TRANSCRIPT

***Transcript has been edited for readability

Sean: Sanjay, welcome to what got you there. How are you doing today?

 

Sanjay: Doing great. Great to be here, Sean.

 

Sean: I’m excited to dive into this and I want to start with the invisible. I would love to know, has there been a mindset of yours that you think has just been incredibly positively impactful for your life?

 

Sanjay: Yeah, you know, it’s interesting. I have to zoom out a bit. My answer would have evolved to that question over the last 5, 10, 15 years. And that’s really because I view my profession, which is investing, as a wonderful platform for self-discovery. I can’t think of a profession that reveals your strengths, weaknesses, biases, and flaws as well as investing does.

So, I’ve learned a lot about myself over the years and what’s gotten me to this position. I would highlight two attributes that I think have really helped me along the way. The first would be optimism. It’s somewhat of a cliché to talk about optimism, but I think it’s incredibly important, especially in fields like investing, where the odds are stacked against you.

The base rate of investors who stand the test of time is not that great. So, I think you need that forward momentum that an undercurrent of optimism provides. I’m not personally an in-your-face optimist; I don’t think people would walk away after a first impression and say, ‘Wow, that guy’s just incredibly optimistic.’

It’s funny. I used to think of optimism as an intrinsic quality, but I’ve come to believe it can be strategic and developed. I don’t know if you watch that show on Apple TV called ‘Shrinking.’ It’s a comedy with Harrison Ford and Jason Siegel. But there’s a supporting character in that show who always uses the line ‘Everything goes my way.’ It’s kind of a cringeworthy line, an annoying character quirk, but I was reading an interview with the showrunner, Bill Lawrence, and he talked about how he uses that line ‘Everything goes my way’ in real life, almost to annoy his friends, but as a strategic facet because, in that field, in media, in show writing, you’re dealt body blows every day with scripts that get turned down and whatnot, it’s an incredibly competitive field. So I do think strategic optimism has carried me forward. And then, Sean, I think, secondly, just embracing cognitive dissonance has really helped me a lot. I’m sure your listeners know cognitive dissonance is when you have a worldview.

And when you’re confronted with something that conflicts with that worldview, for most people, that causes discomfort, right? The response is to avoid it, rationalize it away, or engage in mental gymnastics to resolve those conflicting views. I’ve learned, and I’ve really come to attune myself to embrace and lean into the tension of cognitive dissonance, holding two conflicting thoughts in your head and not losing the ability to think well.

The breakthrough moment for me, Sean, was when I used to think that was hard, that it sounded very hard. It was going to be a harder task mentally to do that, to really hold those opposing thoughts and lean into that tension. But once you get there, it’s actually incredibly liberating, right? Because all the biases that you, I, and everyone face in the world, whether it’s confirmation bias, recency bias, anchoring, all those biases really melt away.

Right when you’re able to see the truth for what it is and see change for what it is. So, I think it’s a good mindset in all walks of life. It’s highly applicable to financial markets, which we can get into. But it’s something I think I intrinsically had to really develop over the years.

And so I would pair those two. Unchecked optimism can lead you off a cliff, but optimism paired with an embrace of cognitive dissonance, I think, can put you in a good spot in many walks of life, but especially in investing.

Sean: You mentioned a minute ago that you were able to break through that. That’s why I started this off around the invisible, right? That was a mental limit you were able to get through. I’m wondering, because you’re someone who is incredibly self aware, looking back at that breakthrough ability, what allowed you to do that?
What were the steps leading up to that?

Sanjay: You know, it’s funny, in high school and even in college, I had a major insecurity. I was very self-conscious about the notion that I didn’t have as strong opinions about as many things as everyone else did. It just seemed like you could talk to anyone about anything, and they would have a strong view on it.

I kind of viewed that as a character liability, if you will, and thought, ‘I really should have opinions on any hot topic that comes up or any historical piece of evidence or fact.’ My response to that was to try to learn everything about everything, right?

So that I could sound smart, have an answer, have a quip, and feel part of those conversations. But it clearly felt very forced under the hood, like an act. I was doing it because it was something I needed to do to get by socially and otherwise. The first real breakthrough moment for me was taking a behavioral psychology class in college.

That class delved into the basic question of why people have different opinions given the same set of facts or circumstances. Learning about the ‘why,’ the biases people have, and where those beliefs come from, I started to see maybe I was right for not having so many opinions about so many things.

I definitely had strong opinions, but the breadth wasn’t as widespread as seemingly everyone else’s. One way to test that, which I learned in that psychology class, was to ask anyone with a strong opinion to explain the opposite of that belief or ask them what it would take to change their minds.

It’s startling how quickly people can crumble and not even put together a semi-coherent response to that very basic question. It just kind of bounces off their brain. So, that really got me to explore why people have different beliefs rather than obsessing over what the belief is.

And that resonated with me. It suited me well and alleviated me from that kind of burden and feeling that I had to know everything about everything, which I again had viewed as an insecurity and afterwards did not. I started to see it almost as an asset.

 

Sean: Hmm. Speaking of assets, you were mentioned a few minutes ago, just around optimism and cognitive dissonance. If you viewed these as skills you became highly attuned to that you were able to develop. And I’m just wondering for you, what does it look like behind the scenes with you? What are you doing to develop these types of skills?
What goes on outside the office that has given you the ability mentally to dive into these, which is something a lot of people don’t do and then keep exploring and going further on them.

 

Sanjay: Yeah, it’s a great question. You know, I find myself hardwired to a fault. In fact, I have some morning routines to counter this in a way, but I’m hardwired to continually try to get better and never feel, kind of, a fear of complacency and a static life. So, I always have this mental energy towards picking apart what I’m not doing well and trying to improve.

And I’m not exactly sure, and I don’t know if I’ve given enough thought, to the root cause of that. But frankly, as long as I can recall, I’ve always had that kind of internal drive to really push forward. And I’ve almost helped create a culture here at my firm to make everyone kind of give them the opportunity to go down that path.

And I think that’s really important because I started off by saying investing is a platform for self-discovery. But it’s only if you allow it to be, right? And I think whether self-inflicted or because it’s just a profession and how it works, most people are not allowed to be or willing to kind of view investing as a growth mindset kind of industry, right?

