Good Investing Talks - What can I learn from "On the Hunt for Great Companies"?

Episode Date: October 24, 2024

Simon Kold published the very entertaining and insightful investing book "On the Hunt for Great Companies". Here, you can learn more about the book.

There's a lot of humor in the book. I don't know if I mentioned that, like, it sort of happened accidentally. First, I wrote the first draft of the book. It was how I intended. And then people were saying, like, I don't recognize your personality. I started adding humor and humor. So the book is actually quite different from stylistically, I think, at least from most investment books. And I was actually quite surprised the impact that had on people's ability to also read the book.

I had an idea for, I thought there was a missing practice. There's a lot of good books on mental models on how to evaluate various aspects of quality and about quality investing, even though I wouldn't say my book is about quality investing, but it's about evaluating quality. But I think a lot of them lack the kind of practical, what is the empirical determinants that you want to see? And I wanted to write a book about that. But then sort of accidentally, it also became a book that is stylistically very different.

This book is sort of more narrow focus. focuses only on evaluating quality. And it doesn't mean that it's a book about quality investing. It's just a book about evaluating quality and quality as an input to determining the value of something. And then because it's more narrow, it's also a little bit more focused and maybe a little bit more advanced. Dear viewers of good investing talks, it's great to have you back and it's great to welcome

Simon Cole. He's a book author and he will is about to release an very interesting book. It's called On the Hunt for Great Companies and Investors. this guide to evaluating business quality and durability so simon great to have you here great to be here tillman thank you great to have you and today we want to talk about your book but before we dive into the book maybe let's add a bit of background around you so who are you and why you're qualified to teach someone with a book on the hunt for great companies yeah so i am danish um I worked 10 years at Novo Holdings, the investment arm of the Novo Nordic Foundation,

which is the world's largest private charitable foundation. But compared to, I think, like U.S. foundations and so on, it's much more direct investments and much more private markets mindset. I have a little bit of an unconventional background into investing in the sense that I also have a bachelor's degree in theology and I used to do stand-up comedy here in the Copenhagen comedy scene 15, 16 years ago that I sort of accidentally also bring to the book. I had an idea for, I thought there was a missing practical book. There's a lot of good books on mental models on how to evaluate various aspects of quality

and about quality investing, even though I wouldn't say my book is about quality investing, but it's about evaluating quality. But I think a lot of them lack the kind of practical, what is the empirical determinants that you want to see and I wanted to write a book about that. But then sort of accidentally it also became a book that is stylistically very different. But that was not the plan in the beginning. The plan was to write this dry practical investment book, almost like a textbook on how to evaluate business quality and investment analysis. So your qualification from Novo Holdings is that you did a lot of investments integrate companies there with their direct investment team.

Exactly. I think that it's it's based on my my practical experience from it's based on my practical experience from 10 years of investing but it's also just based I would say on synthesis of everything I have read like all the all the all the books on specific aspects all the academic research and so on that I have read in stuff that I have tried to integrate in my work I have tried to synthesize in this in this book so so I wouldn't say that every single. word is derived from a particular transaction or something that i was directly involved in it's just based on sentences of information and my practical experience that's a great background for such a book who would be the ideal reader for your book so i think it has multiple kind of readers but i i i think for sure if you're like uh if you are young you're into your investment career maybe you are one to five to ten years into your investment career there will be a lot of stuff in this book that is sort of applicable in your day-to-day analysis so i think that that you will see the book having a sweet spot there but then because of the stylistic aspects that is mentioned i think

the book will have a much broader uh broader reader base i think it will be enjoyed by also very very seasoned investors which who i know liked it from i had 40 reviewers but i think also actually people who are beginners or amateur investors, they will like it. I have these boxes with analytical steps you can take. And since they're in this box, you can actually just skip them. So if you are like a private, you're just an amateur investor. You're just interested in learning about it. You can just skip these boxes.

And then the book is also very accessible to you. So I think it will have multiple kinds of audiences. So maybe imagine a reader who bought the book before. he started reading it and after reading it. What kind of transformation does the book do with someone when they read and study the book closely? So I think what I saw, I had 40 different reviewers and most of them are quite experienced investors. And what I saw the pattern that some of the chapters, people kind of, they understood the concepts very well. They know it already.

