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Sanjay Ayer

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85

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2024-02-05

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2024-02-05

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1

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1. “It's funny. Now, they don't get used enough in the office. We tell people if you want to go on a drive and just think don't listen to music or podcast, sorry, but just make sure you carve out time to think and be intentional about it. Go on a walk. We have clock office time. We like being in the office, but there's no requisite for FaceTime. Really where I get bothered, I just see people in their office looking at daily pricing quotes all the time. I'll say, you know what? Get up, get out. go take a walk think about something creative and come back”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “We signal, we message, we have artifacts in the office. If you walk over to our conference room, you'll see two airplane seats. And the reason for that is we found our best ideas are not standing in front of a screen. They are going on travel in the group, flying back home, sitting across from each other with no Wi-Fi and just chatting, downloading on the trip, chatting about what we can improve on, talking about the team. These are conversations that just would not happen in the office despite everyone's best intentions, thinking about things creatively as far as how should we travel to really maximize insights through constraints, through modeling, through reflection week and audits, and then thinking about how do you generate feedback to get better. It's great conceptually to say we have a get better mindset or core value. How do you go by doing it?”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “In that echo chamber, we found that we were, for instance, doing too much in the way of earnings updates. That once a quarter we publish updates on every earnings announcement. And from a team return on time standpoint, it started to become clear that was very low. People were spending a lot of time publishing those. Everyone was consuming those. In reality, generally speaking, not much changes in the given quarter. The worst impact was we were missing slow motion change because we were too zoomed in. So one of the changes that came out of a series of audits was let's do a more higher level thesis refresh every six to nine months on a name as opposed to getting inundated with these quarterly updates.”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “Main thing I've learned is you do these return on the time audit and they start to look similar. You start to see the gravitational pull then despite knowing these things about information gathering everyone tends to have the same regrets. I spend too much time following news or I was a little bit inefficient with how I traveled. I caught up in the day-to-day and didn't spend enough time on the R&D work. Another one we learned about is mojectory is about detecting change and If you're zoomed in too much, you're going to be slow to see change. So I think one of the reasons why specialists are struggling with the notion of mode trajectory is you're in a vacuum. You're in an echo chamber. You're just covering a sector. You're doing travel with fellow analysts. You're talking to management teams. If I'm a newspaper analyst and the internet came along, I'm going to be the last person to recognize this as a disruption just because I'm”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “Constraints. I think constraints can unlock creativity as we talked about two unconstrained environments actually inhibits creativity. And you need to be jolted out of it. So I think, again, it's just this notion of building guardrails and not slipping into that reactive information gathering mindset and being aware of opportunity costs. I think a lot of investors get that wrong. Just thinking about the opportunity costs on your time, what else you could be doing and codifying that? So there's various ways we have constraints to be reflective about it.”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “It's a concept I think a lot about. So there's a mathematician Richard Haming. He had an observation that employees who work in an office with a closed door get more done than people who work in an office with an open door, but they end up working on the wrong problems. And I think that's a really interesting insight, whereas when thinking about this notion of what we call now return on time, like how are people actually spending their time day to day? And are you carving out time to get better, to think different, or are you just coming to that gravitational pull we talked about? We think a lot about being reflective. So right now, actually, we're doing a reflection week internally. We do it twice a year or we carve out a week and you're turning off all your screens, you're not looking at stock quotes or news, and you're just reflecting in the spirit of getting better. I'm a big believer in artificial”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “When you start thinking about getting better, you mentioned the importance of how you manage your time. And we'd love to hear more about how you go about assessing and improving that important characteristic of what you do.”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Just how you define reckless for us valuation, there's a couple ways we think about it. One is to say valuation for the end of the process. I think if you have a valuation first mindset, it steers you towards a value traps effectively, companies that are becoming less good on the margin. And then the other thing we think about is have a first principles approach to valuation. I think investors sometimes get caught up in the heuristics of the day, take software, this rule of 40 concept that's become very popularized. In reality, I think if you just study unit economics, you study distribution, you study culture. Just from first principles bottom up, you can develop strong varying perceptions around valuation and not get caught up in the flavor of the day.”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “It's funny because then I start my career at Maureen Star, it's hard to believe at this point, but growth investing was associated with career risk. Value investing was perceived as very disciplined. You were exploiting these well-trodden behavioral inefficiencies, mean reversion, recency bias, time arbitrage, and growth investing was just reckless. He was just chasing stocks. Growth investing can be reckless for sure, but silk can value. I don't love how people distinguish these terms. I'll try not to get too caught up in it, but you can overpay for a great and improving company, but you'll recover over time. It might take a long time, but you'll recover. There's a pathway for recovery, whereas if you misvalue a bad”

