WEBVTT - Graeme Forster on Global Longevity Investments 0:00:02.040 --> 0:00:06.000 This is Master's in Business with Barry rid Holds on 0:00:06.240 --> 0:00:07.360 Bloomberg Radio. 0:00:08.560 --> 0:00:11.520 This week on the podcast, I have an extra special guest, 0:00:12.080 --> 0:00:16.080 Graham Foster is PM at Orbis Investment Management. The fund 0:00:16.280 --> 0:00:19.960 runs about thirty four billion dollars. I've been intrigued by 0:00:20.040 --> 0:00:23.520 Orbis for quite a while. They have a truly unique 0:00:23.520 --> 0:00:27.480 approach to investing. They're also owned by a foundation, something 0:00:27.520 --> 0:00:31.120 that's rather rare in the finance industry, and they also 0:00:31.240 --> 0:00:35.839 have a unique approach to fees. When they're generating alpha, 0:00:35.880 --> 0:00:40.040 when they're outperforming their benchmark, they take a performance fee, 0:00:40.080 --> 0:00:44.880 and when they're not generating alpha, when they're underperforming, they 0:00:45.040 --> 0:00:48.839 actually return fees. I don't think anybody else in the 0:00:48.960 --> 0:00:53.400 entire industry does anything like that. Fortunately for them, they've 0:00:53.400 --> 0:00:56.520 been outperforming for decades, so it isn't very often they 0:00:56.520 --> 0:01:01.040 have to return fees. This is one of those really models. 0:01:01.040 --> 0:01:05.119 I've written about them before, I've interviewed other partners at 0:01:05.200 --> 0:01:09.560 Orbis before. They're really an intriguing firm. I found this 0:01:09.600 --> 0:01:13.319 conversation to be absolutely fascinating, and I think you will too. 0:01:13.800 --> 0:01:18.480 With no further ado, my discussion with Graham Foster, PM 0:01:18.520 --> 0:01:23.040 and partner at Orbis holdings. So you have a fascinating background. 0:01:23.080 --> 0:01:25.160 I want to get into that before we start talking 0:01:25.160 --> 0:01:30.240 about asset management. A degree in mathematics from Oxford, a 0:01:30.319 --> 0:01:37.160 doctorate in mathematical epidemiology and economics from Cambridge. What is 0:01:37.200 --> 0:01:43.440 that mathematical epidemiology. I'm assuming that's probability and statistics of 0:01:43.959 --> 0:01:45.280 viral disease. 0:01:45.120 --> 0:01:48.000 Exactly grow, That's exactly right. So that I did a 0:01:48.040 --> 0:01:51.920 math degreat Oxford, which is more pure math, and then 0:01:52.040 --> 0:01:55.880 I was looking for something more applied. You know, pure 0:01:55.920 --> 0:02:00.240 math can be very theoretical and detached from the real world, 0:02:01.600 --> 0:02:04.040 and it's getting worse. It gets further and further away 0:02:04.040 --> 0:02:07.440 the DEEPU go, and so I wanted to move into 0:02:07.440 --> 0:02:12.840 something useful. Mathematical epidemiology is a study of disease spread 0:02:13.160 --> 0:02:17.000 through modeling. You know, how do you understanding the spread, 0:02:17.840 --> 0:02:19.520 how do you treat the spread, When do you treat 0:02:19.520 --> 0:02:23.560 the spread? You know, things that the vaccination programs, and 0:02:23.720 --> 0:02:26.079 it's all the mathematics around that. So it was very 0:02:26.120 --> 0:02:30.000 relevant then and even more relevant recently with all of 0:02:30.040 --> 0:02:33.320 the you know, the infectious diseases seeing. 0:02:33.280 --> 0:02:36.440 So let's talk test your theoretical mathematics. So I was 0:02:36.919 --> 0:02:40.680 for something wholly unrelated. I'm diving into some set theory 0:02:40.720 --> 0:02:44.000 and I come across a paper that makes the claim 0:02:44.120 --> 0:02:49.040 that some infinities are larger than other infinities. Now, my 0:02:49.960 --> 0:02:55.080 naive assumption was infinite men infinite? But is that the 0:02:55.120 --> 0:02:56.960 sort of stuff you were studying undergraduate? 