It's kind of known things like network effects or staying power or something. but maybe they hadn't thought really through how to test the durability and the intensity of a certain aspect. Maybe there were some, they each had like blind spots where they took away something. I don't think there was a single person who were like, I knew everything in this book. I don't think there were that. And then because it's sort of a unified framework for evaluating quality, it's also very tangible. Like, you can just implement it in your, you can basically, if you want, I mean, I'm not encouraging people to do it to systematically go through this as a, as an analytical model because I think it might be a little bit too cumbersome for some people,

but you can pinpoint down what's the most important aspects to your particular investment case you're working on and then use it basically as a guide to say, okay, so these are the hypothesis I want to test. What is the specific information I need to look for to test it? So I think that's what people will take away. Of course, the less experienced you are, the less investment books you have read, the more novel everything in the book will be. But I think even for someone who has read like everything, I think there will be new things. In the appendix, there's also this, it's a different kind of checklist. It's kind of a list you can use to check your own investment hypothesis for sort of logical flaws. And I think that is probably the most

original part of the book. At least I haven't seen or heard anybody describe that before. And I think that is something that probably everybody can use so everybody should check out the appendix they should check out the whole thing but we are all a bit time constrained and other ways you would recommend to do if you want to read the book with a limited time and you already mentioned this boxes um well i mean uh these boxes is is sort of the the uh you could say the optional advanced version so if you if if that's not for you you just sort of a casual have a casual interest in investing just skip those and just read the book then i think it's a very enjoyable read um but if if if what you want is is is more like looking for the specific tools to analyze

certain things i think the boxes is where you have like the value for you so i think depends kind of who you are so if you want to read the book with a limited time and quite efficiently go for the boxes or skip the boxes depend that depends on who you are right depends on who you are what you're after so I have some of my friends who are non-investing friends who read the book they actually understood the books but they asked them so did you skip the boxes and they were like yeah I skip the boxes but then I have other people who are like really hardcore professional investors and they they they liked they like that

part. I mean, there's a lot of humor in the book. I don't know if I mentioned that like it sort of happened accidentally. First, I wrote the first draft of the book. It was how I intended and then people were saying, like, I don't recognize your personality. I started adding humor and humor. So the book is actually quite different from stylistically, I think, at least from most investment books. And I was actually quite surprised the impact that had on people's ability to also read the book. So people who are not investment. investors, they can actually, I think because partly of the style, they actually get engaged by the book, but they get kind of turned off by these boxes, I think, because that's the thing is this kind of bizarre combination between actually a pretty advanced investment book and then kind of comedic tricks. It's a kind of combination that doesn't make sense. But anyway, now I did it. So you already mentioned that humor is an ingredient to make the book different. What else? makes it different to other investing books.

So, well, I think if you, if you, if you, if you, if you, if you, if you, if you, if you, if you, if you, if you, if you, if you, if you, there's a category of investing books that I would call like toolbox books that are very practical, very like not so much mental model very much like this is kind of how you do it. Like for example, Pat Dorsey's book, which is great, which I highly recommend, but I think this book is sort of more narrow focus. It focuses only on evaluating quality and it doesn't mean that it's a book about quality investing. It's just a book about evaluating quality and quality as an input to determining the value of something. And then because it's more narrow, it's also a little bit more focused and

maybe a little bit more advanced. So I think that is where it stands out. I think that's, to my knowledge, that book doesn't exist today. But then of course, then you add on that stylistic aspect, which makes it sort of like, almost like freakish. I don't know. It wasn't my plan originally as I mentioned i mean if i had wanted to actually write like the world's first comedy investing book or something i would have probably approached it totally different um but anyway now it's this way and and and people seem to like it so hey okay then prepare for a lot of humor when reading the book um so imagine a group of investors and maybe let me ask the question based on this imagination which investors might be slightly offended

in reading the book. Yeah, so since the book uses sort of satire a lot and sort of these, you could call them like exaggerated analogies, like you take an argument and then you kind of take it to the extreme in two contrasts, and I use that a lot. So, of course, there are some people who get sort of satirized along. I think the very, the number one is probably the kind of very heuristic thinking, the people who are very, like, binary, like you have the. very thinking you have cyclical industries and non-cyclical industries and it's kind of it's carved in stone