   2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “How do you think differently about valuation, but something in the basic academia of thinking about value investing? There's a lot of pencil sharpening that goes into valuation. And then in growth stock investing, you hear more about stories than that type of pencil sharpening.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Yeah, those are the two we've stumbled upon to date has been so much runway on building out each of those as far as processes and how to do it. I think each of those concepts are sensible in theory, but there's a whole art. The wreaths will be a small team in Laguna Beach, how do you tease out the corporate culture of a company in Brazil? How do you identify growing modes? So a lot of my journey has been focused on doing those two better. At the same time, we are thinking about planting research and development seeds to coming up with third or fourth field of compounding knowledge, understanding base rates, understanding these things over the architect time get competed away. So nothing to share just yet, but we're always thinking about how to push the envelope on philosophy.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “As you've laid out motrajectory and culture, those two core components of your research process, I'm curious if there are other big pockets that you've discovered or looked at carefully and discarded as something that is consistently favorable enough for companies and stocks that contribute to that compounded knowledge.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Picking stocks is effectively just a series of judgment calls. They're taking a lot of information, you're overlaying your own opinion, and you're making a judgment on that specific security at a given point in time. And that's how most shops and most analysts tend to operate. A compounding knowledge approach would be saying, yes, let's do all that bottom-up micro work, but are there fields of knowledge out there that can structurally elevate the odds that you make a series of those judgments more than one so you could think about corporate culture. If you understand a company's culture, you can overlay that culture onto each of those judgment calls over a period of time. So maybe that boosts your banding average. But if you percentage points, but that can compound significantly over time as we think about mode frameworks, how to think about competitive advantage, that's another field of compounding knowledge if you could build patterns around it. That's more evergreen. That's more scalable.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “There's a gravitational pull towards expiring knowledge. There's so much noise out there. And if you don't build guardrails around how you spend your time, you're going to fall into this notion of just gathering more information, having a reactive mindset, benchmark hugging, just doing things in a way that you're just building out, more is better approach. Really trying to think about from a portfolio standpoint, having high active share from a knowledge standpoint, leaning into what we now call compounding knowledge as opposed to expiring knowledge, and codifying this concept of what we call return on time. How should you spend your time and the team spend their time in a way that'll maximize outcomes?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “As you break both of those down when you started framing out what you were trying to do is think different, what are some of the things you saw that were ways that groupthink was permeating how people went about research?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “Effectively standing them on their head and taking the inverse. So if you think about groupthink, how can you create the core value that is opposed to groupthink? And so we came up with a core value called think different, which we then coined it. Apple coined it well before us, but it's very profound in investing that if you want different results, you should do things differently. Having a self-awareness around the base rates of the industry asking, why should we have conviction we can defy the base rate under the constraint we're not going to pivot to minimizing career risk? So building that core value of think different, making sure remessage it and build processes and guardrails around it, and then fixed mindset standing on its head and saying, let's build a core value around getting better. Let's take the opposite, a growth mindset. And so how can we build behaviors that will really allow us to reflect, get better, stay humble, and not succumb to that?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Of those professions where you're not exactly sure what you should be doing. It's tough to tease out cause and effect and the find-written rules seep in. And no one bothers to really question why they exist.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “Think about movie studios. I think if you green light a movie, it's kind of picking a stock. You often get to described as having the magic touch. If that's how you're judged, it's natural that you're going to develop fixed mindset, especially if there's some luck and cause and effect questions at play. You're going to build an ego. You're not going to admit mistakes. So it's natural you're going to get fixed mindset in those professions. You can think about sports if you're a general manager. People get elevated. Cover stories are written about that notion of a magic touch. So I think that's one major commonality is that level of a creative quotient. And it's an unconstrained environment. The one thing I've learned is you would think an unconstrained environment leads to more creativity, but it's the old playground analogy if you put a fence around a playground, the kids start to spread out and explore. If you take away the fence, everyone starts to huddle towards the middle. And you could think of that as minimizing risk or career risk in a professional setting.