahlia's idea meritocracy is exactly the same thing. He's done it from a somewhat different angle. But the idea, I want people to feel comfortable putting out crazy ideas.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“They haven't done any work on people on Wall Street and they haven't heard of anybody that has done work at people on Wall Street. So what you look is like the creativity guys don't know anything about Wall Street and the Wall Street guys don't know anything about creativity. And in an increasingly efficient market”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“The definition of creativity, the formal definition in cognitive science is something which is novel and that has value. So if you think about a variant perspective that is a view that is different from the consensus, which is something novel. And then you have to be right. So it has value. So then when you look that generating alpha, it's being creative. It's creativity. Now, what that allows you to do is it allows you to leverage off of like 90 years of research that's been done on creativity that I'm scratching my head why Wall Street hasn't become aware of that because they've been studying this for a very long time. You talk to the creative Creativity guys like Anders Erickson or Dean Simonton.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Organizations, what do you do with people that are wrong? Because creativity is different. A lot of it's going to be wrong. Well, if you take people that are wrong, and I guess our analogy for the podcast is take them out in the street and shoot them, then you're going to get no creativity. gets free lunch on Friday, you're going to have an enormous amount of creativity and you want to try to balance those two. We almost all two things happen as we get attracted to people we like and this notion of the team looks alike. Second thing that happens is because of organizational structures people start to think alike because they like, ah, boss likes X. I'm doing more of X than less of Y. Every time I can bring up Y, which I think is creative, forces the group to go outside its edge but creates a new angle, boss gets upset, yells at me, embarrasses the person. So you have the skills you want to recruit for, and then you have to create the environment where you nurture that. And Wall Street's been driven by alpha males with ADD.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“And as Paul said, this is one of our many pet peeves or clarity we got is it's diversity it's two things. You need this cognitive diversity that's appropriate to the situation and what you really need is some level of expertise. What we've been working on recently, Paul's really been driving, is this notion of how creativity plays. And it ends up that creativity is shockingly important in security analysis and investing more so than any of the literature we've seen in the discipline, not away from the discipline, and a variant perspective is nothing more than a creative view of the world. It's novel, it's different, it's non-consensus. And what you start to say is creativity is skill and environment. There's lots of factors that go into it. We think the future of this team-based is guess what? Diversity, cognitive diversity, which may have other aspects of diversity, create an environment where people can be wrong. The way you want to, the litness test for whether you have a creative”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“We were very careful in the book, and we argued this a lot we want to be, we didn't want to say to people that genetically disadvantaged, not tall, six two, went to an Ivy League school. We didn't want to tell them, hey, there's no chance because I don't think that's true. There are a lot of biases. That's why we think the book is powerful. Focus on the edge, focus on the four questions, focus on doing the job”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“It kind of influences the other two, which is do I like them or not? And that's where you kind of get into this charisma because if you think about it, if you like someone, you're going to accept what they're telling you more than if you don't like someone. You know, you trust people that you like and you don't trust people you don't like.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in the conversations you've had with portfolio managers, analysts along the way, how much of what gets presented is also tied to charisma. And the view of the portfolio manager of how smart is that analyst, how much do I like them, how much do they present, the whole notion that it's not what you say, it's how you say it.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we guess we really think that where most people screw it up is they don't fully articulate why the stock is mispriced and a portfolio manager subconsciously unless they feel as though they fully understand that they're not going to buy the stock. And if you think about it, if you can explain why the stock is mispriced and why your view is different, you're articulating what your edge is”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we tie all this back. Now, we think if you only get a shot, one question, a p.m., you're going to only get their attention for a minute. We think the third question is really the most important. How did the market get it wrong and how did you figure it out? The other question sort of answer themselves. So if I come in and say the market is, the stocks misprice, the market doesn't understand X. And this is how I figured it out. You sort of argue the upside becomes a bit more obvious. The risk becomes you're wrong in your convention and how the next guy can figure it out, how the market's going to correct kind of is all bundled. So that's what we think.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Every PM asks the same four questions. Now, the thing we've really learned is there's a lot of different vocabulary in the business. But when we go and we press people, they say, yeah, yeah, that's what I mean. So the four questions are simply, how much can I make? What is the upside? Why are we talking about this? Why are we spaced at any time? Almost every portfolio manager, once I get kind of comfortable with that, they're instantly going to say, but what's the risk? Where can this go wrong? Where are the estimates? What's the confidence we have in it? Then the third question, which we really realize is kind of two questions, is number one is, how did the market get it wrong? Why is there a misprice? And the second piece, part B, is how did you figure it out? Now, it's very important that both of those get answered because you come and say the market's wrong, and I've been doing this for two years or three years, and I figured it out versus the crowd. And then the fourth one is, how is the next guy going to figure it out? That's a catalyst, essentially, although that's a word that's controversial as well.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“But let's just repeat that because it's such an important point. So, in order to have an optimally functioning relationship between the analyst and the portfolio manager, each of them have to do 90% of the work and take 48% of the credit.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, no, I think it's like a well functioning marriage where both partners do 90% of the work and claim 48. That's how you get it to work. And the portfolio manager takes ownership, but I expect you as an analyst to be working just as hard as you always have. If something happens, I want to be the first call. And I don't think very few organizations that we've been exposed to have thought about the objective, subjective.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that got into the book. And then the new piece, which we're talking now as we go out to practitioners, say, look, the book is aimed here, but there's a lot of, I like to say, off-label use, is now, if you don't do this ownership, co-ownership. And it's not just co-ownership, but the portfolio manager has to internalize the idea. They won't scale it otherwise.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's amazing to us that piece, the objective subjective. And then we hear from portfolio managers, which former students, colleagues, friends. They say the line I hear over and over, I don't know why we employ analysts. They never bring me an idea. But they do bring you ideas. They just don't hitting that subjective criteria.”
2017-11-27 · Capital Allocators · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · IDENTIFIED FROM THE TRANSCRIPT · source