Motley Fool Hidden Gems Investing - A New Kind of Intelligence

Starting point is 00:00:00 know that your value and your expertise as an investor will definitely change and that there needs to be a letting go of the rigidity of how you see yourself where like oh i only you know look at x type of market or x type of company or this is where my sweet spot is let all of that go and think from a first principles perspective of where it is that you want to take your expertise. Like, don't let the past dictate where you're gonna go in the future. That was Liz Tran, author of AQ,

Starting point is 00:00:41 A New Kind of Intelligence for a World That's Always Changing. I'm Motley Fool producer, Matt Greer. Motley Fool contributor, Rachel Warren, recently talked with Tran about that new kind of intelligence. and about investing in a world that, yes, is always changing. Hello, everyone, and welcome back to Motley Fool Conversations.

Starting point is 00:01:02 I'm Motley Fool analyst Rachel Warren, and today I'm excited to welcome Liz Tran to the show. Liz is the founder of Energenius and a leadership coach to CEOs and founders of some of the world's fastest-growing companies. She's worked with companies like Facebook, Instagram, and the Ford Foundation, and her transformative work has been featured by publications including The New Yorker, The New York Times, The Today Show, Bloomberg, Entrepreneur, Fast Company, and other publications. She brings engaging interactive workshops to startups and Fortune 500 companies, speaking to employees about how to avoid burnout, build unshakable confidence, and unleash their inner genius. Liz is also an expert on unlocking employee potential

Starting point is 00:01:41 in the modern workplace and redefining what it means to be an exceptional leader. She is the author of The Karma of Success, and the newly released book, AQ, A New Kind of Intelligence for a World That's Always Changing. Liz, welcome to the show. Thanks for having me, Rachel. So excited to speak with you today. And I want to start off the conversation by talking about your new book, AQ, A New Kind of Intelligence for a World That's Always Changing.

Starting point is 00:02:06 Now, in your book and in conversations I've seen about it, you assert that IQ was the product of industrialization. EQ emerged from globalization. AQ, short for the Agility Quotient, is the intelligence born of the tech revolution. So I'd love if you could tell us about your book and its core themes and why it's relevant, not just for leaders, but also for investors in today's market. It is so important for us to understand the actual rubric by which we are going to be evaluated for our success and happiness in life.

Starting point is 00:02:38 And the idea for AQ actually came to me about 10 years ago when I was working in venture capital. So I was an executive at a firm called Thrive here in New York City. For those of you who follow venture fund news, Thrive just raised their 10th fund of $10 billion. But when I started there, we were fewer than 10 people. And we were really just starting to begin to understand what made investors and also company leaders successful. Big project I embarked on was to interview our most successful founders, the ones who had exited or pulled off really great M&A for their companies. And I gave them personality tests. I had long interviews with them. And at the end, I could not identify any commonalities they had, except that they were

Starting point is 00:03:23 always changing. They had high AQ, which is what I call the agility quotient. It's your capacity to handle change, uncertainty, and the unknown. I kind of left that there 10 years ago. And then as the pandemic occurred, I started noticing that even people who had really high IQ or EQ were struggling during this time of tremendous uncertainty and change. And then finally, about two years ago, when I became a parent myself and started to think about what it was and why I was struggling with this big transition in life, and also there are larger micro macro changes happening in the world at that moment. And I just realized, you know what, this definition of success that we've all been given around, you know, do well in school, do well on standardized tests,

Starting point is 00:04:13 follow sort of what has been prescribed to you through a blueprint, that's not working for anyone anymore. And that's especially true for investors who make up a big part of the clientele who I coach, meaning I speak to them on a weekly or biweekly basis for years to get them to reach their greatest potential as investors. Something that I thought was really interesting is this assessment you've developed to identify your AQ archetype. And I'd love if you could talk about what that is and kind of break that down for our audience. Yeah, absolutely. When we talk about being high AQ, the opposite of that is being rigid. And rigidity comes from when you're sort of stuck in a mindset, stuck in a perception of the world, or stuck in a perception of yourself.