this is like god came down to earth and he said it's cyclical and non-cyclical that's not a scale or people who think a lot in terms of like uh just heuristics like uh roic or PE or ratios or and don't think qualitatively about stuff and go to the next to the deeper level of of determinants behind what what is actually the leading uh determinants of of durable high return on invested capital instead of just what is the what's the ratio i can pull up on bloomberg you know like and i and i kind of satirize them a little bit and then of course i also satirize people um who just who are just kind of lazy in terms of their analysis who who seek verification of the idea instead of seek falsification of the idea right and and there's a lot of stuff that they get kind

of grouped in as i call them douses you know they they look for water with the with the stick or diviners you know i have this all these illustrations and that so but of course it's it's of course it's an exaggeration if people get offended by it they should be like hey we i think we are all we are all guilty of doing that from time to time but i think it's it's it's just an effective way to get my point across it will be interesting what feedback you will get on the book and outside of the sample you already have for sure there will be some fundamentalists who will read the book very like the same way you have some people who read the book like a religious fundamentalist or something but i mean they're welcome to criticize me i mean if you can't take a little bit humor

then maybe i don't know what are free insights that i can get from the book that might surprise me as a reader um it depends a little bit on you tillman because i kind of don't know where your holes are in in so i think based on my experience from 40 reviewers everybody had something different where they were like hey i hadn't i hadn't thought about this before so it's hard for me to pinpoint like the concept of the book is not to present like one original idea and just go through it the whole book like for example like in checklist manifesto or something it's it's 17 different aspects of quality and how you empirically assess them so if there were maybe two or three of those 17 that you had maybe not thought so much about the determinants of them, that would be

the two, three things that I think you would take away. But for someone else, it might be something else. So is there any pattern you have seen of surprises? Well, I think the chapter on staying power, there's a chapter on staying power with the determinants of staying power. I think maybe you had like a little bit higher percentage of people who hadn't thought about that. There was also a lot of people who I think hadn't thought about some of the analytical methods to evaluate the reliability of people of having simulated following the company for a long time. Maybe there was a higher proportion of reviewers who hadn't thought about that. If you want, I can explain it.

No, people should have a look at these chapters, I think, because I want to now talk about great companies. Great companies are in the title of your book. And maybe to open the book a bit for the reader, about which five companies can I learn the most when reading the book? Yeah, so the book has a lot of company examples. There's like, I don't know how many there are, but every time I mention something, I usually follow up with one example and kind of a counter example and jump back and forth between contemporary and old examples. I think Apple is probably the company that I

used as an example most, probably followed by Berkshire. But then you ask for a top five. It's difficult for me because there's just like different examples for different things. There's an example with ASML. There's an example with the Hong Kong Stock Exchange. There's an example with Saudi Ramco. There's like, there's just an example with standard oil. There's examples of different companies from different times and with respect to different things. So, It's difficult to say top five. But at least I had to take some Apple stuff out because people said there's too much Apple.

You used Apple as an example too many times. So I had to tone it down a little bit. Then maybe let's take Berkshire and Apple. What makes them a great company? Ooh. Okay. So I think Apple is like, I just think Apple actually hits many, many of the examples.

So if you look at it would be difficult to go through all of them but I think can we talk about passionate management I think it hits without going through actually all the determinants that discuss in the book but I would just say I think it hits many of them it hits incentives pretty good they have very good track record of of capital allocation they bought back nearly half of the shares outstanding also at a at a time when the company was valued very very low they have there's a there's a table in my book where I show all the predictions that Tim Cook has made on historical earnings calls and compare them to exposed outcomes to kind of show how you can go back and simulate having

followed a company as an input to assessing the reliability of what they say today. I think Apple has multiple kinds of interesting competitive advantages. It has switching cost multipliers. The more Apple products you own, the less inclined you are to switch. It has a brand that I actually think qualifies as a brand advantage, even though I'm actually quite skeptical of that. It has network effects. You have different kinds of network effects. You have a two-sided network effect on the App Store.

You also have like ecosystem network effects. I think Apple has had great reinvestment options. You know, they could expand into adjacent product carry. that were not only in themselves financially lucrative, but also actually increased the strength of the existing stuff they had. So anyway, I think that you could debate whether they have been too value extractive. That's maybe a drawback where you could say maybe they have, the question is have they extracted too much value

as a percentage of the value that they created for developers and also, I mean, to what extent have they used of their pricing power you could have a discussion on anyway let's not go too much into but i think it should but i guess it should be pretty clear to people who know a little bit about apple it's also a very well-known company that it's a great company so i think berkshire i mentioned specifically with without going specifically into the underlying companies that berkshire own but i think the example where i mentioned berkshire is in relation to internal diversification so when you're concentrated investor like i am personally a very

