Top Ten Lessons After Almost a Year - [Invest Like the Best, EP.44]

A future guest just told me, every band has a song about being in a band, so today I give you my version. I won’t do this often, and only do it this week in case listenership drops due to the holiday—I didn’t want any guest to have a smaller than normal audience. I have now been doing this for almost one year, and have learned a tremendous amount. Since the whole idea behind the show is to learn in public, I am going to share a few of the lessons I’ve learned with you today. I’ll shape it as a top ten list, which ends with a fun story about my recent dinner with Warren Buffett. You’ll notice that many of these are just good business and life lessons applied to something specific: a podcast. I hope you can pull the essence of one or more of these and change how you do things, especially if you create any sort of content as part of your job.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:36Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

• 0:57Speaker 02

  Patrick O'Neal is a principal and portfolio manager at O'Neal Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Neal Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Neal Asset Management may maintain positions in the securities discussed in this podcast.

• 1:19Patrick O'Shaughnessy?

  A future guest just told me every band has a song about being in a band, so today I will give you my version. I won't do this often and I only do it this week in case listenership drops due to the holiday. I didn't want any guest to have a smaller than normal audience. I've now been doing this for almost one year and have learned a tremendous amount. Since the whole idea behind the show is to learn in public, I'm going to share a few of the lessons I've learned with you today. I'll shape it as a top 10 list, which ends with a fun story about my recent dinner with Warren Buffett. You'll notice that many of these are just good business and life lessons applied to something specific, in this case, a podcast. I hope you can pull the essence of one or more of these things and change how you do things, especially if you create any sort of content as part of your job.

• 2:04Patrick O'Shaughnessy?

  Onto the list. Lesson number one. Conversation is my new favorite way to learn. I love books and always will, but conversations are even more efficient and engaging. Talking with people who know their field deeply is the most fun thing in the world, and it is an underused method of learning. Lectures are too one-sided. Books often don't flow in the directions you want them to. But conversations are alive and interactive. I've been doing this very publicly on the podcast, but I've also been doing it more in private after realizing how powerful it can be. If you can commit to having conversations with new people where you tell them as little about yourself as possible, you'll be off to a good start. I don't mean that talking about yourself is bad, not at all.

• 2:46Patrick O'Shaughnessy?

  Only that in each conversation, the time you spend talking about you is time that you aren't learning something new. The less your ego gets involved, the more you will learn, and I should know because I used to have a big ego. This means asking dumb questions, sometimes more than once. It means probing on the simplest parts of a person's field or knowledge. As everyone knows, it is fun to explain something you love to people that don't know as much about the topic in question as you do, but who are eager to learn. So it logically flows that you should want to be the less knowledgeable person in most conversations. Now, if everyone took this tact, things would be a mess, but I wouldn't worry too much about that. One side effect of learning to ask good and interesting questions is that you realize how rarely anyone asks you good or interesting questions.

• 3:30Patrick O'Shaughnessy?

  An example of why it pays to remove your ego. A month ago, I didn't know anything about what a cryptocurrency token was. Now I can have a fairly in-depth conversation on the topic because I've made small incremental improvements across 10 different conversations. In each of those conversations, I was the moron, trying to get up to speed. The more times that you're willing to be the idiot, the faster you will learn. It's a pretty cool formula when you think about it. 10 times the idiot, one time the relative expert. They should teach you how to have a good conversation in elementary school.

• 4:03Patrick O'Shaughnessy?

  Lesson number two, preparation and careful listening are everything. The best editing for this podcast is done before the conversation starts and during the conversation itself. Most of the episodes you hear are very lightly edited, if at all. A majority aren't touched. The ones I have edited a bit were my fault. I didn't prepare well enough to be nimble and attentive in the conversation. What I've found is that the role of the person asking the questions is to create and sustain momentum. I have this visual of a rush of water running down a maze of tubes which have hatches that open and close. If the water hits a closed hatch, everything stops. My job is to anticipate by listening very carefully and get ahead of the water to open doors to keep the momentum going.

• 4:47Patrick O'Shaughnessy?

