Transcript:

Sean DeLaney  Robert, I’m always interested in the concept of practice in people’s work. You think about a basketball player taking jump shots, a pianist practicing scales. I’m curious, in your craft, do you have a form of practice, something you do every day that you think is foundational?

Robert Hagstrom  That’s a great question. I’ve never been asked that. Way to start off the interview. Being a writer, writers have to read, and reading always helps you become a better writer. So I read all kinds of different things. If I were to answer the question, Sean, I’d say that for writers there are two levels of practice. One is that you need to keep reading, because reading helps you think about words and sentence structure, and you pick things up in your reading. And then there’s the act of actually writing. I try to write about a thousand words a day. I’m usually working on different projects: commentaries for the firm, a chapter for the Value Investing Association that wants to put out a book on value investing. So reading and writing every single day is the practice of what writers do, in my judgment. It’s not structured. I just wake up, I read, and I’m usually going to write something during the day.

Sean DeLaney  Has the way you interact with books, or even your writing, evolved over time? What I mean is that earlier, I’d read a book straight through, but as I got more experienced I developed more of a relationship with a book. There’d be notes, I’d go over them again, I’d pull out the key ideas. I’m curious how that process has evolved for you.

How to read a book, the Mortimer Adler way

Robert Hagstrom  That’s also a great question. When I wrote a book called Investing: The Last Liberal Art years ago, which was about investing from a multidisciplinary perspective, I did a chapter on reading and literature. I came across a book I thought was fascinating: Mortimer Adler’s How to Read a Book. Adler was part of the Great Books program at the University of Chicago. The book was published in 1949 and became a New York Times bestseller. This was before television, so people actually spent part of the day reading. He had a very interesting strategy, Sean. He said that when you pick up a book, you have to make a decision early on about whether it’s worth your valuable time. Before I read Adler, I would take a book and read it slowly, carefully, dutifully. I’d highlight it and make notes. Adler’s argument, which I then embraced, was that you don’t yet know whether the book is worth your time. So he divided reading into different strategies. The first he called intelligent skimming, where you rush through the book quickly. You might read the preface. I go straight to the bibliography to see if there are books there I’ve never heard of. I’ll run through the footnotes to see if there are sources I’m familiar with or not. I’m trying to get through it quickly to decide whether the book warrants a real read. If I decide there’s something interesting, then I’ll move through the book fairly quickly. I don’t sit down and take a lot of notes. I might have a highlighter so I can go back and mark it up. In the old days I wouldn’t touch a book. I thought they were holy relics. Now I have highlighters and pens. Adler says make the book your own. After that second stage, I’ll know whether I need to do the deep dive. That third pass through is when I probably do what you’re doing: an outline, note-taking, really absorbing the book. It sounds like a lot of work, but what you’re doing is eliminating a lot of books that don’t deserve hours of your time. As you get older, you appreciate that you don’t have as many hours as you used to, so you’re always looking for ways to increase productivity. Adler’s book taught me how to move through books quickly at the onset, and then let me know whether the book actually deserved an intense read. Sometimes I’ll buy a book on Kindle and go right through it, but if I think it’s worthwhile, I’ll buy the hardback. I’m always trying to increase the volume of what I’m reading without getting bogged down in any one book. Let me ask you a question. Have you ever finished a book and thought, what a waste of time?

Sean DeLaney  Luckily, I learned the valuable lesson that if it’s not connecting, I’ll move on pretty quickly. I never had the issue of staying with a book too long.

Robert Hagstrom  That’s how I am too. I’d finish a book and think, man, that wasn’t worth eight hours, or two hours today and three hours the next. It just wasn’t worth it. It’s got to resonate quickly. The light bulbs have to start going on. If not, I just move on.

Sean DeLaney  One thing I’ll do, and I was telling someone this yesterday, is go on Goodreads. If I find a quote I like from a book, I’ll go through Goodreads and check the language and sentence structure of how the author communicates. If it connects, that’s a quick way for me to assess and then move in. You might laugh at this, but you mentioned your book title. The book was originally titled Latticework: The New Investing, and then it became Investing: The Last Liberal Art. Is that right?

The “Latticework” title story

Robert Hagstrom  You want the story. I love that book. First of all, it’s a great story. The title came from Charlie Munger. When he talked about the art of achieving worldly wisdom, he talked about building a latticework of mental models. So I convinced the publisher to call it Latticework, as a familiar word association for Charlie Munger. I figured all the Berkshire people would pick up on it. Two things happened. The title didn’t work at all, and the book came out in the spring of 2000, right at the beginning of a bear market. So, two quick lessons: don’t let authors title the book, and never bring out an investment book during a bear market. You could write a Nobel Prize-winning book, but if it’s in a bear market, nobody’s interested. My publisher was stuck with a ton of these hardbacks, and he had the clever idea of ripping off the hardback jacket and slapping on a paperback that said Investing: The Last Liberal Art. And the book sold out. It came out a couple of years later and did so well we had to do second printings. If you go back to the original paperback of Investing: The Last Liberal Art, and you open it up, the pages at the top still say Latticework, because he just slapped a new cover on it. Then we did a second edition of Investing: The Last Liberal Art, and that book did very, very well. So, I’ll repeat myself: don’t let authors think they know how to title a book, and look at where you are in the market. In a bull market, bring out a book about investing. In a bear market, wait until it’s over.

Sean DeLaney  I’m curious how you think about this, because it’s one of those things I wrestle with. Your book is about reading and developing that latticework across multiple domains and big ideas. I get this tension a lot with the investors I work with. How do you know how much time to allocate toward studying your craft, the actual X’s and O’s, the blocking and tackling of investing, versus reading history and philosophy? I’m curious how you toggle between those.

Exploration vs. exploitation

Robert Hagstrom  There was a man named John Holland, a computer science professor at the University of Michigan, a really bright guy who was part of the Santa Fe Institute. When I worked with Bill Miller at Legg Mason, we spent a lot of time at the Santa Fe Institute in New Mexico studying complex adaptive systems. It’s a multidisciplinary organization: biologists, physicists, computer scientists, people in psychology and philosophy. It’s a wonderful place. John Holland made the argument that you have to find a balance between exploration and exploitation. You want to exploit what you know and what you’ve learned to do your job, in my case, invest in the market and seek out excess returns. But in order to stay smart, because markets are biological systems, they’re learning systems, people get smarter over time and figure out new things, you have to allocate some time to exploring for new ideas. He didn’t put out the math and say you should do 30 percent exploring and 70 percent exploiting. But I’ve gotten to the place now where I’m about 50/50. I’m aware of the newspapers, the headlines, the earnings reports. But taking in that information hasn’t increased my wisdom or my ability to do things better. It’s just information, which we need in order to think. The exploring part, I try to spend maybe half a day if I can, at night, or sometimes I’ll catch up on weekends. Weekends are great for exploring new ideas, and I’ll go anywhere and everywhere for them. I go through history, biographies, biology. I’m reading Herbert Simon’s autobiography right now. Bill Miller used to say you’ve got to be intellectually promiscuous. You’ve got to be willing to go to different places, different books, different ideas. And again, using Adler: is the book worthy of my time? But I do try to have a 50/50 world of exploring for new ideas alongside exploiting what I already know and doing my job. That’s how I think about it.