concentrated in this right um i think it's a plus if you have some degrees of internal diversification but you sometimes see companies that succeed in internal diversification and then you see companies that don't succeed in internal uh diversification um you have some uh high efficient and some low efficient conglomerates and i use berkshire as an example to discuss and lift core also some of the what i view is some of the determinants of successful companies that are actually quite decentralized but still have a lot of internal diversification um and also is i think i also mentioned it in relation to i make the argument uh that i don't necessarily view cyclical industries as a bad thing and and but it requires of course that you are able to that you know that you that you have

that you're mentally prepared to act in a downturn like for instance micro liery of ryanar but i think also berkshire have shown to be not not that not that their businesses are necessarily cyclical actually i don't think they are but just the mindset of actually being conservative through the cycle and then being aggressive in in the cyclical downturn are you delivering with your book a general definition of a great company or is it more that the book gives you a big big checklist and screen list to find greatness but it's not meant to be a checklist Hillman it's not meant to be like i think if if you if you use this as a checklist then you only end up with very few companies so it's not meant to be a checklist it's it's meant to be an analytical recipe for various

aspects of quality, right? There will be very few companies that will hit all of these criteria. Very, very few. There will always be something where it's weak or where you can debate it. I think what you should try to do is invert a lot. Try to think about, for example, okay, so what are the competitive disadvantages that my target company has in relation to its direct or indirect competitors? Okay, so can I then use these tools, these recipes that I described that I get from Simon's book to evaluate basically the the advantages that the competitors might have over my comment for example or focus on okay so already based on sort of high level pattern recognition I can see that these are the weak spots of this target company so

let me actually approach the determinants as described in this book and focus on that I don't think it should be like I don't think it should be it's it's not my intention that people should be using this as like a crazy mega checklist that's not really the intention but of course it could be used in that way but uh i i i don't know i i i i don't think you need to actually follow through on everything but it's it can it can work as a unified mental model also so it's not only about empirical stuff and analytical stuff, just all of these chapters and all of these determinants, if you kind of use them as a mental model, so actually not going in and doing all the stuff that I write about, but just that works as a great, I think, sort of framework for discussing

overall quality as a mental model. So it can be used in that way as well. In your personal research process, how long does it take for you to identify greatness at a company so how many hours days weeks do you have to invest but i think actually there's something difference like i think so the book you can you can i would separate identifying and evaluating right actually identifying i don't think is not as perhaps necessarily that difficult to identify stuff you you can identify some of these characteristics that you think are there right And you think this company might be great. That's actually not very difficult.

But I think what is harder and what I, what is, I think, justifies this book is, then, okay, so now I have a theory that this company is great. And that doesn't take a lot of time to figure out. That's basically just like pattern recognition. Now I want to test it. And I think I want to, and of course testing doesn't mean that you get to like, I proved it. That's not the point, right? It means can I increase or reduce my conviction based on actual facts with regard to the relevant determinants of whatever I thought made the company great?

And that I think is a little bit more difficult and can take time. But it depends on the case. So, for example, if you talk about network effects, right? If it's a type of network effects that's sort of very local, you might have to go out and do work sort of area by area or an sample of areas just to understand some of the dynamics but if it's if it's a global network effect maybe maybe it's so it kind of depends on the situation what is what is required various case by case the point is not that you should be doing the diligence to death that is totally

not the point what can i or one get wrong when i try to and identify the value greatness well i think what you can for sure get wrong is that you you see something just take an example you see something that reminds you of something so you use kind of in her subconsciously you use kind of an an argument uh of analogy this company reminds me of this this other thing i have seen therefore it's great it's kind of like the visa of this or it's kind of like the you know what I mean like that kind of logic you see a lot in kind of when people pitch a stock they use these analogous arguments it could also be that you rely too much on anecdotal evidence that is supportive of your own thesis so you you kind of subconsciously

even though you don't know it you have actually just given more weight to the to some evidence that to support your thesis and I think by having a systematic approach to how you you evaluate stuff is great And I think that is what I try to do with the book. Hey, Timon here. It's great that you've made it that far into the video. And I think it shows a certain passion for investing you're having. If you want to dive deeper and go further down the rapid hole,