That you can get better, right? There’s this notion of always trying to show off and act like you have all the answers and have a smart quip to every question. But really thinking through holistically in my life, like, how do I embrace this notion of deliberate practice? I’m sure you’ve heard about it, talked about it.

It’s been popularized, but the key issue with deliberate practice is you need high signal feedback. Right. So it’s great to say you want to get better, but do you have the feedback, the raw material to use to get better? And in my profession, you don’t have it, right? If you’re a long-term investor, you’re not making that many decisions.

You have long feedback periods, like three, five, 10 years to know if you’re right or wrong. And even then, there’s so much noise in between that you’re maybe getting very low signal feedback, right? So for me, it’s about being really driven in the last 15 years, taking that hardwired intrinsic quality of getting better, but making sure I was channeling it in a way that was acting on a set of high signal feedback. So, how to create that feedback. And then, as importantly, showing just how to create time to learn. I’m very mindful of creating guardrails in my life, both personally and professionally, to channel that energy in the right way. I do think that can tip too easily into trying to be a perfectionist and almost never seeing the positive side of things, or taking a step back and just enjoying where you’ve come over the years. So, that’s how I view developing qualities like the two I mentioned.

 

Sean: I’d like to expand on some of those guardrails in a second, but I’m genuinely intrigued. You mentioned that internal drive, that mental energy. Is this more a pulling towards that voracious thirst for more knowledge? Or is that more being, I don’t want to say fearful, but not exploring your potential.

 

Sanjay: Yeah, I think it’s a great question. I think it’s both. You know, I do. I’ve had a fear of being a fraud. I don’t feel it as much anymore, but if you had asked me five to ten years ago, I definitely had that fear, and everyone experiences this imposter syndrome. But at the firm where I work, I’m given a wonderful clean slate to paint a canvas around how to build an effective research culture and team, and I have strong views on how to do that. But I never want to get caught just talking about things and not acting on them. So I’m really trying to model the behavior and the platform I’m trying to build.

That really comes from internal energy and drive, and it comes from a bit of fear. Over the years, that fear has waned, and now it’s more of an organic, positive energy and vibe behind that push. But I think it did start from that insecurity and fear of being a fraud to some extent.

That’s another source.

 

Sean: You have a great line I wrote down in preparing for this. And you said, “I think everyone needs a little healthy imposter syndrome to do great things.” You want to expand on that even more?

 

Sanjay: Yeah, I think everyone experiences it, you know. I’m sure some people don’t, but it’s a little bit sad to me that for some people, imposter syndrome can really drag them down. In my view, you can accomplish so much more in life if you just get the insecurities out of the way and are totally open about them.

You know, I want to get to a point, and I think we have in our team, where people can joke about each other’s insecurities. Everyone has them. But for a variety of reasons, many professions kind of steer you towards this notion of theater – like acting, maintaining some label, sounding smart, having a quick answer to every question, pretending you’re infallible, and sounding the part instead of being the part. I think getting better at your craft is crucial.

So, I think the industry, and many professions, do a disservice to, you know, your growth. As a kid, you never know these things will even come into play at all, right? The notion of a growth mindset and getting better, and asking what might seem like dumb questions, I think that’s intrinsic to people, but they’re almost coached out of it in professions like this.

So I think imposter syndrome is something we, at least in our organization, wear as a badge of pride. We’re kind of a bunch of imposters, and we’re going to lean into it because not being an imposter means doing what everyone else is doing, which is to achieve mediocre results, right?

And that’s what our industry has achieved on aggregate over the last many decades. So why would you want that to be the outcome? Let’s embrace being imposters, being outsiders in a way, and use that as an asset.

 

Sean: How have you walked that tightrope as you evolved in the firm and even now as you hold a higher leadership position where you’re being looked to even more to lead, showing your strengths, showing the knowledge, the wisdom you have accumulated over the years. But also showing that you do make mistakes and also allowing those younger people to see that, you know, how it is that tightrope where you want to give them enough ability to make mistakes and learn, but also to develop their own confidence.
I’m just wondering how you do that as a leader in the firm?

 

Sanjay: Sure. Yeah, I think we lead with vulnerability. You know, sometimes for many people, they need trust before they’re vulnerable. We try to flip that script and say it’s very hard to get true trust unless people think everyone in the organization, but especially those in leadership roles, are truly vulnerable.

So, I talk about mistakes all the time. We had an offsite a couple of years ago where my colleague, Mike Trigg, and I, who co-lead the team, had a 50-point slide deck discussing every mistake we made over the years. These were cringe-worthy mistakes.

I really looked at them and couldn’t believe I thought that at the time. There are many reasons to paper over those mistakes. But if you really want to create a climate where people feel it is open, that they’re going to make mistakes, that it is ‘forgive and remember,’ not ‘forgive and forget,’ you have to model that behavior, right? So, I think it’s important. Leaning into those and we left that presentation with the notion of ‘look, if we’re not as a collective cringing at the work we’re doing today, five to ten years from now, then we’re not getting better, right?’ Let’s set that as the bar for getting better.

Let’s look back five years ago. For many things you do, ask, ‘I can’t believe I wrote that or did that piece or made that transaction.’ I think that means you’re on the up and to the right journey. There’s no shortcut. You just have to model the behavior and almost over-index on it to make that point.

 

Sean: Talk to me about that mindset that you have that a lot of people in your field and that listen to this podcast end up falling into the category of not feeling like they’ve done enough constantly trying to get better. And you said you’ve put up guardrails intentionally to counterbalance that. And I’m wondering what that looks like.

 

Sanjay: Yeah. I mean, just can you restate the question, Sean? I just want to make sure I got the which way you’re going on

 

Sean: Yeah, you were just saying about that internal drive that you said you came hardwired where you just continually wanted to get better, never feeling like you’ve done enough research or put in enough time. And that’s a lot, that’s something a lot of us deal with. And I’m wondering, you said you put up guardrails.

What do those guardrails look like so people can kind of balance the scales here?