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “There's so much groupthink why is there so much fixed mindset? And then can we create a team, a culture organization that can insulate ourselves from some of those forces?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Went on a journey. I really just got very introspective, started to read a lot about how people spend their time in various professions and what are some of the mistakes people make and tried to draw analogies with what is it about investing where people are not spending their time wisely, what are these unwritten rules or norms that are causing people to succumb to groupthink. And I started to see patterns where there are certain industries where there's some creativity involved, where it's difficult to connect cause and effect, that you just get these rules. People try to minimize career risk and people try to sound smart so you can think about groupthink and fix mindset. It's interesting because in some ways you would think investing should be a clean slate. People should operate very differently. There's no one rate to do things. But really I went on that journey of unpacking the why. Why do people behave the same why?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Meditate themselves, you know, that was me. It hit me hard. That was a fraud. In that respect, and it sent me on an internal journey about what are the things?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “Product pipeline. And so they put the commercial about their next gen product. I guess it was a Chalupa at that point in time. And it was just a moment, Ted, where time froze. I looked around the room and I just saw a lot of smart people wearing suits, acting the part, taking notes about this commercial, which you just reflect on that, Taco Bell at the time. I'm going to have these numbers wrong. It was 20% of Yum's profit. This product was going to be infinitesimal percentage of Yum's profits. Yet, hundreds of people are taking notes about this. And that's fine. But what made it a lot worse was I was taking notes too. There I was someone who could talk in abstract terms about the biases of the industry and what people get wrong and how people don't spend their time wisely yet I was doing the same exact thing so I was the person who everyone knows in their lives who preaches about meditation but actually doesn't”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Kind of a build your own plane as you fly a type mentality against we had intuitions around how a team should operate philosophically a few concepts, mode trajectory and culture, but it was really how do you build processes and a high performance team around that. One of my other claims to fame is I did have pretty big setbacks early on internally we joke about one of my midlife crises was going to a young brains analyst day back in 2010 so I was three years into the job and this was the New York we owned yum at the time and at that point the firm wasn't doing well this was aftermarket hours one of the stocks I'd recommended and we owned was down I think 35% after hours I was not in a good mood and so I went back into the analyst day and Taco Bell which is one of Yum's properties was presenting and Taco Bell gave the presentation talked about financials and whatnot but then they started to preview their”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “That's the art of investing. Strong opinions Lucy held is a common term. And I think that's what the North Stars should be, or at least my view it should be, is you have to act on what you know while still doubting what you know. And it's a difficult balance, and you want to strike it right. You don't want to be stuck in cognitive dissonance and be unable to make a decision, but you also don't want to make decisions and have blinders on. So that's just a balance, I think, each person has to get through on their own.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “I learned a lot. I learned that one thing I had to conquer was this notion of cognitive dissonance. Cognitive dissonance is when you have a worldview and then you're confronted with disconfirming evidence. You just get very defensive. It's uncomfortable. So your mind races to mental gymnastics to reconcile those views. Explain it away. Rationalize it, et cetera. What I learned through a lot of mistakes and tough decisions was if you can lean into cognitive dissonance, it actually makes life a lot easier. It's paradoxical in that way. It sounds hard mentally to hold two opposing ideas in your head. But if you can get to that point where you can, it can be very liberating. And a lot of the biases you have melt away. So that was the big early stop function change in my career.