you're invited to apply to my community Good Investing Plus. It's a place that's very helpful to people who are ambitious about investing. It's helpful to investment talent as well as experience. fund managers so if you're interested please click on the link below and now without further do enjoy the conversation have you identified any myths or misconceptions investors have about great companies or greatness in companies so i so one thing i think is kind of interesting if you go to like an investor event and you start discussing with people what's a great company i think most people they will kind of agree on the same thing well you know they need to be a competitive advantage

it's good if it's not too capital intensive it's good if it's not too cyclical it needs to have like a capable management it needs to have high return on invested capital and so on and so on and so on but then when you look at their portfolios they are in they are always in totally different positions and one guy he's like oh how can you so i think people they give weight to different things like for example i'm personally probably a little bit more interested in emerging quality so companies that are not obvious quality they are not the kind of they are not established quality where it's kind of so obvious to everybody that their quality. It's more like at the intersection of quality and emerging quality.

That's not about the book. That's just my personal sort of what I like. I like to have to depend on qualitative work to be able to determine it and not just being able to rely on what is like extremely obvious. And just heuristics like return on invested cabals or margins. So I like to go a little bit deeper. but that's just a personal preference i don't i'm not saying that's better or worse um i i think did i lose the question a little bit there no it's about the myths and misconceptions and you you shared the bit okay so yeah so so yeah okay so but that's fine so so i think that that's actually

kind of interesting right so people kind of agree on what is a good company but then yet they ending up with totally different companies so they don't actually agree right so then in the actual investment process there's all kind of individual preferences for what makes a company attractive from an investing perspective or not right so they actually don't agree they actually don't agree so there must be some who knows who's right like i'm not saying misconceptions but diverging views on what's a great company and i think for example uh like the longest chapter in the book is about network effects and probably because that's kind of where i have most personal experience right and i just see a lot of people talking about network effects and when you hear

these investing podcasts or these you see some write-ups or something you you see people sort of casually just mentioning it as if it was kind of just like a binary thing like network effect yes or no okay it's a check kind of like okay wait a minute there's like all these determinants of what makes a network effect intense and what makes it durable that you can decompose it multiple times and you can analyze empirically the determinants of that. It isn't just as simple as kind of yes or no, check, box, check, move on to self-verification

of my pre-existing investment hypothesis. It's not that simple. That said, though, I think there might be some people who will criticize my book for saying, well, aren't there some investors who are so good at pattern recognition that they can kind of a priori

by their own thinking kind of identify? And, you know, actually, I think there is, there is probably people like that. But I bet you it's not you. I bet you it's not you and it's not me. So I think for most people, except for maybe some kind of super genius like One Buffett, I think most people are well served by doing a lot of this empirical work. You have a whole section about passion in your book.

why is passion important for great companies so i think it depends a lot on your investment hypothesis sort of on your investment time horizon if your time horizon is one to three years then i i don't think passion matters at all really but if you're like me if you're more long term so i don't have i don't have really any um proof to back this up and it's actually based a little bit on on on you could say anecdotal evidence but if you look at the really maybe back maybe i can inject something sorry if i'm answering it is it okay it will be a little bit longer answer so i don't know if people listening this if they're familiar with the economist henrik besenbinder who made some studies on the statistical distribution of shareholder wealth creation

uh maybe you can link to maybe some of his articles but he basically found that if you look at from 1926 to today if you kind of just bought the entire market and every time there was a new company you bought it and you hold it you hold everything so it's kind of a permanent buy and hold of the entire market and then you look at over this time over the sort of since 1926 how was the statistical distribution of wealth creation you find that 60 percent of all stocks they underperform tea bill during the lifetime and the top 40 not top 40 percent but top 40 stocks they generated more than i think it was more than 40 or 50 percent of the entire shell world creation if you then look at some of these companies you look at

at some of these sort of thousand baggers, what kind of did they have in common? I think a lot of them had like really, really, really passionate management. They had really, really passionate management. And of course, there's a lot of survivorship bias. And you can criticize me for the making the argument and so on. But I just think if you, so this is my belief. I cannot prove it. But my belief is that if you want to aim for kind of like power law distributed, like you know that the stock market it is actually power law distributed if you're buy and hold investor similar to venture investing and you're like okay so how can i increase the chances of hitting like a really crazy multi-bagger i just postulate that i think passionate management is is going to increase the likelihood