Sanjay: Yeah. So I’m a big believer in artificial constraints. I think in all walks of life, but especially in investing, you need to set up guardrails. Otherwise, you’ll just get consumed by all the noise and expiring knowledge that’s out there. To that point of having guardrails towards almost being too hardwired to improve, I like to introduce provocative terms.

One of the terms I talk about internally is this notion of creative laziness. Right. And I like it because when people hear the term ‘lazy,’ they immediately recoil, as it feels like they’re being trained and pushed to work hard, right?

Everyone thinks hard work is the answer to many things. Everyone loves grit. People despise laziness and love grit, right? This view of both terms is in many ways inarguable. But I do think that grit without a guardrail can lead you astray.

It can mean rushing into things head-first, which is brute force, and not asking, which to me, creative laziness is about. Before answering the question, it’s asking, ‘Is this the right question?

 

 

Sanjay: Or find the lowest part of the fence before you cross it, right? I think there’s a certain elegance to that, which creative laziness brings to a solution.

Take Nathan’s hot dog eating contest, for instance. It’s a funny example of this, right? There’s this guy, Kobayashi, who won many of these contests. ‘How many hot dogs can you eat?’ And I don’t know, what’s the time limit? Three minutes? He won time and again, and he effectively just reframed the question.

Instead of asking, ‘How do you eat more hot dogs?’ he said, ‘How do you make hot dogs easier to eat?’ Right? That’s zooming out. And the way he did it was by splitting the hot dog in half. I don’t want to get into all the gory details, but I think grit can cause you to zoom in too quickly.

So, for me, one of the guardrails I put in place is always to think about how you can zoom out before you delve into anything. And we have a reflection week twice a year here at WCM. We turn off the stock quotes, turn off the news flow. All you’re going to do is sit back and reflect. We have two airplane seats in the office here, business class airplane seats. And the reason we have that is because one thing I’ve learned is that most of my best ideas come from airplane rides back from a research trip where I’m sitting across from one of my colleagues, and we’re just downloading, right? And just having a conversation that would never happen in the office.

It’s a great reminder that getting out of the office, carving out time to have conversations that you wouldn’t have in the office, can generate creative solutions to things. Whereas if you’re too gritty and just in your office with a closed door every day, you could be highly productive, but you might not be effective.

Right. And I think it’s very easy, especially in creative fields, to conflate busyness with productivity. So, having a bunch of guardrails and, frankly, just being mindful of that and never wanting to fall into the trap of thinking it’s just unproductive busyness, I guess, is something I think a lot about.

Sean: What does this look like? I don’t want to get super nuanced here, but I’m just curious. What does that look like day to day, week to week? How do you, how do you navigate that?

 

Sanjay: It’s tricky because, as great as everything I’ve said sounds, there are just fundamental tasks, like blocking and tackling, that this profession requires. You have to write up reports, analyze companies, and have meetings. However, the undercurrent of the language we use internally revolves around this notion of team return on time. We really think about how to measure productivity in fields where there’s some creativity involved, right? That’s an incredibly interesting design and incentive question to me because traditional definitions of productivity don’t quite capture it.

And I think, for us, it’s about how to pair both mindsets, getting the blocking and tackling done, but always having this notion and mindset of opportunity cost recognition.

Opportunity costs are the biggest challenge in investing. Not knowing what you’re not doing. Spelling those out and having processes for discussing those are crucial. So, in our Monday meeting, we discuss what I’m going to work on this week and what I’m not going to work on, and why.

It’s about being open about how you’re using your time and trading it off. And then, everything you do, you have to argue why it’s better for the team. We don’t want to be a siloed organization where people just optimize for their own journey. There has to be a mindset of team contribution, of making the collective better.

So, day to day, it’s a challenge. I wouldn’t say we’ve solved it, but things like Reflection Week and various artificial constraints we have can help. But it’s like a gravitational pull. If you don’t have those constraints, you’re going to wake up every day, check your phone, see the three stocks that were down 10%, come into work, analyze why they were down, call another broker, figure out what’s going on in the markets, chat with three people, and look at all your stock quotes for the day.

Suddenly, it’s lunchtime with an incredibly reactive mindset, and you’re just playing defense all the time. We’ve built a high-trust team where we can call each other out now. Like, ‘Hey, that’s expiring knowledge. That’s low team return on time.’

I think you can hold each other accountable because even when left to my own devices, I try to guard against that.

 

Sean: Looking back, do you think this would have worked the first 10 years of your career? I’m just thinking about some of that blocking and tackling. I’m wondering how much of those fundamental skills do you just have to put in the time before you can actually use some of that open space to then leverage that?

 

Sanjay: It’s a great point, and I hadn’t thought about that jump. I think unless you go through that hard journey, do the blocking and tackling, get dealt a bunch of body blows, and make a bunch of mistakes, it’s hard to truly learn. We’re big believers in learning from history, but there’s a pragmatism to it – learning something yourself is much more powerful than reading about it happening to someone else.

And I think it just resonates in a much different way. So yeah, if I had started my career here and said, ‘Hey, let’s build this platform where people are free to think differently and get better and tune out all the noise,’ people would have probably looked at me and said, ‘Okay, that’s great, but this is like an academic exercise. Come on, get in here, make a few mistakes, then let’s see what you have to say.’ So, building that credibility and going through that journey is such that I can empathize and take the perspective of a newer analyst coming in, maybe making those mistakes I made.

But it’s about sitting back a little and letting them learn, finding the balance you referenced earlier, letting them go on their own journey, and learn from those mistakes, maybe taking it in a whole different direction. You know, we’re big believers in not having all the answers. My co-leaders and I don’t claim to know everything.

So, trying to force-fit something to too precise a degree is not the way we want to go. We want entrepreneurs and innovators internally. And for people to innovate, I do think they have to go through their own journeys. So, as I think about it, I think I needed several attempts at least to gain your point of credibility and authenticity around some of these points I’ve been making.

Sean: Yeah, it’s funny, we so often avoid that pain. But usually it’s that pain that provides the most amount of light. Like, we really need to go through that failure, that hardship, to get a deeper level of clarity on things. So I’m wondering for you, what were some of those really deep, dark moments that you had to experience to get to this other side?