Sean DeLaney  I’d love to hear about your process and evolution. You used the phrase “I found my own way” a minute ago. One of the themes throughout the books you’ve written on Buffett is his ability to find his own way, to go down and paint his Sistine Chapel every day. I’m curious what you’ve learned, studying people and looking at yourself, about your ability to find your own unique, idiosyncratic style in life.

Finding your own way: Buffett, Munger, Miller

Robert Hagstrom  I didn’t dream it up. I don’t know if anybody dreams this up. Basically, I took Warren Buffett’s advice, which was to find the really successful people you admire who are good in your chosen field, and then learn everything you possibly can about them. So obviously I spent a lot of time on Buffett: all the annual reports, the companies he had invested in, the magazine articles. I was like a kid following a ballplayer. I did the same thing with Charlie Munger. Charlie came a little later, because I was so consumed with Warren in the early 1980s. But when Charlie did his lectures on the art of achieving worldly wisdom and the psychology of misjudgment, I started spending a lot of time on him. Charlie’s view was that the really successful people in life are readers. He said he just didn’t know anybody who got to a high level of success who wasn’t a good reader. That stayed with me. I thought, if I don’t read new things, I’m only going to be as smart as I am right now. And if I’m only as smart as I am right now, as young kids come up and markets evolve and adapt, it’s very Darwinian. To stay on the curve in this competitive business, you have to be a learning machine. Then I’d layer on Bill Miller. He was the only mutual fund manager to beat the market fifteen years in a row. Bill was at Legg Mason Capital Management, where I started as a broker, then left, wrote The Warren Buffett Way, and came back to work with him. He was a liberal arts major and did his PhD work in philosophy at Johns Hopkins, all but the dissertation, and he was a great reader. So I had the chance not only to learn Buffett and Munger, which was like writing a dissertation on these successful people, but then to do my practicals with Bill Miller. I saw how being a multidisciplinary, diversified thinker paid off. I was very fortunate. I wrote my dissertation, so to speak, on one of the greatest investors, studied Charlie Munger deeply, and then did the practicals with Bill Miller. I looked at that and thought, this is the payoff. I could see it. So I benefited in these two ways.

Sean DeLaney  I think one of Buffett’s children said his dad was the second-best thinker, behind his friend Charlie Munger. Do you have a take? Does one top the podium?

Robert Hagstrom  Charlie’s the better thinker, because he’s more multidisciplinary. Warren was the better investor, because he was so good at it. He got to levels of gradation in a company and its management. He could read documents, 10-Ks and 10-Qs. Warren’s eyesight is failing him now and it’s harder for him, but he would read six, eight, nine hours a day. He didn’t have clients like I do. I have advisors, and they’re my clients, so we spend a lot of time in conversation. But I remember talking to Debbie Bosanek, his assistant, and she said, Robert, he comes in at seven-thirty or eight in the morning and leaves at four or five in the afternoon, and I swear all he does all day is sit in his chair and read. So it came to me, and Charlie really trumpeted it, that if you’re going to stay competitive, you’d better be reading, and not reading for information. When I work with college kids, they’ll tell me they read the Wall Street Journal today, or Fortune. I say, all you did was get information. I’m not sure any of that made you wiser or made you think differently. The market creates tons of information, and you’ve got to lap it up and be aware of what’s going on. But being aware of what’s going on isn’t getting you smarter. The way you get smarter is to search for and explore new ideas and new insights. Knowing that, I try to create the balance between exploring and exploiting.

Sean DeLaney  Over the last thirty years of your career, how many times do you think you’ve uncovered a true new insight?

Hunting for the rare, actionable insight

Robert Hagstrom  Oh, wow. Bill used to say that if you go to conferences and read books and you can get one idea a week, or even one idea a month, that’s actionable, that you can do something with, that’s success. I’m not so naive as to think wisdom falls out of the sky and floods you every day with nuggets and jewels. You’ve got to go searching for them. Looking back, if I get two, three, or four really insightful, actionable ideas per year, that’s a home run. But you never know when they come. Robert Caro, the great biographer who wrote The Power Broker and the biography of Lyndon Johnson, had a saying: turn every page. I thought that was such good advice. You skim and you move fast, but turn every page, because you never know what’s on the next one. We go to conferences and listen to one more speaker and think, I’ve been here all day, I’m not sure there’s anything here. But every once in a while a little jewel drops down on you and you think, this was worth the plane ride, the hotel, and sitting at the conference all day. I just heard one thing, and that one thing is really insightful. That’s what you do. You’re reading, going to conferences, studying, looking for the occasional Hope Diamond. For me, they don’t flood down the waterfall, but you’ve got to stay purposeful in your exploring to get them. They come infrequently, but when they come, as Charlie says, really big things can happen. They can be very valuable.

Sean DeLaney  Just a quick note, and then we’ll get right back to the episode. Outside of the podcast, I work privately with a small number of CEOs, founders, and investors. I help them navigate the decisions, pressures, and complex situations that rarely come with a playbook, especially the things they cannot bring to their board, their team, their spouse, or their investors. The work is highly personal, completely confidential, and always done behind closed doors. If you’ve been looking for a trusted advisor to help you think more clearly and navigate what you’re facing, visit SeanDeLaneyCoaching.com and let’s have a conversation.

Sean DeLaney  Tell me more about Bill Miller. What did you learn being around him for years that you could never pick up in a book?

