Have you heard of Anthony Deden?
Well, I had not until 2018 when I came across his interview with Grant Williams. I thought that was one of the best investment interviews I had ever seen. And I stand by that thought even today.
Anthony, or Tony, is the Chairman of Edelweiss Holdings (not related to India-listed Edelweiss Financial Services), a Bermuda-based investment holding company that he launched as a fund in 2002. After building a remarkable track record, he converted Edelweiss into a holding company with over US$ 300 million in assets and holdings.
As he talked about in his interview with Grant Williams, Tony came into the profession of wealth management by accident when in 1985, he was asked to manage the monetary affairs of a family where the lead earning member had passed away. Gradually, one family became two, then three, and so on.
In the interview, Tony’s introduction about himself and his work was a remarkable piece in itself (emphasis mine) –
…I found myself being an investment counselor without having the preparation or the background. I’ve never worked for a financial institution; a bank. I had to learn a great deal by the sheer desire to do the right thing. So my background is not as extraordinary as you make it sound.
…When you are an investment counselor to a family, and in essence, you are asked to provide guidance for the entire wherewithal this family has, you come to the inevitable observation that this is all the wealth this family possesses, and no one is ever going to give them any more.
And there is a sense of irreplaceability to this capital, so you have to start respecting it. Respect the fact that it is really irreplaceable. It represents a lifetime’s worth of savings. That is that you must avoid the kind of error that would put this family out of business. You also learn fairly early on something that takes men far longer to do, that is it’s easier to actually make money than to keep it. Not merely on account of external issues, such as inflation, taxation, but also internal things: error, imprudence, and other such factors. It is a kind of different world than a fund manager has, where a fund manager in essence has an undefined, unlimited amount of capital at his disposal. And if he loses part of that, he can get others by changing his policy and his investment objectives to something more desirable at the time.
As you may watch in his interview, Tony is well aware of the ‘irreplaceable’ nature of the capital of his clients that he is handling. This sets him and his thought process clearly apart from most fund managers who work with almost no such awareness or accountability as they seem to have, as Tony said, an undefined, unlimited amount of capital at their disposal.
Anyways, I was re-watching Tony’s interview yesterday, and came across these two very important ideas on having an “owner’s mindset” that separates successful investors from most others who are into the stock market without much idea of who they are and what they are doing there.
What Tony shares has also been taught by the likes of Warren Buffett and Charlie Munger for years. But then, he has brought some unique perspectives to this idea, which are worth reading, learning from, and practicing in our investing endeavors.
Here they are.
1. On Identifying Managers with Owner’s Mindset
Tony shares the story of an Arabic date farmer he met who had inherited an orchard that had about a thousand trees. As the farmer was showing Tony around his orchard, and took him to something like a hundred trees that were recently planted, Tony asked him out of curiosity, “How long will it take this tree to bear fruit?”
The farmer replied, “Well this particular variety will bear fruit in about 20 years. But that is not good enough for the market. It may be about 40 years before we can actually sell it.”
Tony replied, “I have never heard this. I did not know this. Are there other date trees that would produce faster?” Meanwhile, he looked at all those trees that were being harvested and realized that this farmer could not have possibly planted them.
The farmer tells Tony, “Okay. Here’s my grandfather and my father, great grandfather.”
“It was fascinating,” Tony says in the interview –
Why would a man do something today for which he would receive no reward in his lifetime? And the only reason he would do this if his time preference is solo. That he is concerned about his family’s wealth a generation or two from now because he received no reward by planting a tree that will have no …
In your world they would call it an economic loss. A loss of opportunity or God knows what they would call it, but he saw the world differently. And in the supermarket, I see dates. I think about the story now. And I am sure there are other similar kinds of situations.
Tony then spoke about his idea of identifying such managers to deploy his capital with –
So how many people in the world can I find that I can buy 2,3,4,5% of their business to think like that. Cause that way I can sleep very well at night and I can assure you the capital that I commanded is deployed, it is going to be around 50 years from now.
2. On Difficulty for Investors to Have Owner’s Mindset
When asked to explain his thoughts on the distinction between investors and people who are owners in businesses, Tony says this (emphasis mine) –
…there is a substantial distinction…
An owner in a business is far more interested in his survival, in the first instance, than its necessary monetary value. No owner of a business wakes up every morning asking himself what he is worth.
He does not know what he is worth. He is concerned with his products, he is concerned with his employees, he is concerned with his suppliers, he is concerned with his customers. To do that you have to have a time preference that is different from other people. If you only own things that are quoted, you look at the quotation machine as to give you confidence in the fact that “Hey, I made a great decision yesterday, this thing went up.
You have a falsity in your understanding, you are an investor you rent something for hoping that it will go up. You are making decisions based on expectations of what you think other people’s expectations are likely to be based on their framework, and you know, an investor is really, one who generally acquires something hoping he will sell it at a higher price.
And so, all of the calculations, and all of the pseudo intellectual activity that goes along with it is based on this idea of price. Is this price high or low relevant to what other people are going to think of it next year? What is it likely to be next year, and why et cetera?
Owners do not do this, they instead build in substance, they instead build in the productive base of the company, you’re recapitalizing earnings, or whatever. So, the focus on wealth creation is different from that of an investor as an owner.