 

Sanjay: Yeah, I laugh because, you know, I’m kind of infamous or famous, I guess, internally for going through several midlife crisis crises.

 

Sean: So then that’s a serious strength.

 

Sanjay: Yeah, I guess. So, one fun story we like to share internally is about the time I went to a Taco Bell Analyst Day back in 2010. This was when our products were not doing well. I had just joined a few years prior and didn’t have a great level of self-confidence at that point. One of my stocks was down 30% after the market had closed. So, I went to this Taco Bell Analyst Day, and I’m wearing a suit and tie, which, for your listeners, is unusual since at WCM, we usually dress in flip-flops and shorts.

I’m in a suit and tie, and they start by showing a commercial, kind of a preview of a commercial that’s going to air about their new innovation pipeline, right? It might have been the new Cheesy Gordita at that point. They show this to a room of probably 250 investors, all looking very serious and smart. And during that commercial, I just kind of froze. It was one of those moments where I took a step back.

I looked around the room and saw people taking notes about this commercial, this new product Taco Bell was innovating, which was going to be 0.001 percent of their current revenue and just a negligible part of any intrinsic value Taco Bell would have. And by the way, Taco Bell is part of a larger conglomerate known as Yum! Brands.

So it was complete noise, right? This commercial was not a relevant piece of information. Yet, there were 250 people in the room taking themselves seriously and taking notes, which is bad enough. But guess what? There I was, taking notes too. It was a moment of fear of being a fraud.

At that time, I would talk about all the same things we’ve discussed today – biases, platform, and all this abstract, aspirational way of how I would build a research culture and a research team. Yet, I was still doing what everyone else was doing.

So that hit me. Wow, I’m kind of a fraud right now, right? I’m saying all these things, but I’m doing what everyone else is doing. And it set me on this journey of intense self-reflection. I asked myself, ‘What am I doing with my life? Why am I spouting all these things but not acting in a way that’s in accordance with how I say I want to spend my time? How should I even think about time as it relates to investing and how one should spend their time?’

And it made me realize that investing is one of those professions that, along with a handful of others, have a quotient of creativity to them, where it’s hard to evaluate talent, hard to know if you’re any good, and where process and outcome are very hard to correlate. There’s no defined playbook on how you should do your job.

So then I went on this journey of just thinking about that and understanding, ‘Wow, this is really interesting.’ In all these fields where there’s some creativity involved, you’d think it’s a blank slate, right? So you have this wide canvas to be creative. There would be so many different ways people do things, right?

There would be high variability in how people work and behave, but it’s the exact opposite. Counterintuitively, everyone, when you look around, is doing the same thing, saying the same thing, acting the same way. And so that, really, Sean, I don’t think has ended. It’s been a 15-plus year journey of peeling back that onion.

Like, ‘Hey, why, if this is a creative industry, why do people behave so similarly? Why is it paradoxically an uncreative industry?’ And it’s kind of resulted in a lot of the solutions I’ve come up with by going through that pain of making those mistakes, reflecting on it, and just iterating on how we could build something different here.

 

Sean: Correct me if I’m interpreting this wrong. You go through a pain, you have a setback, you end up asking yourself a new question and then what it seems like you do really well is you reframe it to a more interesting question. Is that what I’m hearing?

 

Sanjay: Absolutely. Yep. Yeah, I think reframing is crucial. You know, I often think that if I could teach my kids two superpowers, one would be reframing, and the other would be what I call counterfactual balance. I believe these two things are incredibly important. Reframing is especially crucial in investing, where you are constantly dealt setbacks.

And if you let those setbacks get the best of you and bring you down, it’s going to be a problem. So, in periods like that, I’ve found myself to be adept at reframing, which might come from the optimism point I made earlier. I always try to reframe and think, ‘How can this end up being a positive five or ten years from now?

Sean: Can you just walk me through how you teach that to your kids?

 

Sanjay: I don’t know if I have succeeded yet, so I think I always try to reframe things. For instance, when it’s raining outside, I say, ‘Yeah, we get to go play in the rain and do X, Y, Z,’ or ‘Yeah, we get to have a family game night.’ So, I think anytime there’s a complaint, you try to immediately and instinctively turn it into gratitude.

It’s like saying, ‘Here’s why something good can come out of this.’ So, I think I’m almost intrinsically, or rather instinctively, responding to each issue like that with optimistic reframing. But it’s interesting, Sean. Have you found that every kid is different? You have three kids now, and some of them are just hardwired to view things in a different way.

You have to almost coach them out of it, whereas others are more receptive to reframing. So, it’s an interesting journey, this parallel journey, I guess I’m experiencing on the parenting end.

Sean: Yeah, one of the things I’ve noticed about leaders, moving beyond the context of kids and reframing, is their ability to instantly jolt themselves into a new level of awareness. This prevents them from spiraling downwards. I think it’s common for people to perpetuate negativity, finding it difficult to break free. The best leaders, however, use reframing as a tool to open up their minds to new possibilities, allowing them to move forward out of that downward spiral. It’s a technique that I’ve observed in effective leaders, and I understand that it’s practiced at WCM.

I’d like to delve deeper into another topic you mentioned. You said there are two things you’d teach them, one being counterfactual balance. Let’s expand on this.

Sanjay: Yeah, it’s interesting. You asked about some of the guardrails I have. And, you know, it’s dawned on me in life that there’s the counterfactual, just like alternative scenarios I could have played, right? So, kind of the opportunity cost idea. There are upward counterfactuals, which are like, ‘How could things have gone better?’

And there are downward counterfactuals, which are like, ‘How could things have been worse?’ It’s dawned on me over the years that we, as humans, constantly see triggers for upward counterfactuals, right? Like what could have gone better? You’re stuck in traffic on the way to work, and the lane next to you is moving much faster.

You notice that, get annoyed, and switch lanes. You’re in a grocery line, always in the slow-moving line. You come home and talk about it. You never come home and say, ‘Oh, I was in the most normal-moving line or the fastest-moving line at the grocery store,’ right? That doesn’t dawn on you at the time because you don’t see what downward counterfactuals are. They are non-events, by definition, for the most part.