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “I just learned on the fly. So it was similar to Maureen Starr in that you're given a lot of responsibility and it's up to you to define your own career path. What I've learned to love about investing, Ted, is I view it to be a platform for self-discovery. It's effectively a mirror. It can reveal your biases, your insecurities, your temperament, what type of teammate you are, what type of communicator you are. Just so much about you if you allow it to be. I was someone who I've always been pretty introspective and reflective. I would try things. I would get feedback. I'd iterate and I'd take these fledgling concepts we had around our philosophy of investing. And I just with the help of Mike, Paul, and others is really trying to build on those and turn into intuitions into a more formal framework.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “First is the people. I didn't have much context. I never worked on the buy side, but you walk in and it feels like a very disarming culture where people are having fun, intensely searching for the truth and the best possible judgment. But there is a strong emphasis on relationships, which I didn't expect. I thought the buy side would be much more formal. I think by and large I've learned that it is. And what really appealed to me was an irreverence of industry norms that seemed to be a firm that did things by our first principles, things as simple as how you dress. People wearing shorts and sandals, people talk, which is how humans talk as opposed to a lot of jargon. Didn't know much about the industry, but was sold by the people.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “One of my colleagues at Maurice, I might trigger, who I know you've had on the show, he joined WCM a year prior to me leaving business school, and he caught wind of my departure, and him and I were pretty close, pretty like-minded. We worked actually side by side at Maureen Star. So he gave me a call and said, why don't you plan out to live in a beach? There might be a fit. I'd never been out to Southern California. Made the flight, met the people, and was sold pretty quick.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “I didn't really have too much of a plan, so I thought about there was various business startup ideas I had. One was the launch shake shack concept before Danny Meyer pioneered that concept maybe do a part-time MBA and get a full-time job. I didn't have a firm plan, so it was pretty much jumping off the deep end and hoping at that point things would work out.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “Ismod, my claims to fame is I'm a business school dropout. It's one of those life events tab where you just realize pretty quick it's not for you. Had the instinct that I was doing in business school because it was perceived as the right thing to do as opposed to it actually being what I wanted to do. And that's never really been the compass with which I operate. So it was tough. I mean, it's lost on cost, a lot of relationships, one of those decisions if you ask a lot of people, you'll quickly be talked out of it. So I just found my own went with my gut and I quit school about 10 to 12 weeks in.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Always had this thought that I wanted to transition to the buy side and I at the time believed the right way to do that was to transition to business school as the gateway. So about three and a half years in, I decided the time was right to move on and I joined business school.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “Map out why those opinions will converge over time. Why And WAN Interesting approach, and it dovetails with how I think about investing nowadays, which is basically a convergence and expectations. How did you get started?”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “I misspelled tickets and resell them with the proper spelling. So just odds and ends like that. I had an interesting business, but it was really in college where I took a behavioral psychology class and what's interesting about that, Ted, is I used to have a major insecurity about not having strong opinions about as many things as most people seem to. My response to that was just to learn more about everything, but it felt a little inauthentic and forced. But taking that psychology class and just learning about the biases people have and why with the same set of facts people had significantly different opinions. I started to reframe that insecurity into an asset. And if I can understand why people have different opinions.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “An interesting combination of curiosity about business and psychology. So growing up in Connecticut, I used to tell people when I grow up. Want to be an international businessman? I have no idea what that meant, or I had no idea. It sounded cool. But I dabbled in various businesses. I remember when eBay first came out, I had like a spelling arbitrage model going where I”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source

35. “I guess on today's show is Sanjay Ayre, a portfolio manager at WCM Investment Management, the Laguna-based $80 billion equity manager profiled on popular past episodes with CEO Paul Black, President Mike Traig, and emerging market portfolio manager Mike Tian. Sanjay joined WCM in 2007, and alongside Mike Trigg, leads the firm's research process that follows the mantra, Think Different and Get Better. Our conversation is a fascinating exploration of the differentiated mindset at WCM. We discuss topics including self-discovery, cognitive dissonance, thinking differently, getting better, compounding knowledge, reflection time, and feedback loops, all in the context of Sanjay's path and the application of the concepts to WCM's research process, investment. Examples and business.”

    2024-02-05 · Capital Allocators · Sanjay Ayer – Think Different and Get Better at WCM (EP.366) · IDENTIFIED FROM THE TRANSCRIPT · source