of that so so that's why i focus a lot on it but of course if you don't if you have a different time i think it makes no sense to to go through all this work of an evaluating passion it's kind of actually quite time consuming if you have to follow all these recipes i think if you have a shorter time horizon it's a total waste of time because it's not going to matter but i think you know decisions they kind of compound and accumulate kind of like the same way as an investment can accumulate i think decision on decision on decision on decision on decision accumulates and if those people are really really passionate they are really really persevered they really drive for the long term they love what they do they would do it even without the money and so on and so on and so on the people below them they

stay in the company, they have high retention, they communicate in a really crazy, authentic way, and so on and so on, all of these determinants, then I think you're much more, you're not sure, but you are more likely to hit the really long-term winners. And I think if you compare yourself to the, to an index fund, an index fund is always exposed to the next thousand bagger. It's always exposed to the next thousand bagger. But you're not, like in my concentrated portfolio, I'm not, I'm probably. not right so so i have a competitive disadvantage there i'm i am not exposed to the new to the next

thousand back and i think at least by focusing on passionate people maybe i make up a little bit for that so you mentioned a section on passion maybe as a small teaser to the book which other which what else is important to spot great companies aside from passion um but i think um well i think So some of the other things on people that I have a chapter on is long-term incentives, capital allocation, and reliability. But I think especially number two and three is probably already very well described and obvious to people. But I think reliability of communication is also maybe something where people don't think about to the same extent as me. Some people do. Others may not. But I focus a lot on it.

So in my analytical process, I kind of like to simulate having. having followed a company for a long time so i like to go through and sort of chronologically read or listen to uh to earnings calls and to whatever they have said in interviews and what they have written in the annual report and in shareholder letters and so on and i think this is a great exercise to do especially if you do it like in a compressed time frame like over one or two or three four days you actually um there's so many interesting uh buy products that come out of this analysis. I know it sounds like if you haven't tried it,

maybe sounds silly, but just try through it once, you'll see it. Like you, first of all, you get a pretty good idea about sort of, did the predictions they made compare with the ex post outcomes. But you also get a very good chronological understanding of stuff

instead of just sort of a static view of today. And you get a surprisingly good understanding of the business also sometimes. So I think it has some interesting side effects in addition to just evaluating the reliability of... Because like the point, the justification for doing this is when you make an investment in a company today, and I'm talking about public and private,

like my book is not limited to public companies. But so when you make an investment today in a company, how much of the information you are relying on does really originate from the current management? Well, one thing, you might have had some direct interactions with them. You might have not. So you might have just read what they have said and so on. But then if you rely on maybe some sell-side stuff, that also originates from the management, probably.

If you rely on some kind of industry experts, maybe that also originates a little bit. Their opinion is also affected by what the management says and so on and so on and so on. So I don't think you can, like, no matter which way you go, you're going to end up relying on information that originates from them in how you build your investment thesis. Well, then it's pretty important, I think, to have an idea about how reliable has that been in the past. But of course, just because it has been reliable doesn't prove that it will be true, but I mean, it's just an important input. So what else? I mean, I have like, I think also something that maybe is not so much described, but I also, I already mentioned it

before is the stuff with competitive advantages. I see a lot of people, they always talk about if you hear like investment podcast, investment books, they always talk about. So what's the competitive advantage? So all these companies you hear about, they all have a competitive advantage.

But then you never hear about some companies have a competitive disadvantage. So that's like, that's weird, right? So if you have like, there's something wrong sort of statistically, if all these companies on these podcast would ever have competitive advantage, then there must be like 10 times as many companies

with competitive disadvantage. Why are they never described? on the podcast or on the right it doesn't make sense so the all the companies have some form of competitive disadvantages you didn't seemingly i don't know why i never hear about people talking about competitive disadvantages there are people always talk about competitive advantages i have some stuff in the book about that i actually had a specific chapter on that that i had to delete because i thought it got i got this sort of middle part with it got very technical and i didn't want to lose people because i think the part three of the book is actually the best so i didn't want to have

people sort of drop off because it got a little bit too technical but um but i still think you can just invert and just use these frameworks to evaluate disadvantages as well uh and then yeah i don't know i don't want to go through all the chapters it's it's fine you teased a lot and people who can read the book and why are the link below they also can buy it and we also link the the Besson Binder studies so people can also have a look at them and for the end of the interview