So, you’re just constantly battling on an uphill treadmill, being inundated with these kinds of upward counterfactuals throughout your day, of what could have gone better, and it almost acts as an impediment to happiness. And to the point of being hardwired, I think I was just always naturally hardwired to be sensitive to upward counterfactuals.

‘Oh, we missed this stock. We should have bought this stock. It went up a lot. Yeah, it’s going to really bring me down,’ right? I’m not talking about, ‘Wow, we missed this other stock, and it went down 80 percent,’ right? I’m more sensitive to the upward counterfactual. So, I’ve made it a point in my own life to be more aware of downward counterfactuals.

What could have gone worse? Bring them to life, both at work and at home. And just talk about them more, right? So, try to introduce downward counterfactuals, surface them, create them if need be. Yeah, I think there’s this study, and I think it’s somewhat of a contested study, but you know, when they analyzed Olympic medalists, right?

They found that bronze medalists were happier than silver medalists, which is a counterintuitive conclusion, but they hypothesized it was because the silver medalist was engaged in an upward counterfactual, ‘Oh, I just missed getting gold by two seconds,’ whereas the bronze medalist is instinctively confronted with that downward counterfactual.

‘Yeah, I was two seconds away from getting nothing, no medal at all,’ right? So, there’s a different trigger there. You just get a level of happiness and contentment. So, about it, I think it correlates with the reframing point we talked about, but just bringing in, I think humans are just not good at one thing, and that’s non-events, things we don’t see.

When you’re sick, you’re complaining, ‘Oh, I can’t wait till I get better.’ You never wake up saying, ‘I’m so happy I’m not sick,’ right? So, it’s really hard, and I’m not perfect at this at all, but just finding ways to tip the scales a little more balanced, so you’re not always letting those upward counterfactuals get you down.

Sean: I’m always intrigued by this journey where people cross over another one of these invisible thresholds, transitioning from knowledge to wisdom around certain things, and it’s clear they’ve attained a level of mastery, whether it be intellectually or skill-based. And thinking about this in relation to you…

You mentioned bringing in those counterfactuals earlier. I’m wondering if doing so would have diminished some of that innate drive. The drive where you think, ‘I could have done this better, I could have pushed further here.’ It makes me think about those bronze medalists. I wonder if they would even be on the podium if they hadn’t dreamed of gold.

So, I’m curious about how you navigate that, especially when thinking back to people earlier in their career and introducing these concepts to them.

Sanjay: Yeah, I think everyone’s different, you know. Because I’m hardwired in a way that makes me highly sensitive to upward counterfactuals, I don’t need that; I need balance on the downward side. There are other people who view things the other way and maybe they’re not as driven or passionate about self-improvement. They want to self-improve, but it doesn’t keep them up at night, right?

So, they might need more in the way of upward counterfactuals. I think it’s about finding a pragmatic balance because what you’re optimizing for is both the short term and the long term, right? You want that journey, that sharp arc of self-improvement, but you also want to be durable.

You don’t want to get burned out just because you’re so consumed with the negativity that upward counterfactuals could bring, which could eventually lead to flaming out. But you also don’t want that complacency where, if you didn’t care about that at all, you’re just going to kind of waste away.

So, I think it’s about having self-awareness and being very attuned to who you are intrinsically, and then figuring out if there’s a balance to be had. That’s how I think about it. And every person is a little bit different. It’s also a pendulum that swings, right?

I think over time, you can overcorrect one way or another.”

Sean: This has me thinking about the strategic thinking that WCM has put into the Reflection Weeks. I think you said you guys do that twice a year. I’m just wondering what that looks like, and what you hope comes out of that.

 

Sanjay: Yeah, so it’s number one is open-ended. We’re not too prescriptive about what you need to do. The key point is a mindset of reflection, right? Because again, you’re drawing guardrails in an industry where, this week, most people would just be reading earnings transcripts 24/7, right? It’s earnings season. So, creating the notion that this is for reflection, for looking backward in the spirit of getting better, is vital.

 

One thing we do mandate during that week, from a process point of view, is what we call a ‘return on time audit,’ where everyone looks back over the last six months and talks about how they spent their time. They discuss what were the highest team return on time activities they did, what were some of the lower team return on time activities, and upon reflection, how they would like to change their return on time over the next six months, actions, like a game plan for doing so. This becomes almost a blueprint for how people are thinking about their own time and the team’s time.

We didn’t know this going in, but it turned out to be a great mechanism for self-accountability. Now you have this document; you would look back six months ago and say, ‘Wait a minute, I said I was going to do this, and I didn’t execute on it at all.’ And sometimes there are reasons why. But in many cases, you just didn’t execute to the standard you held for yourself.

That team return on time audit usually takes a day because most people here journal, and they kind of track how they spend their time. We have built an app internally where people log every decision they make in the spirit of getting better, so we have tools to help that process. And then beyond that, it’s open-ended, so you know some people do case studies where they look back and analyze a bunch of recommendations they made and share what they learned.

They could do a thought piece, like ‘Here’s how I grew as an investor.’ I wrote this thought piece about the notion of curiosity and, you know, if there’s something as passive curiosity versus active curiosity in my last reflection week. Some people have written documents on ‘What it’s like to work with me,’ so to get a lot of that noise and friction out of the way. They discuss their pet peeves, how they like to work, how they like to have meetings, and so on, so we can understand each other better and have a shortcut to getting to that point. So, it’s pretty open-ended, but the only mandate we have is the return on time audit, and we really want to walk by someone’s desk and not see them reading the latest transcript or what have you. We try to hold ourselves accountable to the spirit of reflection.

 

Sean: You said in the last one, you put some thought into active curiosity versus passive curiosity. Can you share your ideas around that?

 

Sanjay: Yeah, it’s still something I’m kind of wrestling with, Sean. It dawned on me recently that almost all financial analysts are curious, right? I mean, if you just hire for curiosity, that’s not that effective of a filter. But I think there’s a danger in passive curiosity, which manifests in a few ways.

So, I’ll define active curiosity as taking agency over your learning and then communicating in a way that pushes the ball forward, right? In many learning organizations, which is what we’re trying to build at WCM, there’s a temptation to take the tack of learning by osmosis. So it’s like, ‘Hey, invite me to a bunch of meetings. Let me join group trips. I’ll consume a bunch of email flow, and I’ll get better.’ Right? And I think that’s almost a passive manifestation of curiosity. It might sound harsh, but it’s almost extractive.