Starting point is 00:05:02 So what the AQ archetypes assessment does is it helps you to actually see yourself more thoroughly and codify what your strengths and weaknesses actually are to help you spot blind spots. I actually think this is one of the core fundamentals of being a competent and successful investor these days, is this constant pressure testing of yourself, of understanding where your biases are, where your blind spots are. And that's actually what the assessment helps you do. It characterizes you as one of four archetypes. You're either a firefighter, great under pressure, great in emergency situations, but not very planful. A novelist, which is the opposite of that, extremely planful, goal-oriented,

Starting point is 00:05:43 great at synthesis and narrative, but not so good at emergency situations. You could be an astronaut, which is the most quote unquote innovative of all the types. You're always thinking about the next frontier of innovation, but people might not be able to quite follow you because you move so quickly. And then finally the neurosurgeon, which is sort of the most thoughtful, the most diligent and the one motivated by excellence, but can also move a lot more slowly. And so for us, we need to understand our type because one's not better than the other, but you need to know how to make the most of the specific hand that you've been dealt and know how to play it with sort of the most intentionality and to be able to see yourself extremely objectively. I myself am a

Starting point is 00:06:28 novelist. I love making a plan for my life. I always have a five-year plan. I always have an agenda for every call. I always have my week mapped out exactly, you know, how the meetings need to fall, how everything needs to go. But I do get turned upside down when, for instance, We have a blizzard in New York City, and I'm meant to fly to a work conference in Miami tomorrow. So just knowing the type you are. You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with a delicious Pret organic coffee, starting at just $1 all day, every day, now until December 31st.

Starting point is 00:07:10 Well, and something that I think as well is really interesting to think about as long-term investors, understanding this reality that you've been discussing and really leveraging the power of AQ to kind of free ourselves from these patterns of avoidance and cultivate more agility when it comes to actual investment decisions. So maybe you can delve a little bit more into how some of those principles as it relates to AQ can help us be better decision makers in the current and, of course, long-term market environment. Yeah. And I think this is especially true for long-term investors is that the way that I describe this in AQ is about wearing both a green hat and a black hat. And what we'll explain by that is that there's this way of describing different methods of thinking. And there are six hats. Each color represents a different way that you can work through a problem. So, for instance, the white hat is just facts and figures. It's just understanding literally the information in front of you. The black hat, which is one of the hats that all investors need to hold, is truly that of what is the worst case scenario? What is the downside here? If everything goes wrong, what would that be? What are all the details that I need to understand here? It's almost the sort of cynical, pessimistic, but also just very realistic way of seeing the world.

Starting point is 00:08:37 And at the same time, I think that what's required for AQ is to hold that black hat in tandem with the green hat. And the green hat represents future, hope, potential, what could be in the future for your investments, right? You're always looking at, oh, okay, if I believe the story that's going to happen, then we're going to get X rate of return on this because this company, this stock is going to live up to its greatest potential. And so what I think is really interesting is that investors are being stretched to wear both of those hats equally as our operators. I mean, I think we all are. And so this is what I mean by AQ is that there's actually like this fluidity and this flexibility with mindset where you can actually hold these two very opposite sides of the spectrum simultaneously. And so I'll give you an example of that. One of my clients is a GP of a crypto fund. And he holds hundreds of millions of dollars in his portfolio in liquid crypto assets. So constantly evaluating whether or not he should buy or sell. And of course, they have a very, very detailed sell plan that they've worked on. They've had this in place for four years. And then they have individual plans for each of the individual assets. And then in this past fall, as things started to change a lot in crypto, there was this big conversation of, do we sell everything? What's going to happen? Is there going to be a downturn? And he, for months, would look at that sell plan every single night in different parts of it. And he would, this is what we call an AQ language, he would strategically unlearn. So he would look at the cell plan and think, does this actually make sense? Can I pull more data? Is this accurate? And truly, 80% of the time, 90% of the time, he would leave these thinking sessions and

Starting point is 00:10:24 think, yeah, actually, the cell plan's right, right? And so that was the thing. It's like there wasn't actually that much movement, but there was the constant black hat of thinking, is this wrong, right? Was I wrong before? He didn't really change his plan at all. Like when he looks back at this month long period, but it was all necessary to get to an accurate understanding of like, not just holding the green hat of like, our sell plan

Starting point is 00:10:46 is right. We did a great job. You know, we're just going to keep going with this. The market looks good. And then here we are a few months later and out of all the top funds, he was the only one that sold and actually timed it correctly. And all of his GPs and his investors said, you look like a genius. You're the only ones who did that.

