Motley Fool Money - 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. I don't let the past dictate where you're going to go in the future. That was Liz Tran, author of AQ, a new kind of intelligence for a world that's always changing. I'm Motleyful producer Matt Greer. Motleyful 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 Motleyful Conversations. I'm Motley Fool analyst Rachel Warren, and today I'm excited to welcome Liz Tran to the show.

Starting point is 00:01:07 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, at 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 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.

Starting point is 00:01:54 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. Now, in your book and in conversations I've seen about it, you assert that IQ is 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. And the idea for AQ actually came to me about 10 years ago when I was working in venture capital.

Starting point is 00:02:44 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.

Starting point is 00:03:17 And at the end, I could not identify any commonalities they had except that they were always changing. they had high a IQ, 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, 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,

Starting point is 00:04:05 this definition of success that we've all been given around, you know, do well in school, do well on standardized tests, 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 bi-weekly 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 it kind of break that down for our audience.

Starting point is 00:04:46 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. 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. days is this constant pressure testing of yourself, of understanding where your biases are,

Starting point is 00:05:27 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, 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

Starting point is 00:06:12 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 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 meant to fly to a work conference in Miami tomorrow. So just knowing the type you are. If you're early in your career and looking for insight, inspiration, and honest advice,

Starting point is 00:06:54 listen to the Capital Ideas podcast, hear from Capital Group professionals about leaning into the differences that make you unique, making decisions that last, and what it means to lead with purpose. The Capital Ideas Podcast from Capital Group, available wherever you listen, published by Capital Client Group, Inc. Well, and something that I think as well is really interesting to think about as long-term investors, the 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

Starting point is 00:07:32 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 I'll explain by that is that there's this way of describing different methods of thinking.

Starting point is 00:07:58 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. 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, 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,

Starting point is 00:08:48 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

Starting point is 00:09:34 cell plan that they've worked on, you know, 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 in an AQ language, he would strategically unlearn. So we 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 think, yeah, actually, this cell plan's right, right?

Starting point is 00:10:17 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 plans 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 were the only ones who did that. And it was his willingness. The reason why quote and quote,

Starting point is 00:11:01 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? Where are you wrong? Are you wrong? Is there more data I can pull from somewhere? Should I look at, you know, the trades that ETFs are doing?

Starting point is 00:11:13 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 say, okay, am I a moron? I don't know. Let's figure it out.

Starting point is 00:11:32 Is there any data you've seen whether, you know, 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. Like, I think as just a very specific example, to go to one person, you know, end of one, I think about when Satya and Adela took over Microsoft in 2014. and, you know, the stock price at Microsoft had been flat for a number of years, and they had really

Starting point is 00:12:10 missed out on big trends like mobile, social, gaming, and investors were not bullish about that stock. When he took over, 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 no-at-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 aque 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.

Starting point is 00:12:50 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 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.

Starting point is 00:13:19 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 Molly 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 of every investor's tongue, a space, quantum computing, the list goes on. But as we see these movements and changes in the market, whether it is concerns over a bare 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

Starting point is 00:14:32 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's 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 recommend given that mindset. And one is one that we touched on briefly, which is this idea of

Starting point is 00:15:16 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, you know, portfolio changes. for some people once a month is enough, for some people once a week is enough, 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.

Starting point is 00:16:01 Are there, you know, 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 right now? And then with that strategic on learning, 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.

Starting point is 00:16:47 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 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 a future. And I think that that's just something that we need to accept that maybe you've been taught, you've grown up on value investing or, you know, you've grown up with a specific mindset of the way that, 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.

Starting point is 00:17:36 I call it bushwhacking. It's an important skill of AQ. And it's creating a path where none existed before. So we are not going to just be able to rely on, you know, 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. you know, the principles of investing, we can hold on to 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 because you're knowing that, like,

Starting point is 00:18:21 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, ten years ago. And finally, the last 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 may not be the best for you. You're able to look at yourself very

Starting point is 00:19:05 clearly and say, okay, maybe I did make this decision a month ago, but it's just not right right now. The old adage goes, it isn't what you say. It's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest innovations in comfort.

Starting point is 00:19:42 Use the cabin air purification system alongside active noise cancellation for all new levels of quality and quality. it. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. 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 So we look ahead over the next, you know, five to 10 years.

Starting point is 00:20:23 How can investors prioritize remaining financially agile rather than just financially literate? 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.

Starting point is 00:20:59 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.

Starting point is 00:21:18 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 IQ. 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.

Starting point is 00:21:44 we like ultimately live in temperature controlled buildings and like, you know, we can like 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. Like, 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 ACQ. And

Starting point is 00:22:30 for those who are listening or watching, check out Liz's book, AQ, AQ, a new kind of intelligence for a world that's always changing. Liz, thank you so much for joining me today. 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 ourselves stocks based solely on what you're here. All personal finance content follows Motley Full 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 full money team, I'm Mack Greer. Thanks for listening, and we will see you tomorrow.

Starting point is 00:23:12 Thank you.

Motley Fool Money - A New Kind of Intelligence

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