You’re viewing the team as there to serve you, as opposed to you serving the team. There has to be a balance there. It dawned on me that we just had a few people here who are highly actively curious. They learn with a very proactive mindset. They don’t wait for others to come to them or for that learning to come to them.

They just carve out time to get up to speed on the whole portfolio, even though that’s not their mandate. They’re just intrinsically interested in what other people are working on. They proactively ask questions as opposed to waiting for a meeting. So, they really think about that give and take balance as it relates to agency over learning.

One of the things that started to annoy me a bit was seeing people just put thoughts out there to get their own thoughts out there, right? As opposed to thinking, ‘There’s an email chain before you. How can I take what’s come before me and build upon it or redirect it?’ As opposed to just getting my views out there, throwing out a big-picture question without making any effort to push the ball forward or come up with even a fledgling solution.

So, early this year, I kind of decided, ‘You know what? There’s probably a point to be made here.’ One of the outcomes of that was to make our meetings much smaller, right? Because I thought we were devolving into a situation where everyone’s just showing up because they want to learn, but it’s a noble intent. There’s no hidden agenda. People legitimately want to learn, but it’s creating almost a hidden tax on the system.

You know, I’m sure you’ve thought about the meeting sizes and some of the issues it creates. But I think because we had created that culture of learning and osmosis, it was a bit of a challenge trying to make those changes. And I think putting this thought piece out there on active curiosity helped elucidate why it got to a point where we felt like we did have to make those changes.

 

 

Sean: The idea to write that piece, I’m wondering what other questions do you gravitate towards to spark new ways of thinking for yourself?

 

Sanjay:No, it’s funny because there are times when I think it’s very hard to force-fit creativity. You just have to create a lot of space without stimulation. Probably my most creative period, Sean, was when I lived up in Santa Monica and drove down to where our offices are. I did that drive every day, right? This was before I knew about podcasts. So, you just had time to think, right? And I found myself being highly creative. It’s like going on an airplane and not using the WiFi. I was on a five-hour flight the other day and came back with a couple of really creative nuggets.

So, in my mind, it’s about immersing yourself in the world and then almost taking a step back, zooming out, and just thinking about creativity. There were times, like last year, when I didn’t think I was very creative. I didn’t come up with many novel ideas. This year has felt a lot better, right?

And why is that? Did I do anything different from a design standpoint? I’m not sure, but I never want to get to a point where I feel like I’m forcing content or thought pieces out there that aren’t authentic. So, what I like to do is just have a notepad or Evernote, and jot down a bunch of fledgling ideas or thought pieces that come to mind. Most of them never see the light of day. Then, a few will have two or three things reminding me to add to them over time. And it hits a threshold where I say, ‘You know what? This has reached a point where I think there’s enough substance here to turn it into a piece, and it merits the time I’m going to ask from everyone to read it.’

It comes in fits and starts. I wish it was more consistent. But, I would say there are times like this year where it’s felt a lot more free-flowing as far as creativity goes.

 

Sean: Have you ever zoomed out over five, 10 years to see if there’s any commonalities or patterns to the time of year that your insights seem to spark the most?

 

Sanjay: I have not.

 

Sean: That might be an interesting one for you to explore. I’ve found certain correlations with that among different people. Let’s call them different types of creative energy at different times of the year.

This pattern seems to be pretty resonant, which would be a fun one to look into. But I’m also intrigued because you’re so intentional with your time and your return on invested time. Additionally, you have these fun explorations into creativity. At the beginning of this conversation, you mentioned reading an interview with Bill Lawrence.

I’m intrigued as to why you’re reading an article about a showrunner when you’re so driven to improve your investing ability.

Sanjay: Yeah, I think it is hard to convey this in a way that will resonate with everyone. But, you have to, you know, one of our core values at the firm is fun, and I think when you decompose creativity, having fun is part of it. When you have fun, like when you watch a YouTube video, for example. You’ve read the book ‘Creativity Inc,’ right? Ed Catmull talks about how, in many organizations, if they see a group watching YouTube, they’ll snuff that out and say, ‘Hey, guys, get back to work.’ But a lot of creative moments come from that time.

In investing, what’s fun is that you can borrow from all walks of life. If all I did was be very insular and think about best practices in this industry and how to create the best investment firm, being blind to other fields of knowledge, I think that does a disservice.

So, looking at how other creative people think in different industries, how people have gotten to their position, and trying to connect patterns is important. The commonality there, which drew my attention, was media. Take Bill Lawrence, for example. That’s a highly creative industry. It’s easy to draw lessons from my process-driven industries like business systems, which are very cut and dry. But how can you also intelligently borrow practices from more creative industries?

That’s how I’m wired. Part of it’s intentional, and part of it’s just making sure you lay the groundwork for having fun and letting something come out of it. If you get too consumed with personal productivity, in my view, it just becomes a different form of busyness. So you have to be intentional about what you mean by productivity and how you’re measuring it. If you don’t allow for some of that softer work, like reading about things that 90 to 98 percent of the time won’t have any payback, you’re going to miss that one or two percent that leads to those breakthrough moments we talked about.

 

Sean: Have you read Rick Rubin’s new book?

 

Sanjay: I have, I have, I enjoyed it.

 

Sean: I’m just curious about your thoughts on that.

 

Sanjay: It’s interesting, right? That’s a highly creative field. He talks about things like just having a clean slate as it relates to any roles, right? And about thinking from a true first principles mindset. You know, listening to his podcast here and there, and reading that book, it’s refreshing. It’s almost as if at times in his career, he just kind of rebuilt everything from a clean slate. Like, forgetting everything I’ve learned, let’s take this in a new direction. And all the important stuff you’ve learned will filter back in, but you’ll cut out a lot of the bad habits and nonsense that’s been practiced.

When you look at his success, obviously over a long course of time and across different genres, there’s definitely something to be learned there. There were things in the book where I was like, ‘I don’t really know how to apply this,’ but there were definitely nuggets that were quite interesting.