What Bill Miller taught him up close

Robert Hagstrom  I can’t say this enough, and I’ve said it publicly. Warren was huge for me, but Bill was even more than that, because he held me by the hand as the practical teacher. We talked about philosophy books, William James and Wittgenstein and Emerson, and all the things we learned at Santa Fe. Most successful hedge fund and portfolio managers don’t share their insights generously. They want to keep it, because it’s a competitive advantage. Bill was the exact opposite. He was a true teacher. He opened up the kimono and told you everything he knew. He’d tell advisors the books he was reading. He did a squawk box research call on Tuesdays and he’d always finish with a book or two he had read that appeared to have nothing to do with the stock market. When I was a broker there, I would go get the book. This was before Barnes & Noble, before Amazon, so you had to track these things down, and they were really obscure. I’d attempt to read them, and I’d occasionally call him and say, can you help me understand this, or I don’t understand that. We developed that relationship. Then when I went to work with him for fourteen years, I saw it every day. The generosity of his willingness to teach and share is unmatched. I’ve never seen anybody so willing to do that. In the beginning you go to client meetings, presentations, and proposals, and it would be Bill and an analyst or two, and I was fortunate enough to go along because I was the growth manager. You could just sit there and listen. Imagine sitting down a hundred times to listen to Warren Buffett pontificate about something. That would be an incredible experience. Well, I had probably a thousand times sitting around with Bill, at dinners, conferences, breakfasts, on planes, in cabs. It was always about what’s going on in the world, what he was reading, what I was doing. It was always fun. I can’t overemphasize, Sean, how valuable that was for me.

Sean DeLaney  As you’re saying that, is there a dinner, a meeting, a moment that comes up?

The Amazon IPO: the right description wins

Robert Hagstrom  I remember when we were talking about doing the Amazon IPO. Bill had already invested in America Online and Dell Computer. Jeff Bezos was interested in Bill, who had already had five, six, seven years of outperforming the market, and through conversations Bill was teasing him out. He said to Jeff, can you help me understand your business model? Everybody was talking about Amazon as Barnes & Noble, and it was too expensive relative to Barnes & Noble. Then it was too expensive relative to Walmart. They had all these analogies and descriptions, and everything came back to: it’s too expensive, don’t buy it. Jeff said, the business model is Dell Computer. And people said, wait, what, Dell Computer? If you think about how Dell worked, it was a negative working capital business. He grew the business off the cash receivables of his customers. Back when it got started, you’d call a 1-800 number, and eventually you’d go online and buy a computer. You’d say, I want this size monitor, this keyboard, this much memory, this much speed. The operator would say, great, we’ll get it to you in two weeks, now let me have your credit card. You’d give them the American Express or Mastercard, and they’d have the cash in the bank that night, and they wouldn’t have to pay their suppliers for thirty, sixty, ninety days. So he could grow the business over time off those receivables. As long as new orders came in, the money came in, and then he’d pay suppliers in thirty, sixty, ninety days. He was the very first company to ever earn one hundred percent return on invested capital, which was remarkable because he didn’t have much capital in the business. It eventually went to two hundred and eighteen percent return on invested capital. When we were sitting there, Bill said everybody has Amazon wrong. They’re comparing it to brick and mortar, but it’s really a service business. Amazon would get books, sometimes give them back and not be charged by the publisher, and as it got into more products, it had thirty, sixty, ninety-day payables. So Amazon was running pretty much the same way. Bill teased out from Jeff that the whole market had the business model wrong, and the model was Dell. Dell went up eight thousand percent in the decade of the 1990s. So we thought, that’s a good business model, let’s think about this. We went through the bear market in 2000 to 2002 and came out the other side, but the model still worked. And it came from a philosopher I mentioned earlier, Wittgenstein, an incredible thinker. He only wrote one book, which he ultimately disowned. He didn’t like it. Right before he died, his friends brought his papers together and published Philosophical Investigations. He began talking about language, the philosophy of language. He said the mistakes people make in life are often because they have the wrong description of what’s going on, and therefore their explanation is wrong. A failure to explain something is often caused by having the wrong description. So, to be long-winded about it, the reason we did so well on Amazon is that we had the right description. Amazon was a Dell model, not a Barnes & Noble model, not a Walmart model. Therefore it was going to go up a lot relative to retailers. When you’re in a meeting and that happens, it is wow. Oh my God, I can’t believe it. That was one of those moments. Bill said, let’s figure this out, and he told everybody how he was thinking about it and why we did it. Then we went all in. I think he still has a nine-dollar cost basis on Amazon in his personal account. It’s been a great ride. When these epiphanies come from the multidisciplinary connections, who would have thought about Wittgenstein as it relates to Amazon? But there was the link. When he explained it that way, it was like, holy cow. You don’t get that at the CFA Institute. They’re not writing about that in the Wall Street Journal. This is other stuff. When it happens, you get the chills, the good kind of chills. The Amazon story will always stay with me.

Sean DeLaney  I’m always intrigued by investors who can go against the grain. I think about the Emerson line that Howard Buffett, Warren’s father, used to tell him: it’s easy in the world to live after the world’s opinion, easy in solitude to live after your own, but the great man is one who in the midst of the crowd keeps with perfect sweetness the independence of solitude. I’m curious what you’ve seen out of Bill in those moments. I’m very curious to go back to ’08, when he was down. I’m curious what that was like.

Going against the grain: Emerson, self-reliance, and 2008

Robert Hagstrom  Let’s go through ’07 and the ’08 and ’09 financial crisis as it relates to Wittgenstein. I’m sorry, I just lost my train of thought.

Sean DeLaney  The Emerson quote. The great man is in the midst of the crowd.