But, to be an owner … it is difficult for an investor to be an owner, because you cannot have immediate liquidity. You know, if you and I owned a big farm to grow carrots, we cannot sell part of it tomorrow, because we want to finance a trip around the world.
…As I said to someone recently, it is akin to the idea of, if you are a captain of a ship. It is nice to know that all of the passengers on board your ship are going to the same destination, or that is where they wish to go, and that is where you started out going. And so, they will judge you eventually by having gotten there, rather than perhaps how long it took, because you avoided certain weather, or other such things.
By the same token, this like-mindedness, I have come to conclude that it is a necessary ingredient even in the deployment of capital, and that is, if I am interested in acquiring a 5%, 10% of your enterprise as a participation, I want to be absolutely certain, that the motivation that you have as an owner and a manager is similar to that of mine. I have an interest in you making the kind of decisions that will have an impact on the company 20, 30 years from now, rather than next quarter, or next year.
So, if your objectives, and if your motivation is different than that of mine, and the capital that I deploy, then at some point I am going to be disappointed.
So, like-mindedness, whether it is in a marriage, in a business, or in any enterprise is a principal and important factor in doing the right thing in the right way.
Brilliant, isn’t it?
There are tons of other lessons to learn from Tony’s interview, which I would share over time.
Meanwhile, you may watch the interview below, read the interview transcript prepared by the Intelligent Fanatics team, and also read Tony’s investment firm’s Guiding Principles.
Mohan Lal Tejwani says
Very good article 👍. Very interesting, inspiring. Thanks for sharing.
With regards 😊
Amrinder Mann says
Thanks Vishal. Your thoughts and blog, regularly render some timeless advice not only on finance but more importantly on living. Thanks once again for your efforts.
Valuable insight. Thank you for the article Vishal . I am a new subscriber, your articles are commendable , it has completely changed my mind set on a lot of things. Grateful to you .
Bhavik Shah says
very nice, having a long term view and horizon is the key.
Vishal, I read most of your posts and they’re all nice, but this one is truly timeless. Thanks for sharing!
Wonderful insights, lots of implementable ideas, thanks for sharing Vishal.
Thanks for sharing this nice article, the guding principles are fantastic
Hi vishal,It took me the whole day to finish this almost 3 hrs video.
Every single second was worth it,the way i think about investing has changed for life after watching this interview.
Thank you for writing this post,had it not been for this,i would have never learned what i did today.
Atchutanandam Tatavarthy says
I found investing in stocks, Mutual funds and ETFs(absolutely waste) is only to feed firms involved and employees working in the firms from top to bottom and it is absolute 100 percent risk for retail investors for whom it is 100 percent safe if they invest in purchasing plots and old buildings or otherwise fixed deposits yield better than stocks. Do not believe in any so called expert investors ideas.
Sandip Padwal says
Well, stock markets are not for everyone. There are more losers and only a handful real gainers. You need lot of study and perseverance to gain from Stock Market Investing. In Real Estate on the other hand your capital is mostly safe and due to inflation the gain is almost certain, but this also has exceptions.
Neval Menezes says
Nice article Vishal. I did hear to the entire interview and lots of wisdom to harness from. I will listen to it couple of times more 🙂 . Anthony comes out as a well grounded and keeps his expectations clear. You have nicely articulated the story as well. Thanks for sharing this piece.
thanks for the video link Vishal! I loved it. I dont know if Anthony’s framework is different from that of Value investing, even though interviewer say that so. Its still fundamentally Value Investing? or did I miss something?
Sandip Padwal says
looks interesting. I would definitely watch the interview later. Having owners mindset is comparatively simpler than fining business with owners having ‘Owners’ mindset to invest the capital in. There are more stock price manipulators in the play than honest business owners.
Wahh Vishal bhai Thanks for such a thoughtful blog,artical.
vishal I want also need some artical on ‘The great deprssion’ written by BENJAMIN ROTH.CAN BE?
1) “To do that you have to have a time preference that is different from other people”.
2) “But, to be an owner … it is difficult for an investor to be an owner, because you cannot have immediate liquidity.”
Are 1 and 2 not contradicting ? Time preference and liquidity. Or may be there is a different perspective ?
Subhaschandra H D says
Vow Vishal, that was a great interview, Revelation , Honesty and integrity very difficult to get nowadays
Interesting article and video, the logic sounds good, possibly to good to be true.
But what about poor Joe who looks at the market long-term, does his research well, re-invests his dividends. Then is wiped out on a market reset. 2008, then a growth and again 2019/20.
Yes the market recovers, but you have to start to go into cash, [when it paid decent % rates] then property to create, bot an income stream and a capitol gain. Or simply buy gold when it is in one of its troughs.
Which speaking of troughs 2019 when all the US Senators after the Covid19 briefing collectively unloaded their shares, before the collapse.
Is/was the market rigged against the outsider? Or is it a job creation scheme for financial advisors, pension funds or Insurance companies.
But most companies that you describe are long gone and with it the values. Now most large companies are indeed owned by Hedge Funds who work collectively [illegal, but try to prove it] to manipulate the market and make money on the swings.