 

Sean: Yeah. There’s a depth, almost a spiritual element to his exploration and creativity. He also throws in a lot of constraints, like he mentioned, he’ll throw in different times and beats and things like that too, to navigate it. So if you’re interested in creativity, that might be one to explore. I am curious for you though, do you believe you need a deep love of the craft you’re in to become great at it?

 

Sanjay: I do, Sean. I think it’s a non-negotiable. You know, if you don’t really love what you do, like the notion of active curiosity, when it works, it’s because it comes from a place of authenticity. You’re so curious, excited, and passionate about the field you’re in that you’re willing to go the extra mile, work on a weekend, whatever it takes. You’re going to have dreams about the industry. It just consumes you, right?

I think, yeah, I’m sure there are people who’ve done very well without that passion. So I don’t want to say it’s an absolute, but I’d say you’re much better off if that’s your starting point. If you give me people who are passionate and self-aware, we can work with them. Those are the two critical ingredients. I even use the term ‘loves’—like you really love what you do. Right. Many people like what they do, which can get you to a good place, but there’s probably a ceiling there. If you love what you do, I think the potential is, in many cases, limitless.

 

Sean: How did that show up for you in the early days? How did you know, or were you still just kind of, you know, tapping your cane in the fog in the early days, trying to figure it out. And then all of a sudden you realize there was a certain depth of love you had for the craft.

 

Sanjay: It more came from the fog, you know. I think I knew I liked it and it was intriguing to me. There were some things that really resonated with me. And then, you know, where we started with this idea of investing as a platform for self-discovery. When I realized, ‘Wow, this is tremendous. I get to learn so much about myself, magnify what’s good, try to fix what’s bad.’ It almost became a passion project, right? And it was clearly about building portfolios and generating performance for clients. But having a parallel journey that contributed to that, which was about trying to figure things out as they related to myself and building a team that can stand the test of time and really conquer the base rates of the industry.

From a design standpoint, I’ve just become incredibly curious and passionate about how to solve for some of those challenges that are just intrinsic. So, I would say I always liked the industry. I’m not sure when it tipped to love, but I would say it’s been at least a decade since I felt, ‘You know what, I can’t see myself doing anything but this.’ It’s just too interesting, and the problems and opportunities come in ever-changing shapes and sizes, so it’s hard not to keep that heartbeat going.

 

Sean: You sent me over some notes as we were preparing for this conversation. You said game selection and design. I’d love to know what you want to dive into there.

 

Sanjay: Oh, it’s, you know, in some ways a Kobayashi reference I talked about. It’s just about making sure you design your game in tune with who you are, where you can differentiate yourself, and then build a toolkit that’s highly aligned with that, right? So, for us, it’s about the long term. We play a long-term game, right? And so we have long-term capital, which is an advantage because we’re very candid with clients. We’re transparent on the front end about what we’re going to do well and where the environment will be tougher for us.

So, making sure with that long-term timeframe, you have a toolkit that enables long-term performance. For instance, if you were trying to outperform the market every quarter, or let’s take an extreme, every month, you would need an incredibly broad toolkit. You’d need to pivot your portfolio every month to catch the flavor of the day. That’s fine for some managers. I don’t ever say there’s one way to do things, but you need alignment. What tools you have should align with the game you’re playing. If you’re playing a longer-term game, you can have a more narrow toolkit. If it’s too narrow, then you run the risk of it being the right toolkit at the right time, and when the world changes, you’re out of luck.

So, it’s about being pragmatic about what game you’re playing. Do you have a toolkit aligned with that? Do you have a capital base in our field that’s aligned with that? And then, what are you trying to do on a day-to-day basis? If you’re just doing blocking and tackling, how does that align with the kind of game you’re playing? Is it truly sustainable? Are you balancing blocking and tackling with research and development, building compounding knowledge that makes the whole team better and creates durability?

How do you incentivize people based on the game you’re playing? The way you keep score defines the game you’re going to play. We always want to create luck. I’ve read a great quote: ‘Luck is a residue of design.’ So, how can you design your organization in a way that you expose yourself to good luck, to good fortune over time?

For us, holistically, and for me, holistically, it’s about thinking about game selection. We were in a very privileged position early on. Not to get too in the weeds about investing, but we picked a game that didn’t have much competition. Non-US growth at the time we launched in 2004 wasn’t a very competitive field. It’s the best possible scenario when you have something that’s differentiated in a field where there’s very little competition. You’d love to tap as many veins like that as you can.

That notion of game selection, being very mindful of it—it’s again about zooming out before you zoom in. What’s the game you’re playing? Do you have a toolkit aligned with that? How are you keeping score? Just asking these questions. Being mindful of that, I think, is really important in any walk of life.

 

Sean: You said you want to increase the luck. How do you strategically do that?

 

Sanjay: Yeah, that’s a great question. I think for us, and this doesn’t have to be for everyone, it’s about having an entrepreneurial nature. So, taking risks, capitalizing on things that come in front of you with a positive, optimistic mindset is important. I’ve noticed, and I see Paul Black talks about this a lot, that many firms get too caught up in a vision. They have a five-year vision of what they want to be, and if they’re too laser-focused on that vision, they can miss what’s right in front of them. Opportunities that are right in front of them get overlooked because they are too focused on where they want to go in an abstract sense.

Having a firm that plants a lot of seeds, and invests in long-term research and development, without being too strict about near-term payback periods, is our approach. We plant a lot of seeds, maintaining some guardrails for accountability, but ensuring we’re taking various kinds of bets. And this isn’t just about the portfolio; it’s about different initiatives to improve our research process and philosophy. There are many examples where we incubate ideas, allow them to build ownership around them, and let people run with their ideas. I believe one thing we’ve done well is really building an entrepreneurial culture.

This approach, in many ways, tips you towards good outcomes, or fortune, when something does spring to be something big. You’re there because you focused on it, maybe even when it wasn’t popular. That’s important. And then, some of the stuff we’ve already talked about, like reflection, carving out time for creativity, almost by definition, will tip you towards being lucky over time.