Robert Hagstrom  Every great investor has a self-confident level of being able to look at the market and distance themselves from it. It’s not necessarily contrarianism, although value investing does start with a contrarian viewpoint. You want to take the other side, but you don’t want to be stubborn about it. You want to think independently, but you don’t want to be different just for the sake of being different. Buffett said it slightly differently. He said, I’m not going to give my money to someone else to manage, so why am I sitting around listening to them think about the market? The famous line was, if you’re in a poker game for twenty minutes and you don’t know who the patsy is, you’re the patsy. He spent his whole life making sure he wasn’t the patsy in the game, that he knew everything there was to know. He read everything about a company. There wasn’t anyone who knew much more than he did about it. So when the stock price misbehaved, and it does, for lots of reasons that aren’t long-term intrinsic value, traders, high-frequency trading, leveraged ETFs, options, he could look at a price, and if it was doing something other than what the economics said it should be doing, he never got flustered. I’ve seen even good investors who have an investment thesis, and when the price starts to move against them, they get nervous, their hands start to sweat. They think they’ve missed something, that their thesis is wrong, and then they lose something. Once you’ve lost your self-confidence, and there’s Emerson, once you’ve lost that self-reliance, you’re cooked. You’re at the whim of the market. Buffett wasn’t perfect, but he was good seven or eight times out of ten, and Bill was the same way. There’s a difference between stubbornness and conviction. You don’t want to be stubborn in the face of contrary facts, but you want to have conviction, so that when the price moves against you, you don’t do something stupid like sell on the way down, or worse, buy on the way up because everyone else is. So that Emerson idea of independence and self-reliance, independent of the market and of other people, is hugely important for successful investors. It’s funny, in the old days I asked Debbie whether Warren watches CNBC. She said, Robert, he has a little TV in the corner of the room, but he never turns the sound on. He just looks at the tape. He doesn’t want to listen to people pontificate about what the market’s going to do. It’s just the old ticker tape for him. How many of us sit around and listen to CNBC, or Bloomberg, or Fox? You get mesmerized by all these people saying, I think the market’s going to do this, I think the stock’s going to do that. Buffett does zero of that, and Bill was the same. He didn’t need to follow other people, picking up breadcrumbs to convince himself he was doing the right thing. He had his thesis. If the market agreed with him, great. If it didn’t, he’d ask, did the facts change, or is the market just off in a speculative trading mode? Often you’d find the market was pricing things on different strategies, not discounted cash flow. People trade stories like cotton candy. Stories can move prices, but numbers matter. When you get back to the numbers, you can often tell when the story is overplayed, when it has become disconnected from the economics.

Now, the great financial crisis. Boy, we got that one wrong, and we got it wrong based on Wittgenstein, right after I told you Wittgenstein was the reason we got Amazon right. I wasn’t working with Bill at the time. He started his great track record in 1992 during the savings and loan crisis. The great financial crisis had a lot of similarities to it. In the S&L crisis, the politicians, the government, and investors solved it by not letting all the savings and loan stocks get merged out or go to zero. So when the great financial crisis began in the fall of ’08, we had it in our minds that this looked very similar to 1992. You could buy Fannie Mae at three bucks and Freddie Mac at six bucks, and banks in the single digits, and in 1992 they went up multiples after that. But in the great financial crisis they took them down. The politics of that time were not interested in saving Wall Street again. AIG got taken over by the government, and that’s a zero. Bear Stearns got taken over by JPMorgan at one or two dollars a share and never had a chance to rebound. So we had the wrong description, and therefore our explanation was wrong. Our description was that we thought it was 1992, and it was not. My lesson is that when politics is involved to such a big degree, and politics is always involved through government and regulation, but when politicians are the ultimate arbiter of what’s going to happen, get out. You can’t predict what committees will do, what politics will do, what emotions will play. If you get into a situation where an emotional committee will dictate the outcome, it’s probably best to move to the sidelines and not play that game. That was my lesson.

Sean DeLaney  I’m curious, because we were talking about self-confidence and trusting yourself. There’s another Emerson line: if I lose confidence in myself, I have the universe against me. And I love the German playwright Goethe in his play Faust: as soon as you trust yourself, you will know how to live. So coming out of ’08, is self-trust on shaky ground? Walk me through it. How do you develop that self-belief again?

Robert Hagstrom  First of all, you’ve lost a lot of money, and you’ve lost a lot of money for your clients. So you feel horrible. You explain to them how you failed. You told them you thought this was going to happen, but at the end of the day, the buck stops here. You’re hired to make decisions, and we made the wrong decision. So we confessed it, we put up our hand, we lost lots and lots of money, lots of clients, and lots of assets. It was a huge body blow. We were talking about the man who beat the market for fifteen years. We were pretty good at this. I was running the number one growth fund in the late ’90s into the early 2000s. We got through the tech crash no problem and came out the other side. So we were feeling our oats, not overconfident, but confident. Then the great financial crisis is a gut check. It’s bad. So you have to make a decision. Are you going to wrap it up, call it a day, and go do something else, be a teacher, whatever? Or are you going to get back in the game and try to rebuild? We attempted to rebuild it. Bill decided he wanted to go in a different direction. We ended up shutting down Capital Management. Bill went on to run his own money. I was fortunate that some ex-Legg Mason guys had partnered with Stifel Financial to start an asset management division, and they called and asked if I wanted to run a portfolio the same way I had for Bill. I jumped at the chance. That was twelve years ago, and now we have a great twelve-year track record. We’re beating the market, everything’s fine. I made the decision to give it one more go. Some guys said, no, I’m out, and they retired and moved on. I was young enough that I wanted to go one more time, and I’m glad I did. But in those dark moments, it’s no fun. There’s a lot of self-doubt, a lot of hand-wringing, a lot of do I still have the chops to do this? Fortunately, I came out the other side, and it worked out.

Sean DeLaney  What’s different for this chapter compared to the prior one with Bill? Is there something about how you approach your craft that’s different?

A new chapter at EquityCompass: stay in your sandbox

Robert Hagstrom  At Legg Mason we had different portfolios, and every portfolio manager called their own shots. But there’s a tendency to get a lot of overlap across multiple portfolios. You have a growth portfolio and a value portfolio, but sometimes there are concentric circles and everybody starts to see the world through the same lens. So your strategies aren’t as diversified as you might think. When I became CIO at EquityCompass, I purposely changed that. We all think about stocks as businesses. We’re united in that. We run concentrated, low-turnover, high-active-share portfolios. That’s good. But we don’t have a lot of overlap. I want the value dividend guys to go after good value dividend-paying stocks, and the growth guys to go after growth. You can see today in some dividend portfolios that they own Nvidia, or Microsoft with a tenth of a percent yield, and it’s like, you’re performance-chasing the growth guys. And the growth guys will pay dividends when their stock stalls. There’s a lot of style drift. What we’re trying to do is not let what happened in ’08 happen again, when we all jammed into financials at different levels. I had the growth financials, Bill had others, and another portfolio had financials, so we were all long financials. Today we spend a lot of time making sure everybody stays in their sandbox. We think about stocks the same way and manage portfolios the same way, but you’re in your slow-growing, high-dividend sandbox, and I’m in my low-dividend, high-return-on-capital, rapid-sales-growth sandbox, and I’m going to stay in mine. So today we’re a lot more diversified by strategy than we were at Capital Management back in ’08 and ’09.

Sean DeLaney  I’m curious about the phrasing you used when talking about the Santa Fe Institute, that the market is a biological system that evolves and changes. So when people say “this time is different,” can that actually be the case, where this time really is different? Not any specific time, but how do you think about the evolution of markets?