  The clues to what each person loves are usually buried in another answer. I've gotten much better at picking up on those cues. One tiny example, every time someone says, "We can talk about that later," it means, "I want to talk about it now, and if you ask me, I'll give you a great answer." The way I prepare for this ahead of time is to read everything I possibly can and try to be able to discuss it as if I were answering my own questions. This way, I can sense when there is a deviation between how I'd answer my own question and how they do. That deviation is often the door to something very interesting, an opinion or an idea not already discussed by the guest in some other medium. A recent example, Scott Norton mentioned in passing that he'd read up on the history

• 5:29Patrick O'Shaughnessy?

  of ketchup as part of his early research for Sir Kensington's, so I asked him to tell me that history, and it was one of my favorite answers. I moved it to the front of that podcast. Lesson number three, finding the next guest is all about the quality of the other guests and the quality of my questions. The first few guests on the show were people I knew well, or well enough to invite on a non-existent platform to chat about investing. But in the majority of the conversations, I was meeting the person for the first time, 39 of the 47 guests, to be precise. That means that almost all these wonderful conversations started because someone else introduced me to the guest and to their ideas. They introduced me because of two things. Either one, they liked being a guest themselves, or two, they liked listening to the show.

• 6:14Patrick O'Shaughnessy?

  At the end of each episode, I ask the guest who I should talk to next, which allows the conversation to thread from person to person organically. But it isn't just the guests, it's all of you. I am grateful to everyone who devotes their time to listening to this show and for all the thrilling and often random connections it has created in the real world. One example here. Brian Baers of Baers Capital Management emailed me, offering to connect me with Will Thorndike. Will is the author of one of my favorite books, The Outsiders, and was near the top of my wish list. But I had no connection to him whatsoever, and then one just appeared. Brian has also connected me with another guest who you'll hear from soon. Because of his kind outreach, I now know more today. This has happened many times.

• 6:57Patrick O'Shaughnessy?

  If you are listening and know someone fascinating, please send them my way. Quick sidebar here, if you are someone whose job it is to book podcast guests, please stop emailing me, not that you're listening anyways. The network effect is what drives this show's success. I just happen to be sitting in the central node of this particular network. The more listeners, the more connections, the more connections, the more great conversations you'll hear. It's a clear virtuous cycle. So please, send me guest ideas, send me topic ideas, things you want to understand but don't. Send me anything, I'll read it all. I do my very best to keep the quality up and then depend on you. Number four, give the audience credit. There have been few conversations, the recent one with Michael Mobison comes to mind, that

• 7:41Patrick O'Shaughnessy?

  have been pretty complicated. But these episodes often generate the most positive feedback. The accepted rules for content are that simple and short are good, but I've found the exact opposite. There is a strong positive correlation between the length of an episode and the number of listeners, and between the complexity or newness of the ideas explored and the number of listeners. I get emails from people all the time, and they are often a lot smarter than me. I've had countless coffees and lunches all over the country now, with listeners who have written incredibly thoughtful emails, which help me understand fields like private equity and venture capital at a much deeper level. Because I push myself to the very limit of my brain's abilities, I've been lucky to attract a ridiculously interested, smart and kind audience.

• 8:25Patrick O'Shaughnessy?

  They say that you get the investors that you deserve, but it's clear that you also get the listeners that you deserve. The biggest compliment I am paid is by the army of smart people who just give me their time. I think the real rule for content should be just operate at your own level. Don't try to move simpler or more generic. The beauty of the internet is the power of the niche. Just find one and own it. Lesson number five, avoid colonized topics. I have a lot to say about smart beta strategies, but it is a topic that has been so thoroughly picked over by the investment community that it's no fun anymore. It's a very good rule that if I'm bored of some topic, everyone else will be too. Instead, I search for aspects of the investing world that I don't know much about because

• 9:09Patrick O'Shaughnessy?

  if I don't know, it's a decent indicator that some chunk of the audience won't know either. I think this lesson is really key. It's so easy to explore the same stuff as everyone else because it's less work. But as many guests have pointed out, the key to their personal success was that they wrote the playbook instead of reading someone else's. If the playbook is already out there, look for a different question to explore. Lesson number six, consider the user experience. An upcoming guest observed that most bank customers aren't customers at all, but suppliers. They give banks the capital they need to do business and are therefore treated like suppliers, not like customers. I think it'd be easy to view podcast guests as suppliers, in this case suppliers of content.

• 9:52Patrick O'Shaughnessy?