0:02:57.080 --> 0:03:00.160 That was a number that was number theory, pure number theory, 0:03:00.280 --> 0:03:02.520 and that was one course I did not take. But 0:03:02.960 --> 0:03:05.679 that is a fascinating field, that's for sure. There's many 0:03:05.680 --> 0:03:06.919 different types of infinities. 0:03:07.880 --> 0:03:13.000 Apparently it's I just assumed if it's infinite, it's infinite. 0:03:13.120 --> 0:03:15.960 And whether it's all numbers or even numbers. 0:03:16.200 --> 0:03:21.760 Yeah, that is an incredibly complex area of mathematics, to 0:03:21.840 --> 0:03:24.840 the point where you spend weeks and weeks proving that 0:03:24.880 --> 0:03:27.760 one isn't equal to zero. Right, that's how fundamental. You 0:03:27.880 --> 0:03:30.160 get it right back to the axioms and you do 0:03:30.200 --> 0:03:31.840 a lot of work with infinity. 0:03:31.720 --> 0:03:35.160 And then economics, which is a little bit squishier. What 0:03:35.320 --> 0:03:39.080 made you add economics to your to your graduate degree? 0:03:39.240 --> 0:03:40.880 Well that was really an add on. But you know, 0:03:40.920 --> 0:03:44.240 if you're thinking about the spread and control of disease, 0:03:46.120 --> 0:03:49.400 given this is academia, you know the big focus is 0:03:49.440 --> 0:03:51.920 on how do you do it? It's not really on 0:03:51.960 --> 0:03:52.680 what does it cost? 0:03:53.040 --> 0:03:55.960 Right? Right, which some people actually care about. 0:03:55.960 --> 0:03:58.480 Some people do right, that is, that's quite a relevant question. 0:03:59.600 --> 0:04:02.880 So a big part of the thesis, which we sort 0:04:02.880 --> 0:04:06.360 of started, you know, around one year in after getting 0:04:06.400 --> 0:04:09.560 the kind of the basis right, was how do you 0:04:09.680 --> 0:04:10.880 treat this? 0:04:11.200 --> 0:04:11.280 Was? 0:04:11.760 --> 0:04:14.480 This was in agricultural system? So how do you treat disease? 0:04:15.360 --> 0:04:16.880 When do you treat and how much is it going 0:04:16.920 --> 0:04:20.200 to cost? And it's basically an optimization problem. 0:04:20.240 --> 0:04:22.600 Well, we'll talk a little bit more about fees and 0:04:22.680 --> 0:04:25.960 costs later, So let's talk about your first jobs out 0:04:25.960 --> 0:04:31.919 of school. I'm assuming mathematical epidemiology wasn't the career you followed. 0:04:31.960 --> 0:04:33.680 What did you do after Cambridge? 0:04:34.360 --> 0:04:41.080 Yeah? I mean academia should be meritocratic, should be should 0:04:41.160 --> 0:04:41.800 be right. 0:04:42.240 --> 0:04:45.200 It's a little more political than that. It's very very political. 0:04:45.560 --> 0:04:49.120 And you know, the deeper you go within a field, 0:04:49.560 --> 0:04:52.400 the less the people who are funding the research understand 0:04:52.400 --> 0:04:55.919 about the research. So it gets very bureaucratic and you 0:04:56.000 --> 0:05:00.080 spend a lot of your time, in my view, try 0:05:00.240 --> 0:05:04.000 to build your funding to do your next project. And 0:05:04.080 --> 0:05:06.839 so you know, one reason for looking for an exit, 0:05:07.120 --> 0:05:11.040 if you like, from academia, which has its positive elements. 0:05:11.120 --> 0:05:14.479 Right in academia you get the feeling the fulfillment of 0:05:14.920 --> 0:05:17.719 doing something that's good for the world. 0:05:18.839 --> 0:05:20.719 In theory theoretically. 