I want to look at you and how to your transformation you had done with the book. So how did writing the book change you? Well I think there were two we can talk about two dimensions of change. So I think

for me it was very frightening to start adding the humor to it. Like it was like it was like a mental journey so i had just for context in in in in about october 2023 i had written the first draft of the book i had the whole full book no jokes no humor a little bit of sort of subconscious uh analogies here and i hadn't thought about it one guy he mentioned to me he's a professor at the cobenhagen business school he mentioned to me this book is so dry i don't recognize your personality i started adding a little bit to it and it felt sort of um i don't know it felt really

weird. Can I put this out that? It will be so embarrassing. I have all these professional investors looking at this fool with these silly jokes. And then the next reviewer who read it, they liked it. So I add a little bit more. And this journey, and then at some point I just kind of got over the hill. And I was like, okay, screw it. Screw it. I'll just be like 100% myself. And I just, I won't care what people think. And it was great because I had this secret dream of writing also kind of a comedy book and comedy novel or something. So, So I kind of just married those two ideas. And I think that was like beautiful and it gave me like so much satisfaction.

So that's the one answer. But I also think like on the, on the, you internalize. This is something I probably already knew, but I know it much more now. By writing down something, you really internalize something. So by writing down this book, I had this framework already. I knew exactly the chapters how they were going to be structured when. I started writing, but I just really internalized in a totally different way in respect to my own research.

And what I actually discovered is now when I do research, I really like to write these crazy kind of like very draft kind of, it's not a write-up, but it's like I take these structured notes. I don't even make an attempt to make it nice. I don't want anybody to ever read them, but I only write them with the intention of internalizing information so that it sticks in my head. head more. And I discovered that through writing the book also. I think that was, and probably everybody who wrote a book probably discovered the same, I presume, but it was something that was

quite interesting to discover. So I have for sure internalized this framework much more than I had before, before I wrote the book. Would you recommend other investors to also write a book? yes but i would say so so if you look at my personal um if you look at my personal um journey i had just i had i had started writing the book in january i quit my job in overholdings and had the last day in in september um and i thought i had written most of the book and completed most of the book but i totally underestimated me so i was actually quite lucky that when i wanted to start my own because I also started my own investment firm. I had to wait quite a long time for the regulatory license.

And that actually turned out to be quite lucky for me because then I had more time to make the book really, really good. But I also just discovered how big a distraction. How much time it actually took from having written that first draft to editing it over and over again. Like I went through every single sentence and how big a distraction that can be. So if you run a fund or something and you want to write a book,

I mean, I will probably not write a book again. unless it's kind of like some kind of natural byproduct of the stuff that I'm already writing that I can publish in some form of the other. Like it's very time-consuming. But I think it was a great experience, but it kind of depends if you can justify the distraction it's going to be because it's probably going to be a, like to me at least it felt like over the window like a big distraction compared to the fact that I was also going to start an investment firm. But I had underestimated how much.

long time it would take from writing the first draft to to finishing it totally that's a normal mistake you do is that something it always takes way longer it's more painful yay so for the end of our interview i always want to give my guess the chance to add anything we haven't discussed so is there anything you want to add yeah maybe i i would like to also recommend a few other books actually So I think if you kind of criticize my book for being kind of too checklisty, I think it would be interesting for you

to read the book called The Checklist Manifesto. I think you will have a different view on sort of the process of checklists. There's another book that is actually not recommended in my book, but I think it's quite useful. It's the book called Factfulness by Hans Rosling. He talked a lot about this thing called The Gap Instinct.

And I think this actually aligns very well with the kind of thinking that I saturized so much in my book. But these are not investing books. These are just like other kinds of books, but I think they have some interesting aspects, both that I think parallel my book in some way, that I think you would, they would compliment my book in a good way. I mean, I'm not trying to compare myself to these books.

They are like crazy bestsellers, right? But I think that if you, they would compliment my book in an interesting way, I think, if you disagree with me after reading my book, you should maybe read those two books. Then thank you very much for this edition. I will link them below for people that they can find them to buy. And Simon, thank you very much for our interview and sharing your insights with us. Thank you so much, Simon.

And bye-bye to the audience. Bye-bye. I really hoped you enjoyed this conversation. If you did, please leave a like and a comment and for sure subscribe to my channel. Traditionally, I want to close this conversation with the disclaimer. So here you can find the disclaimer. It says, please do your own work. This is no recommendation.

What we are doing here is just a qualified talk that helps you, but it's no recommendation. Please always do your own work. Thank you and hope to see you in the next episode. Bye-bye.