  So I'm very careful to remind myself that the opposite is true. The guests are my customer just as much as you are. I try to make the experience of coming on the show easy and fun before, during, and after taping. I am careful to provide lots of feedback to each guest once the episode launches. I like Airbnb founder Brian Chesky's notion of an 11-star experience. He suggests that any business go through the thought experiment of explaining what a 1 through 11-star experience would be for their product or service. When you do this, star levels 7 through 11 are ridiculous, but it helps you calibrate and reorients you to the customer. I think I provide a four or five-star experience now, but in the coming weeks, I'll sketch out what an 11-star experience might be and see how I can make it better.

• 10:37Patrick O'Shaughnessy?

  In fact, this is something I'd love to discuss with you all. How to make both the guests and listeners' experience more enjoyable. I'll explain how to be a part of that conversation at the end of this episode.

• 10:48Patrick O'Shaughnessy?

  Lesson number seven, find great partners. The show sounds so clean because of my excellent producer, Matthew Passy. If you want to start a podcast, he is your guy. He has already started working with others that I know, and my plan is to fill his entire schedule. He is but one example of a key partner. The show also works because I don't have to spend much time finding guests anymore. This is because of a great network, but a few nodes in that network stand out. Kay He, Jeff Graham, Brent Bishore, Morgan Housel, Josh Brown, Ted Seides, among others, have all been instrumental in introducing me to some of the best guests on the show, and for that I am deeply grateful. People often ask how I have the time to do this show, but the secret is, it doesn't even take that much time.

• 11:31Patrick O'Shaughnessy?

  This is only possible because of great partners I've found in the last year. The person whose voice or face is attached to something always gets way too much of the credit. Partners drive everything, and I'm thankful to have such great ones. Lesson number eight, a generalist mindset can be a huge advantage. It is easy to pay homage to Charlie Munger's latticework of mental models, but when you live it, you see why he is so right. Knowing the key drivers and major ideas in a variety of fields is a huge source of leverage. It is difficult to study broadly and deeply, but the two aren't mutually exclusive. I could talk to you about quantitative equity strategies until you pass out, but a key to the podcast's success is that I can usually fake it in other fields like history, psychology,

• 12:15Patrick O'Shaughnessy?

  science, philosophy, travel, book, foods, economics, mythology, sports, and so on. Having these in one's repertoire is like having a set of keys to getting the best out of other people. Different keys unlock different people. I think that a lot of being a good investor is also about asking good questions. If you know a little bit about many different fields, it makes that task much easier and increases the odds that you'll get the goods from whoever you are talking to. If these seem too daunting, I've found food, travel, and sports, simple things, to be the most widely accepted keys.

• 12:49Patrick O'Shaughnessy?

  Lesson number nine, amplify what works. The most downloaded guest on the podcast so far is Brent Bishore. He's been on three times and you can bet he will be on again. The second most downloaded is Michael Mobison, also a repeat guest. Andy Radcliffe told me that one of his best business lessons is that you learn far more from success than from failure, and that you should use success as a compass. Drive hard in the direction of what works rather than trying to shore up weaknesses. If something is working, more of that thing, or a better version, is likely to work too. But a better version of a failure is still likely going to fail. A lesson within this lesson. This is all even more true for unexpected successes.

• 13:30Patrick O'Shaughnessy?

  Brent is now a close friend, but I didn't expect him to be the most popular episode. This has been a recurrent theme in my conversations on venture capital. It is usually the thing you didn't expect which yields the biggest payoff. When something is expected or obvious to you, it's expected and obvious to others. That means competition. If Brent had been on 10 other podcasts before mine, the results would have been very different. Instead, Brent opened my eyes, and about 100,000 other sets of eyes, to a fascinating new area of investing. The 10th and final lesson. Don't expect anything in return. People always ask me what my goal is with this podcast. The answer is very simple, none.

• 14:12Patrick O'Shaughnessy?