0:05:21.880 --> 0:05:25.360 So, but one that that sort of looking for something 0:05:25.440 --> 0:05:29.720 meritocratic was one reason for look. And I started during 0:05:29.760 --> 0:05:36.120 my PhD getting into game theory and decision making under 0:05:36.200 --> 0:05:40.080 uncertainty and all these interesting areas which were a bit tangential. 0:05:40.720 --> 0:05:45.480 Although maybe not so tangential. I read something you had mentioned, 0:05:45.880 --> 0:05:50.200 Schlansky's book, The Theory of Poker. A professional poker player teaches 0:05:50.240 --> 0:05:54.400 you how to think like one. Obviously, decision making under 0:05:54.520 --> 0:06:00.760 uncertainty with probabilistic odds and an inherently unknowable future. Is 0:06:00.800 --> 0:06:02.280 that poker? Is that investing? 0:06:02.400 --> 0:06:04.279 Sounds like, Well, it's the same thing, right, It's the 0:06:04.279 --> 0:06:08.239 same skill set. And so during my PhD I started 0:06:08.800 --> 0:06:11.720 playing a lot of cards. It was Omaha and poker 0:06:11.839 --> 0:06:15.160 and gin and then backgam and all these games interesting 0:06:15.480 --> 0:06:22.200 from the sense that luck or uncertainty play a big role, 0:06:22.960 --> 0:06:25.839 and that's interesting. I thought that was that's an interesting 0:06:26.000 --> 0:06:28.440 element of those games. And one of the things that 0:06:28.520 --> 0:06:32.360 drew me into that wasn't just the intellectual side of it. 0:06:32.440 --> 0:06:38.159 How do you make decisions under uncertainty? It's the uncertainty 0:06:38.200 --> 0:06:41.360 itself and what that does. And you know, if you 0:06:41.440 --> 0:06:45.120 if you're a chess player, it's almost pure skill. If 0:06:45.120 --> 0:06:47.359 you're a poker player, I think it's you know, maybe 0:06:47.480 --> 0:06:50.520 forty percent skills, sixty percent luck over short periods. And 0:06:50.560 --> 0:06:52.440 what that does is it draws in a lot of 0:06:52.480 --> 0:06:57.680 people to the game. But maybe you know, don't appreciate 0:06:57.720 --> 0:07:01.480 that that kind of the rigor goes into the decision making. 0:07:02.360 --> 0:07:04.200 It's like people who play the lottery. Why do people 0:07:04.200 --> 0:07:07.200 play the lottery? They know it's a negative expected value game, 0:07:07.520 --> 0:07:09.720 do they Maybe they do, maybe they don't, But they 0:07:09.760 --> 0:07:15.240 see the potential to win the big jackpot, right, And 0:07:15.280 --> 0:07:17.040 they also, you know, they get little wins here and 0:07:17.080 --> 0:07:19.440 there through the lottery, right, it gives them a buzz. 0:07:19.480 --> 0:07:21.960 It's why do people go to the casino. They gamble. 0:07:22.240 --> 0:07:26.200 So game playing with large elements of uncertainty draw people 0:07:26.240 --> 0:07:31.120 in who aren't necessarily suited to the rigor of the activity. 0:07:31.800 --> 0:07:34.280 And if you think about what's similar to poker in 0:07:34.320 --> 0:07:38.400 that regard, it's investing very very similar, massive levels of uncertainty, 0:07:38.400 --> 0:07:40.600 in fact, more uncertainty in the investment world in the 0:07:40.600 --> 0:07:43.760 poker world, because you're making these long term decisions and 0:07:43.760 --> 0:07:46.560 getting very little feedback from your actions until years and 0:07:46.680 --> 0:07:49.680 years down the road. So it draws people in. So 0:07:49.800 --> 0:07:51.680 they'll have big wins, you know, they'll buy a stock, 0:07:51.720 --> 0:07:53.960 it'll go up. I can do this, and they keep going, 0:07:53.960 --> 0:07:56.080 and they keep playing, and they