“This time is different” and why markets rhyme

Robert Hagstrom  The markets are always evolving. They’re always different to some degree. The argument about “this time is different” is that markets tend to rhyme more than they duplicate. There may be similarities, but when you’re doing comparative systems analysis, the tendency is to look at what’s in common and say, oh, it’s just like that. But often it’s the differences you need to highlight. So we’re always looking at what’s different between today and back then. We’re trying to figure out differences more than similarities. When you get into bubbles and stretched bear markets, they are different from other ones, but they rhyme, at the point where prices disengage from value.

Now, I’d argue that recently, and set AI aside for a moment, markets are a lot more patient with higher price-to-earnings stocks, because they recognize those stocks have higher returns on invested capital. In the old days, you didn’t really think about return on invested capital. So if one company had a high P/E and one had a low P/E, you always thought the high-P/E stock was overvalued and the low-P/E one was undervalued. Buffett straightened that out in 1992, but it was the work of people like Alfred Rappaport and others on returns on invested capital. If one company has a fifty percent return on invested capital and another has ten percent, with the same earnings and growth rate, the one with fifty percent should have a much higher multiple. It’s a more valuable company, compounding intrinsic value at a much higher rate. When you understand that, you’re willing to let the higher-multiple stocks run a bit. So ever since 2022, everybody kept saying this is 2000 to 2002, this is a bubble, it’s going to burst. They’ve been saying that for almost four years now, and it hasn’t. Why? In 2000, Cisco was trading at one hundred and one times earnings. That’s a problem. Microsoft, Intel, and Dell were at sixty-five times earnings. When we looked at the earnings of the tech stocks today, they were at twenty-five or thirty times. Even Nvidia, at the best of times, was forty percent return on invested capital. So the stocks rhymed in that they went up parabolically, and the higher-P/E stocks went up the most, but they were nowhere near the valuations we saw in 2000 to 2002. They rhymed, but they weren’t identical. So you haven’t had the big 2000-to-2002 blowoff, because I’d argue many of them are simply not overvalued. You can argue about how long they stay in the game, how long they’re going to buy chips, what the data center demand is, and I get all that. But they’re totally different animals today than they were in 2000 to 2002. Markets rhyme, but it’s in the differences that you need to understand whether it’s worthwhile to stay in the game. Everybody who got out of these things two and three years ago has been begging for a correction, because that’s the only way they can save their performance. The fact is, today you can buy Nvidia at twenty-five times earnings. Remember Dell at one hundred percent return on invested capital? What’s the return on invested capital for Nvidia today? About two hundred and twenty percent. It generates over two hundred billion dollars in free cash flow every year. That’s a serious number. You can make a lot of investments with that. When you’re generating that kind of return on invested capital, it’s a totally different animal. At twenty-five times forward earnings, that looks kind of interesting. It doesn’t look like Cisco at one hundred and one times earnings with hardly any return on invested capital. So you’ve got to understand the differences as much as the similarities.

Sean DeLaney  We’re talking about letting your winners run, and we’re talking about the psychological makeup, the ’07 and ’08 drawdowns and what that’s like. I’m curious, how do you hold those winners? It’s one thing to go one or two times your money. You said Bill still holds Amazon at a nine-dollar cost basis. What’s the psychological makeup to hold like that?

Holding winners: economics over price

Robert Hagstrom  It’s the economics. At the end of the day, you let the economics determine whether you should be in the stock. Now, we do have position limits in the portfolio. We won’t own a position greater than ten percent. That’s still a very big bet in today’s world, but it’s not a twenty or twenty-five percent bet. Bill made those bets. It’s not a thirty-five percent bet like Warren did with Apple. But at ten percent, because we have IRAs, pension plans, endowments, and foundations, we have to do some risk management. Once we get to ten percent, we’ll pull the position back down to five, six, or seven. We’ll also change the position based on the margin of safety. As the price goes up, the margin of safety is less, and therefore my payoff is less, so my bet is less. If you have four aces, you’re going to bet a lot. If you have two pair, you’ll bet less. It’s the margin of safety in your hand. Lou Simpson used to say it’s not hard identifying and buying great companies. The difficult part is holding on to them, because the prices start changing. You’ve had a good run, the stock is doing well, but now it’s going sideways. You’re seeing that in some of the AI stocks, the hyperscalers haven’t done anything for a year. But what are the economics? We’re looking at sales, return on invested capital, cash, total addressable market. If the economics are still supportive of holding the position, that is paramount, whether the stock has outperformed or not. If the economics are superlative, that is the command of what to do. Here’s something interesting. Over twelve years we’ve beaten the All Country World Index by a significant amount, and we’ve beaten the S&P 500 over the last twelve years by a pretty good amount. But on a month-to-month basis, Sean, we only outperformed the market fifty-five percent of the time. On a quarter-to-quarter basis, only sixty-six percent of the time. On a trailing one-year basis, only seventy-five percent of the time. People ask, you have this great long-term track record, but month to month, quarter to quarter, about half the time you’re underperforming. How do you do that? The answer is the difference between frequency and magnitude. It’s not how many times you beat the market versus how many times you don’t. It’s how much money you make when you beat it versus how much you give back when you don’t. It’s the difference between batting average, how many base hits you get, and slugging percentage. We run concentrated, high-active-share, low-turnover, big-bet portfolios. We want home runs, multiples of our investment. We don’t want to just get something up twenty percent when the market’s up ten and say, we won, let’s sell and move on. We want to compound home runs. That’s where big wealth is made. So we’re willing to hang on. Out of twenty-three stocks, I’ve probably held three for twelve years, another four for six or seven years, and another two or three for four-plus years. So over half the portfolio we’ve held for four years, and they’ve all been great companies. We wouldn’t have held them otherwise. They performed very well, but we didn’t sell just because they doubled. As long as the economics are doing well, we want to compound them even more. Compounding is where a lot of the money is made. Economics determines our investment more than how long we’ve been in it or what the price return has been. Those are shorter-term signals we’ll check on, but if the long-term economics are still playing out, we’re happy to keep the stock in the portfolio.

Sean DeLaney  Speaking of high concentration and low numbers, you did some additional research into Hendrik Bessembinder’s work, right?

Robert Hagstrom  Oh, yeah.

Sean DeLaney  Can you elaborate on that? I have a number of notes from your research, and I’d love to hear about it.