  I don't expect to get anything out of this other than the conversations themselves. The means and the end are the same. This is so important to me. When the process itself is the goal, magical things tend to happen. When I have a guest on the show, it's like buying a call option. Actually, it's better, because I'm not even paying for the option. Instead, the option is purchased through a conversation. It's free and highly enjoyable for me. The beautiful thing about call options is that the potential upside is enormous, but the downside is very limited, or in this case, close to zero. Investors everywhere hunt for asymmetric outcomes. Low downside, huge upside. And that is exactly what I've found this podcast to be. The second best compliment I get is from guests who often tell me that the podcast

• 14:56Patrick O'Shaughnessy?

  generated a bizarre amount of inbound feedback, or even opportunities that they never expected. They always use that word, bizarre. I don't expect anything in particular to happen, but now I know that crazy things just will happen. It's hard to escape the most obvious examples, so let me tell this story in closing. The entire podcast began because of a rule of mine. When I read an interesting book, I email the author and ask them to lunch. I emailed Jeff Graham about a year ago after I read Dear Chairman. We got lunch and we hit it off. We hatched a plan to record a conversation and that was the beginning of the podcast. Very simple. Six weeks later, the same strategy paid off again. I met and recorded an episode with Ted Seides on hedge

• 15:38Patrick O'Shaughnessy?

  funds after reading his book. Now, we give Ted endless grief for his losing bet with Buffett, but I've learned so much from him about all corners of the investing world. He quickly became a friend and confidant. Ted also happens to be friends with the best investor of all time, something I didn't know when I first met him. Fast forward to this past week. Ted, Brent, and I flew to Omaha to have dinner with Warren Buffett. Street value of almost $3 million, my dad quickly reminded me. I'll get back to Warren in a second, but first, a key observation here. Not in a million years would I have thought a podcast would turn into a three-hour private dinner with Warren Buffett. If I had had the temerity to set that as a goal, it probably would have been impossible. If I'd been angling

• 16:22Patrick O'Shaughnessy?

  to get a private dinner with him, it most likely never would have happened because everyone hates that guy. I think that because I am never angling for anything, the outcomes are far more interesting and improbable than if I was trying to achieve some specific goal. Another thing, the best thing about the dinner wasn't even that it was with Warren, but that it was with Brent and Ted who had become such close friends, and the chance to meet Todd Combs, who was fantastic. Now, back to Warren. He's incredible. Kind, sharp, funny as hell, and relaxed. Early on, he said to us, "Do you know what it says on Wilt Chamberlain's tombstone? It says, 'Finally, I sleep alone.'" We spent the first hour talking about college football. He could be a football color commentator. The amount of facts and

• 17:04Patrick O'Shaughnessy?

  dates and people he was throwing at us was staggering, and I know a lot about college football. I went to Notre Dame and he had five Notre Dame-specific stories that were some of the best I'd ever heard. He told me he once got through to a Notre Dame captain by calling his dorm room. He'd heard the player was a big Buffett fan, and he called the kid and he was awestruck. The reason for his call was an offer. Two stock picks in exchange for Notre Dame's playbook in the upcoming game against Nebraska. Now, I don't idolize people, and I never will, because idols are just people like anyone else. What was most refreshing about this dinner was realizing that Warren is just a person too. An exceptional one, but still a normal person. One that wants to shoot the breeze, tell stories, tell jokes, and learn about you.

• 17:48Patrick O'Shaughnessy?

  Knowing that even the greatest investor of all time is just a person is so reassuring. It makes anything seem possible. I'll keep most of the details of the dinner to myself, but suffice it to say it was something I'll never forget. But, and this may be more important, it was also something I never expected. If you can find some way to give back to other people which they enjoy, and do so without any expectation of a return, you'll be so happy and great things will result. It has worked for me, and I'm sure it will work for you too. So those are 10 of the many observations and lessons I've learned so far, and here's a bonus. There's room for a lot more. In the coming year, I plan on experimenting with lots of ways of bringing this community together, digitally or in person.

• 18:31Patrick O'Shaughnessy?

  If you're interested in being more involved in the podcast in general, stop by investorfieldguide.com/frontier to learn more and get involved. As always, thank you so much for your time. Thank you for listening, and have a happy 4th of July.

• 18:45Speaker 03

  Hey, everyone. Patrick here again. To find more episodes of Invest Like the Best, go to investorfieldguide.com/podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com/bookclub. After you sign up, you'll receive a full investor curriculum right away, and then three to four suggestions of new books every month. You can also follow me on Twitter, @Patrick_OShag, O-S-H-A-G. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.