 

Sean: Yeah. You mentioned Paul Black. He was back in episode 312. Excellent episode. I still get a lot of emails about. So if you guys are interested in that, check that out. I’m curious, Sanjay, you mentioned that entrepreneurial drive and that spirit within the firm. And you said you built that. Can that be built by bringing in people without an entrepreneurial mindset and developing that?

 

Or does it have to start with them being hardwired with an entrepreneurial spirit and they get thrown into the system?

 

Sanjay: Yeah, it’s an interesting question. I think you can certainly nudge people, especially those who might not believe in themselves enough to take those entrepreneurial bets, or who might be a bit more risk-averse. I believe you can nudge them out of that mindset. Especially in investing, where people are sometimes sabotaged by a lack of innate creativity.

When interviewing or hiring someone, it’s important to notice if they say things that surprise you or show some entrepreneurial bent. Maybe that’s been quashed in the firms they’ve worked at, but is there some fire there? That’s important, even if it hasn’t manifested itself in high levels of entrepreneurialism.

In our hiring process, we need some element of betting on oneself and taking risks. We focus more on the arc of a person’s career trajectory rather than the school they went to or the number of qualifications like CFAs they have. It’s about where they started and where they are today, how they’ve bet on themselves.

I think you can nudge certain people into a more entrepreneurial mindset. However, it’s quite challenging if there’s no evidence of any inherent drive or passion along those lines to really create something substantial from it.

Sean: Yeah. We’re going to wrap up here in a few minutes, but I’m curious, what else are you trying to tease out in that hiring process?

 

Sanjay: Yeah, Sean, as far as the qualities we look for, the non-negotiables would be people who truly love what they do, particularly the craft of investing. Self-awareness is critical, and given the industry’s ups and downs, resilience would be the third essential quality.

When it goes beyond that, I’d jump to our research team’s core values. The first one is ‘Think Different’, which, during interviews, I evaluate by keeping a tally mark every time someone says something that makes me think, ‘Oh, that’s interesting.’ Whatever it is that prompts that reaction, I believe, correlates well with the ‘Think Different’ mindset.

The second core value is ‘Get Better.’ For me, this involves scoping out the trajectory of the person’s journey. I’m much less concerned with pedigree or credentials; what’s more interesting is the slope of where that person has come from over time and how they’ve grown.

The last core value is ‘Make the Team Better,’ which can be challenging to distill. Many people in this industry have been trained to optimize for themselves. However, in our culture, it’s crucial that people wake up thinking about how they can make the collective better. Some of the qualities we look for include active curiosity, of course, and a founder’s mentality, where people, regardless of their literal ownership in the business, act and feel like owners of what we do.

The last point is, as we alluded to earlier, a strong preference for an entrepreneurial gene. WCM is a bit of a ‘choose your own adventure’ type journey. If you want a defined role, you could have it, but we tend to prefer people who push the boundaries of their scope of work and really reinvent or invent their own roles over time. That captures a lot of it. Our processes are very methodical in terms of hiring and evaluating talent, but those are several of the qualities that immediately come to mind.

Sean: So Sanjay, say you could not invest. You had to walk away from WCM for the next three years. What would you love just spending time on over the next three years?

 

Sanjay: Yeah, I’m a huge sports fan and there’s always, you know, I love that world. It’s got comparable components to what we do. So if you, if I wasn’t investing and you made me a general manager for a basketball team or something, I’d probably, I’d probably enjoy that.

 

Sean: What insights do you have that you’re not seeing general managers execute on right now that you would bring into your organization?

 

Sanjay: You know, I think we’re starting to see the scales tip towards thinking differently. Many industries, including sports, are still stuck in the past. We began to see the Moneyball phenomenon, where people started to think differently and introduced more first-principles thinking.

But even simple concepts, like Michael Mauboussin discussing, ‘If you’re an underdog, you should introduce luck into the game. If you’re a heavy favorite, you want to simplify the game as much as possible.’ I think that’s a highly intuitive, pragmatic take. So, if you’re a team and you’re a 20-point underdog in a football game, you should probably try some off-the-wall strategies to create complexity and luck, potentially tipping the scales in your team’s favor.

You’ve seen this in Super Bowls, like when the Eagles did an onside kick to start the game. In my mind, you don’t see enough of that. In tennis, for instance, if you invented an artificial intelligence player, they would probably play the game dramatically differently than how it’s traditionally been played. They might frequently use unpredictable drop shots, serve in unusual ways, and create a variety of angles and elements. But tennis is a sport so steeped in tradition and a certain way of playing that it’s been resistant to much change.

I’m always intrigued by what these sports would look like if you really applied first-principles thinking to them. Who knows? I’d probably flame out in any of these fields, but it would be an interesting journey to try. And if I didn’t venture into that, I’d probably be an entrepreneur of some sort.

 

Sean: Well, you’d definitely be thinking differently. So, Sanjay, final one here. Say you could do this, sit down for a long form interview with anyone dead or alive, who would you love to sit down with and just ask questions of.

 

Sanjay: Okay. I guess I’d choose someone whom people admire, Sean. The people I admire are probably those who have been successful and yet remain very humble. So, since we’re talking about sports and it’s top of mind, take Carlos Alcaraz, for example. You look at that kid, just in his early twenties, and see how humble he is. He’s the number one player in the world, I think, or at least was. Just consider how he reacted to his US Open loss, saying in his interview something like, ‘This just taught me I’m not up to snuff. I need to get better.’ That’s next-level thinking for someone of his age. I’m sure you could learn a ton just by talking to someone like him. Plus, it might be fun. He seems like a really positive, energetic young guy who has a lot ahead of him.

So that’s one person who jumps to mind.

Sean: Sanjay, this has been great. I think we’ve only hit the tip of the iceberg here in topics. We could explore that and I would love to at some point, but where do you want the listeners to stay connected with what you guys are doing at WCM?

 

Sanjay: Yeah, I think we are. At WCM, we’ve been on this journey, starting from being a more insular firm to now becoming more of a known entity. But yes, we’re out there. We’re on LinkedIn, and we do a few podcasts here and there. We don’t engage in too much media, but we’re always hiring and looking for great people opportunistically. If any of this resonates with anyone, feel free to reach out. I’d love to chat.

Sean: Well, thanks again.