Starting point is 00:11:07 And it was his willingness. the reason why quote unquote he looks like a genius now is because he was willing to look like a moron for months you know to constantly make himself think were you wrong were you wrong were you wrong or is there more data i can pull from somewhere should i look at you know the trades that etfs are doing like should i keep you know is there an area that hasn't been explored and he didn't just rest when he said yeah okay self-time looks right he would do the same thing the next day from 9 p.m when he put his kids to bed to 11 p.m at night he would just go back through and and say, OK, am I a moron? I don't know. Let's figure it out.

Starting point is 00:11:41 Is there any data you've seen, whether observationally or otherwise, about how founders, execs of public companies with high AQ tend to make better financial or investment decisions or just decisions for the direction of the company overall? I mean, that could be publicly traded examples or otherwise. Yeah. I mean, I think that the proof is in the pudding in a lot of ways. I think as just a very specific example, to go to one person, out of one, I think about when Satya Nadella took over Microsoft in 2014. And the stock price at Microsoft had been flat for a number of years. And they had really missed out on big trends like mobile, social, gaming. And investors were not bullish about that stock. When he took over,

Starting point is 00:12:28 The very first thing that he did was instead of making, you know, kind of big strategic decisions, he turned around the entire culture and he said, we're not going to be a know-it-all culture anymore, where everyone says, I'm right. I'm the expert. We're going to transition into a learn-it-all culture, which is about as high IQ as you can be. This idea that success isn't in being the expert, but success is in constantly being a sponge, open to learning, open to growing. And so they made mugs and they put them in all the kitchens about how you need to be a learn-it-all. They put up posters everywhere. He trained the executive team to constantly come back to this idea that people needed to be learning, learning, learning constantly. And then look where they are now. You know, their stock price has 10x in, you know, the few years that he had had taken over. And then they actually have been innovators in AI and really been bullish about their investments there. It's been a totally different Microsoft. And so that is just like an end of one example that I think about all the time where you can hire the best and the smartest people, but unless you're also pushing them to be agile and adaptable, then you're not going to get the performance out of them or your company. You know, and so much of, I think, what we're talking about today has to do with the psychology of being an investor, which is something that we really talk about a lot here at The Motley Fool, is that mindset with which we approach portfolio building. And of course, that looks very different for every individual investor. But I think as we've seen a lot of volatility in the markets of late, there's, of course, a lot of exciting trends in which to invest. Of course, AI is on the tip

Starting point is 00:14:06 of every investor's tongue, space, quantum computing, the list goes on. But as we see these movements and changes in the market, whether it is concerns over a bear market or just the ongoing volatility, what are some principles that we as long-term investors can apply to not see those changes as threats, so to speak, but as proactive change events? Yeah. So the first thing I'll say is that it's about defining what you think makes you successful as an investor, right? And AQ is really at the heart of that. And that's actually fun and exciting. I think it opens up an opportunity for everyone to see this moment where the markets are quite volatile as a moment to level up. And, you know, there are some doors opening for people to, you know, gain expertise and footing in places where they haven't had it before, which I think is actually really exciting. You know, in this new world, there's also new opportunities and new chances to sort of broaden your portfolio in a way that you hadn't thought about before. So one, I want to say, like, let's all level set and just say this is an exciting moment. It's scary, right? It's different. But with newness and with change invites in opportunity. And so there are three strategies that I would recommend given that mindset. And one is one that we touched on briefly, which is this idea of practicing strategic unlearning. So on a regular basis, conducting some sort of audit and the cadence of which is going to depend on how actively you're making portfolio changes. For some people, once a month is enough. For some people, once a week is enough.

Starting point is 00:15:40 but it's basically going through pieces of what you've invested in or parts of the knowledge that you've made assumptions on. And you can choose one piece every time you do an audit. And then you simply ask yourself, is there a part of my core belief about this industry or about this investment that is no longer true? And how can I find new or different sources of information or data that could prove or disprove this? You can also ask yourself, what parts of my workflow are no longer accurate? Are there ways that I've been writing investment memos or making investment decisions that no longer hold true to how quickly or slowly I need to move through these decisions right now? What parts of my expertise might I be clinging to too tightly

Starting point is 00:16:24 right now? And then with that strategic unlearning, you remove something. Maybe that means actually removing something from your portfolio or it could mean killing a legacy process, redesigning an investment thesis from scratch and seeing if you come up with the same thing, but doing that again. But really what you're doing is you're creating new space for new expertise to emerge. And I think a lot of us were trained to just add more, right? Add more information, add more knowledge. And that can be a fire hose these days. If you're just absorbing, absorbing absorbing and people can become overwhelmed but high aq people are also willing to let go of some of what they've learned before that's the first one the second thing i