Bessembinder, drawdowns, and frequency vs. magnitude

Robert Hagstrom  Bessembinder is a professor, I think at Arizona State University, and he was looking at how stocks behave over time. He looked at long data sets, a hundred years, fifty years, twenty years. What he found is that very, very few stocks out of the totality actually generate above-average returns over time. He has many papers running now, but I think the original paper found that about one-tenth of one percent of all stocks over the last hundred years are responsible for ninety percent of the value creation in the stock market. In the old days it would have been IBM and General Motors, then it became Merck and Home Depot, and now it’s the technology companies, the Apples and Nvidias. What it spoke to me on two levels. One, if you have a stock with a large total addressable market, superlative economics, high returns on invested capital, and a good growth rate, it’s very likely to be a multiple home-run bagger. There aren’t that many of them that can sustain it over time. The reason they don’t sustain it is that the market changes. It evolves and adapts. You have Joseph Schumpeter’s creative destruction. One thing about capitalism is that it has a great way of tearing down old moats and building new ones. Things get destroyed and new things come to market that are better, cheaper, more efficient. So we’re quite aware that what is great has a low probability of being great ten or fifteen years from now. We know there’s a failure rate out there. But if something has a success rate, we measure its returns on capital, we measure the total addressable market, and we’re always looking at who the competitors are. There was an old saying about Amazon: if you were a competitor, it was “kill me last.” You didn’t want to go to war with Amazon, because eventually they’d take your business. We’re always looking over our shoulder. Who can take our business? Who can do this better or cheaper? I’m phobic about that, paranoid about that. One way we judge sustainability is by looking at returns on incremental capital. You have return on capital, which is what’s happened over the life of the business, but we look year to year at the return on incremental capital, the new capital you put in this year, not over the last twenty years. If the returns on incremental capital are still stout and everything else is matching up, you may have a multi-bagger. These multi-baggers can pay for a lot of mistakes. Even Buffett says he’s had two, three, four, five, six really great ideas. Think about GEICO, Cap Cities, Coca-Cola, Apple. You’ve got four, five, six, seven phenomenal ideas. The others were okay ideas, good ideas, and some beat the market and some didn’t. But if you’ve got these big multi-baggers, you want to hold on to them as long as you can, subject to risk management. If it were my personal account, I’d have no problem letting Nvidia go to fifty percent of the portfolio, but we can’t do that here with IRAs and pension plans.

Sean DeLaney  What really stood out to me, and unlocked new insights, was your research. I’m hoping I don’t get these numbers wrong, but directionally we’ll say they’re correct. You looked at, I forget if it was fifteen stocks, that drove all the returns in your research. Does that sound right, that when you distilled it over the last twenty years, there was a very limited number of stocks?

Robert Hagstrom  That’s what I was saying, yes.

Sean DeLaney  But what you discovered is that they underperformed the market fifty percent of the time, and quarterly they lagged about sixty percent of the time. So imagine you’re on the way to a ten-bagger or a twenty-bagger, and sixty percent of the months or quarters you’re losing. That, to me, is the psychological makeup. I was talking to a very successful investor the other day who brought up tennis. He said when Carlos Alcaraz was number one a couple of years ago, he was only winning fifty-two percent of his points. Number one in the world by a mile, only winning fifty-two percent of his points. You also had big drops. The portfolio saw one hundred and two periods of twenty-percent-plus drops, about twice a year, and the worst drops averaged forty-one percent. I’m thinking, you’re on the way to a hundred-bagger, and the ability to hold through that volatility is impressive.

Robert Hagstrom  We took one of Bessembinder’s lists and went through that frequency-versus-magnitude question: how often did they underperform, and what were the drawdowns? We saw pretty much the same data we saw when we did Lou Simpson’s GEICO portfolio, Charlie Munger’s portfolio, Bill Ruane’s Sequoia Fund, and John Maynard Keynes’s portfolio. At the portfolio level, they had significant drawdowns and periods of underperformance, but then phenomenal long-term track records. That was in the first edition of The Warren Buffett Portfolio, and in the second edition we got into the Bessembinder-type work. The reason I did that was to help people understand that even the best company is going to go through a drought and can have significant drawdowns. It is not unusual. But if the economics still rule the roost, be careful not to throw the baby out with the bathwater. You may want to throw out the marginal stuff, the stuff that disappointed or didn’t achieve what you thought. But the really good stuff will still go through underperformance and drawdowns and bear markets. It happens. What is most important for long-term investors is not short-term performance, but long-term economics. If you’ve got the economics right, you’ll get paid over time. Graham was right that in the short run the market is a voting machine, and it gets the votes wrong because people do a lot of stupid things. Voting is mostly System 1 thinking. System 2 thinking is really understanding the economics of what you own. Too many people buy and sell stories at the surface level without thinking. So, to be long-winded, if you’ve got a really good company, expect it to underperform periodically, expect it to have a drawdown. That doesn’t mean it’s a bad company. It’s the kind of world we live in, where stock prices gyrate a lot today, even more so because the structure of markets has changed, so that derivatives are the tail wagging the dog, making prices move in exaggerated fashion they didn’t used to.

Sean DeLaney  I was pulling up The Warren Buffett Portfolio. Chapter three, the super-investors of Buffett, does an incredible job going through some of these investors, their returns, and then breaks down the charts of what it looks like year to year. Very helpful and applicable. Chapter four had really good stuff too. I want to go back to something. You said that in your private account you’d be comfortable holding Nvidia up to fifty percent. Talk to me about a younger Buffett. I think it was in ’63 when he put forty percent into American Express. I want to understand the early days of Buffett and what we can learn from that.

Position sizing and Buffett’s early concentration

Robert Hagstrom  First of all, Buffett was never schooled in modern portfolio theory. I don’t know how far you want to go on that, but modern portfolio theory started with Markowitz in ’52. He had it in his mind that variance was risk, so the bumpiness of a stock price was what he was trying to eliminate. You get negative correlations, create low tracking error and lower standard deviation, and get a smooth ride, which is psychologically more comfortable. Buffett never drank that Kool-Aid. He didn’t even know who Markowitz was. Most of that stuff built in the fifties, and William Sharpe’s work in the early sixties, nobody paid attention to until after the ’73-’74 bear market. Then it surfaced and became part of the standard portfolio process we use today. Back in those days, Graham talked about diversification in the third edition of Security Analysis, but he said you should be comfortable with twenty to thirty stocks. That’s a pretty focused portfolio. Today we run twenty-three. But remember, GEICO was the single largest investment Graham ever made, and at one time it was thirty to forty percent of his portfolio. So Buffett could look at Graham and his GEICO position and, in ’63, make a big bet on American Express. He made other big bets that were twenty and thirty percent, which look outrageous by today’s standards. But back then, if you did the fundamental work and were really smart about it, there was nothing wrong with that. Now, I don’t want to tell anybody to go out and put thirty or forty percent of their portfolio in one name. Diversification does help. But too much diversification is the problem. When I wrote that book in ’99, we did the super-investors of Buffett. It was ten years later that Martijn Cremers and Antti Petajisto at Yale University came out with active share. They were the first academics to measure the optimal number of stocks you need in a portfolio to outperform the market. They had a mathematical term, active share, that measured how different your portfolio is from the index you’re trying to beat. If you have no stocks and no weights in common with the index, you have an active share of one hundred percent. If you held every stock in the index at exactly the same weight, your active share would be zero, and you’d be a closet indexer. What they found is that too many institutional portfolios and mutual funds are really closet indexers. They have too many stocks, their weights aren’t far from the index, and they have very low active-share readings. The people who did beat the market had very high active share, readings of eighty percent or higher, meaning their portfolios were very different from the index. Those portfolios outperformed low-active-share portfolios. Then they did another study on turnover ratios. If you took the high-active-share portfolios, turnover mattered a lot. High active share with high turnover, you underperform. High active share with low turnover, so concentrated and low-turnover, gave you the best chance of beating the market. But then we’re back to the same issue. If I run a concentrated, low-turnover portfolio, the frequency of my underperformance goes up. And what does the market want from you? It doesn’t want you to be frequently wrong, it wants you to be frequently right. To be frequently right, you can’t deviate too far from what the market’s doing. But what they’ve learned is that everybody hugging the benchmark, trying to stay in the game and not get fired, doesn’t generate good long-term performance. By the time you add trading expenses and management fees, look at the SPIVA scorecard for 2025, S&P Indices Versus Active. Look up any category, value, growth, core, small, mid, large, over one, three, five, ten, or twenty years. About eighty percent of active managers are underperforming the market, everywhere, still today. They’re underperforming because they’re not running high-active-share portfolios. But running high active share can get you into trouble with clients who want to outperform the market more frequently, not less. So we’re back to square one. To beat the market, I have to manage money this way, but managing money this way means fifty percent of the time, or two-thirds of the time on a shorter horizon, I’m going to be behind. The psychology of that is really hard for people. That’s the tension you’re always working with.

Sean DeLaney  It seems to get back to the Emerson line. I’m curious how you think about this. Being in this game so long, studying so many people, do you think this independence of thought, this ability to stay with your ideas, is more nurture or nature? Were you born with it?

Nature or nurture: handling underperformance

Robert Hagstrom  Great question. I think it’s both. Some people are wired to handle underperformance better than others. But there are also nurturing reasons why you can get better at it. We know from Kahneman and Tversky, who weren’t studying the stock market back in 1982 when they did prospect theory, that you hate a unit of loss twice as much as you enjoy an equivalent unit of gain. It’s been proven psychologically. If you recognize that as an emotional misfiring, an emotional error, it shouldn’t be that way at all. It should just be how much money you make when you win, less how much you lose when you lose, and the net of that is your optimal ranking. So some people are better at handling loss than others. But nurturing and learning from other people, whether it’s the super-investors of Buffett, the Bill Millers, reading about active share, or doing the study on Bessembinder, you can take these examples and stiffen your backbone when you’re running a portfolio. When you underperform, you go, yeah, that happens with this kind of strategy. Let’s check the economics. What are the economics telling us? Let’s go back and look at the scorecard. If the economics say you’re okay, then you go, this is part of the ride. If you’re going to beat the market over a long period, you’re going to go through periodic underperformance. It’s a fact of long-only, buy-and-hold investing. You go through periods of downdrafts. It just happens, and you have to accept it.

Sean DeLaney  Talk to me about the nature element. Has there been an idea it took the longest for you to change your mind on?

Munger’s three piles: easy, no, too hard

Robert Hagstrom  It’s interesting. I’ve gotten better on the front end. Chris Davis, who runs the Davis Funds, said value investors are really bad at selling. That’s probably true, because of the contrarian streak. You don’t want to let it go, because you had an original investment thesis. On the front end, Charlie Munger phrased it in a way I apply. There are easy decisions in the market that you’re qualified to make, where you have the facts and can figure it out quickly. Then there are decisions where you’ll never invest. You’ll never buy a capital-intensive, low-return-on-invested-capital business with terrible management and terrible margins. I think about commodity businesses, heavy brick-and-mortar businesses, lousy economics. I’ve never owned an airline stock, and I’m never going to. So I can do the “no” pile really quickly. I’ve got the easy pile, and I’ve got the definite no pile. I can just put things in the no pile and not spend a minute on them. I don’t care if it’s down seventy percent, I’m not buying it. Then Charlie says there’s the difficult pile, where you’re not sure it’s a good or bad investment. You keep working at it, and it just doesn’t get comfortable. Our too-difficult pile is the biggest pile, and typically we just throw it in there. It’s too difficult to figure out, so move on, don’t wear yourself out. For me, software stocks today are too difficult to figure out. We sold all our software stocks in 2024, because we knew AI was going to take some share. We didn’t know how much, but we knew enough that it was going to do something, and we could see it in Adobe’s numbers, in Salesforce, in others. Now those stocks are down fifty and sixty percent. So you tell yourself, wow, that used to be higher, it’s a great company. But then you’re back to the difficult question: how much is AI going to take? I’ve got Adobe down fifty percent, and you see the reversion-to-the-mean trade coming in, people bottom-fishing it, and it’s rallied half a dozen times only to give it all back. Software stocks are in the too-difficult pile for me. I can’t figure them out. Maybe one or two of them will be great and double from here, but I don’t know. So what do I do? Into the too-difficult pile. I try to stay with the easy pile: easy to understand, easy to figure out, easy to get the math right, and the market’s giving me a gift with a lower price. That’s my sweet spot. That’s where I like to hang out. There’s the economics I’m never going to own, and if it’s too hard to figure out, I just move on and come back to it later.

Sean DeLaney  Talk to me about that easy pile. If you look at the ten best investments you’ve ever made, was it almost intuitive, knowing instantly and then piling on the data? Or was it more that you piled on all the data, wrestled through it, and only then knew? Was it almost instantaneous?