Starting point is 00:17:07 will say is expand the contours of your universe and so a lot of this comes down to talking to other people growing your network coming up with new strategies and tools for the way that you invest because the blueprints that we've used in the past are not going to carry on towards the future. And I think that that's just something that we need to accept that maybe you've been taught, you know, you've grown up on value investing or, you know, you've grown up with a specific mindset of the way that, you know, you manage your long-term investments. Not to say that it's not going to be fully accurate, but part of your new thesis as an investor is going to be brand new. I call it bushwhacking. It's an important skill of AQ and it's creating a

Starting point is 00:17:48 path where none existed before. So we are not going to just be able to rely on the old philosophies or the old ways that we've grown up, whether it's in business school or what we've learned from our mentors about the principles of investing. We can hold onto those, but we also need to create our own. And so this means talking to people who are maybe newer or more free-flowing with their investments, not to say that you should take everything from them, but just expanding your repertoire of what is possible in terms of the way that you see the world. And so I think that's a really, really important one. Like how do you expand the aperture of your universe, your toolkit of investing, even if it seems opposite to what you've learned in the past,

Starting point is 00:18:28 because you're knowing that like what the future demands is not a path that has been already clear cut. You're going to have to make your own way because the world is not the same as it was even five, 10 years ago. And finally, the last, you know, skill I will use is to know yourself really well. It's about self-awareness these days. And you have to know your biases, your limitations, the places where you're holding on too tightly to pieces of your investments or where you're holding on too tightly to the way that you see yourself. Because a big part of AQ is about relinquishing the ego, which I think makes everyone a better investor. When you can see the mirror very clearly, you're not going to be tricking yourself into specific decisions that

Starting point is 00:19:11 may not be the best for you. You're able to look at yourself very clearly and say, okay, maybe I made this decision a month ago, but it's just not right right now. One final question. You know, I think that one of the big takeaways I've had from our conversation today is that AQ is one of the most important skills that we can pass down and implement, certainly as investors, as well as in other areas of our life. But as we look ahead over the next five to 10 years, how can investors prioritize remaining financially agile rather than just financially literate?

Starting point is 00:20:11 Yes, definitely. I think part of this is also, you know, creating a learning plan for yourself, knowing where it is that you want to go. And as we discussed before, there are moments to be reactive to the market and let that dictate the type of investor that you need to be, right? What you need to learn. But then there's also this part of knowing that you are going to be evolving and growing and constantly having individual development plan for what your gaps are. You know, I've definitely seen investors who say things like, oh, well, like, I'm just not an AI person, right? Like, I'm a consumer person. Like, those are the companies that I understand. Those are the markets that I want to be in. We can't say those rigid things about ourselves anymore. You can't be like, oh, well, like, I'm an X person, not a Y person, because it's just not true. We all are so adaptable innately. And that's actually what we need to remember is that AQ is our birthright. We all have the potential to be extremely high AQ. Our ancestors were nomads who were hunter gatherers and they didn't know what was going to happen tomorrow. They didn't even know what they were going to eat or where they were going to sleep. And so they were dealing with like a much greater degree of volatility than even the most risk taking investors are. Right. We like ultimately live in temperature controlled buildings and like, you know, we can predict our future with like a far greater certainty. And so I think what it is, is like, know that your value and your expertise as an investor will definitely change. And that there needs to be a letting go of the rigidity of how you see yourself where like, oh, I only, you know, look at X type of market or X type of company, or this is where my sweet spot is. Let all of that go and think from a first principles perspective of where it is that you want to take your expertise. Don't let the past dictate where you're going to go in the future. Well, I think you've given us all a lot to think about today, Liz, and it's been so fun to chat with you and talk about the concept of AQ. And for those who are listening or watching, check out Liz's book, AQ, A New Kind of Intelligence for a World That's Always Changing. Liz, thank you so much for joining me today.

Starting point is 00:22:21 Thanks for having me, Rachel. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For The Motley Fool Money team, I'm Matt Greer. Thanks for listening, and we will see you tomorrow.

Motley Fool Hidden Gems Investing - A New Kind of Intelligence

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