Stories and numbers

Robert Hagstrom  It’s a combination. There’s a great valuation professor at NYU who says investing is a bridge between stories and numbers. The story is the long-term favorable outlook of the company. What are its long-term prospects? How long does my competitive advantage period last? By the way, Buffett says that’s the single biggest mistake variable he’s made over his life. He told me, of all the mistakes you made, Warren, what was it? It was the competitive advantage period, how long something was going to last earning high returns on invested capital didn’t last as long as I thought. Think about farm equipment companies, retail stores, even Berkshire Hathaway with Dexter shoes. He thought he’d earn a high return on invested capital much longer than he actually did. So when I look at something, I look at the story. What are the products and services? Are they in high demand? What’s the total addressable market? How is management allocating capital, and what are the financial returns? Who am I competing with? If the story lines up and I get it right, then you do the valuation work, and if it says this is a good price and you’re going to make money, you strap in and go. Maybe it goes back to Peter Lynch, buying products and services that you use and that are popular. I’ve owned Louis Vuitton for twelve years, and it’s gone through different categories. I’ve owned Apple for twelve years, and the story remains intact. Apple has three billion users, and there are only a couple of smartphone makers in the entire world. It earns two hundred percent return on invested capital because it outsources all its manufacturing. Louis Vuitton is the same. You go through Maslow’s hierarchy of needs, and that hasn’t changed in thousands of years. I know that business. It lasts a long time. I can be comfortable in that story, so I can go through the bad times, because I like the story and the numbers still make sense. If I get stories and numbers together, I’m home free. As long as the story resonates, I’m good to go.

Sean DeLaney  We’re going to round this out in a minute. I’m curious, though. Say every shareholder letter and every interview of Buffett and Munger disappears. You’re starting your career again, and you can never read anything they’ve put down. What are you building your curriculum on?

Rebuilding a curriculum without Buffett and Munger

Robert Hagstrom  Well, do I get Graham? If I don’t have Buffett, do I get Graham?

Sean DeLaney  I’ll give you Graham.

Robert Hagstrom  Then I’d go to Ben Graham, and then to Phil Fisher. Fisher was the qualitative side. Graham was quantitative, but he didn’t spend time on companies or management. He thought those could be measured badly and end up being a problem, that they were qualitative aspects that didn’t lend themselves to being easily measured. You’d think a company was better than it was, or that management was walking on water when they were really quite mortal. Phil Fisher filled in the qualitative side. I said in The Warren Buffett Way that Buffett, with Charlie’s help, really did both Graham and Fisher together. So I’d spend a lot of time on Fisher, because he talked about what makes for a good company and good management. So I’d have Graham doing the hard intrinsic-value work, although he didn’t get the cash right or the return on invested capital. Then I’d go to Alfred Rappaport, who did Creating Shareholder Value and returns on invested capital, mightily important. Then I’d probably do Joseph Schumpeter, creative destruction. That would be a pretty good round-out. You could spend a lot of time in those books and do well, even without Buffett and Munger.

Sean DeLaney  I’m going to push you a little on liberal thinking. What about some of these other books across different ideas and philosophies? What would you add to the bookshelf right away?

Robert Hagstrom  I’ve read pretty much everything ever written on William James, and pretty much everything on Wittgenstein. We’re pretty good on Emerson. I have a lot of books from the Santa Fe Institute library. If you go to sfi.edu, they have a lot of books listed there. In philosophy, and I’m trying to spend more time in literature. Bill spends a lot of time on Russian literature, but I just don’t have it in me.

Sean DeLaney  To go through Dostoevsky.

Robert Hagstrom  I really don’t. The Brothers Karamazov. I said, Bill, are you sure? He said, yeah, there’s really something good there. I said, oh my God, I can’t get through that.

Sean DeLaney  Say you were going to sit down and have a great conversation with anyone, dead or alive. Who would you love to do that with?

The changing structure of markets

Robert Hagstrom  I could do it over and over again with Bill Miller. Michael Mauboussin is also a guy I think is great. Do you know Michael?

Sean DeLaney  Yeah, I’ve had him on before.

Robert Hagstrom  Michael is just huge. I think he’s great. And Jeff Yass at Susquehanna. I know Jeff personally, but I haven’t really gotten down deep on high-frequency trading and options. If I could do it this way, Sean, if I could stop the clock and spend a year, then come back to my portfolio and hit the go button, I’d spend a year just trying to understand the changing structure of markets. Markets are so different today, because the products are so different. The notional value of option trading every single day is now greater than the market value of what’s being traded. It’s the tail wagging the dog. We’ve got futures on individual stocks. We’ve got more ETFs than individual stocks, many of them levered one, two, and three times. You’re watching Korea implode. That’s the changing structure of markets. They’re overwhelmed with levered ETFs. I’d love to spend time with people who could help me understand it, the specialists, options dealers, futures traders, all of it, to help me understand how you’re impacting markets today differently than ten years ago. Then I could tell clients this is why these stocks are banging around ten and twenty percent, because the structure of markets is different. I’d spend a lot of time doing that.

Sean DeLaney  You said the phrase “help me understand.” I knew I’d have this page earmarked. This is in your book. You write: pragmatism, in summary, is not so much a philosophy as it is a way of doing philosophy. And this is why I think it’s important to what you were just saying. It thrives on open minds and gleefully invites experimentation. It rejects rigidity and dogma. It welcomes new ideas. It insists that all possibilities should be considered without prejudice, for important new insights often come disguised as frivolous, even silly, notions. And then you say: we learn by trying new things, by being open to new ideas, by thinking differently. This is how knowledge progresses. I absolutely love that, and I feel like it’s one of the reasons I wanted to have you on.

Closing: read, read, read

Robert Hagstrom  You’re very kind. You bull’s-eyed it there, Sean. I don’t know a single investor who can manage money for twenty, thirty, forty, or fifty years successfully without doing what you just said. You can’t still be managing money as a low-P/E, low-price-to-book guy the way you could twenty and thirty years ago. Today you can’t. New ideas are what drive market returns. You’ve got to figure those out. You’ve got to stay flexible and open-minded. Well done. That was great. I appreciate it.

Sean DeLaney  I’ve learned so much from you over the years. It’s an honor to finally have you on. We’ll have all the books linked up. Is there anywhere specifically you want to send anyone listening?

Robert Hagstrom  Amazon.com has all my books, and you can go to equitycompass.com, which is my firm. There are about a dozen of us, and we manage about seven billion. We have our commentaries and reports there if you want to drill down into what we’re doing. But read, read, read would be my message to all your listeners and viewers. Read, read, read, and it will put you in the top one-tenth of one percent, because that’s about the only people who seem to be reading nowadays.

Sean DeLaney  Thank you so much, Robert.

Robert Hagstrom  Good luck. Thanks for having me.

*Transcript edited with AI & may contain errors.