keep going. And so 0:07:56.160 --> 0:07:58.680 it is a game that a game. It's a field 0:07:59.200 --> 0:08:01.280 that drives a lot of inefficiency, and I think that 0:08:01.600 --> 0:08:05.280 inefficiency is sustainable. And so that's you know, one of 0:08:05.280 --> 0:08:07.080 the reasons that drew me, And the other reason that 0:08:07.160 --> 0:08:11.920 drewman was, you know, I think the relationship we, you 0:08:11.960 --> 0:08:16.120 and I, everybody has with money is heavily dictated by 0:08:16.120 --> 0:08:21.240 their upbringing coure. And so if you have spent you know, 0:08:21.280 --> 0:08:24.920 your childhood, making compromises because you're always bumping up against 0:08:24.920 --> 0:08:27.720 the barrier of not having enough money, it changes the 0:08:27.720 --> 0:08:31.320 way you look at money. And so I didn't want 0:08:31.360 --> 0:08:33.240 to spend my life in academia, where you know, the 0:08:33.280 --> 0:08:35.960 money is not bad depending on what you do, but 0:08:36.280 --> 0:08:38.080 I would always be in that situation of sort of 0:08:38.080 --> 0:08:40.600 bumping up against that barrier. It limits your choices in 0:08:40.640 --> 0:08:43.120 life if you don't if you have that constraint. 0:08:42.880 --> 0:08:46.040 No doubt about that. So I love where you've taken this, 0:08:46.640 --> 0:08:48.760 and I want to I want to stay with the 0:08:48.800 --> 0:08:53.600 idea of poker and casino and uncertainty. Some people look 0:08:53.640 --> 0:08:56.839 at a casino as entertainment and hey, we're going to 0:08:56.880 --> 0:09:00.000 spend X dollars picking up for five hundred, two thousand 0:09:00.120 --> 0:09:02.840 and whatever it is, and that's you know, that's what 0:09:02.920 --> 0:09:06.280 a night out at a Broadway play would cost. Here's 0:09:06.280 --> 0:09:09.080 what I'm going to spend that night. I think that's 0:09:09.120 --> 0:09:12.800 a small percentage of people and other people. It's not 0:09:12.880 --> 0:09:19.160 a coincidence that the One Armed bandits those machines that 0:09:19.240 --> 0:09:21.480 pay out the most with the lights and the bells 0:09:21.480 --> 0:09:27.080 are right by the entrances there to capture people a 0:09:27.120 --> 0:09:30.760 lot of was kind of fascinating because I always thought 0:09:30.840 --> 0:09:34.120 you paid two dollars and were coming up on nine 0:09:34.200 --> 0:09:37.600 hundred million as we speak. Is the current lottery nine 0:09:37.720 --> 0:09:41.000 hundred million? Yeah, they changed the lottery a couple of 0:09:41.080 --> 0:09:44.559 years ago, so there are some blank numbers in it 0:09:44.640 --> 0:09:48.199 in order to create these billion dollar payouts, and they 0:09:48.240 --> 0:09:51.680 go on longer and longer and obviously more profitable for 0:09:52.440 --> 0:09:55.320 the states that run the lottery. But to me, it's 0:09:55.360 --> 0:09:57.679 like you paid two dollars and you get to fantasize 0:09:57.720 --> 0:10:00.839 about what you would do with a couple of hundred 0:10:00.840 --> 0:10:03.679 million dollars. That's the two dollars that the lottery is 0:10:03.720 --> 0:10:07.199 worth for me. I don't think the average person who's 0:10:07.240 --> 0:10:10.280 plucking down twenty or one hundred bucks every week thinks 0:10:10.280 --> 0:10:12.400 of it the same way. I think they're just junkies 0:10:12.440 --> 0:10:18.240 at this point, and very addictive manipulation of dopamine for people. 0:10:18.480 --> 0:10:22.240 I think that's absolutely right, And I mean it's two 0:10:22.320 --> 0:10:25.480 sides of the same coin, really, because you know, you're 0:10:25.520 --> 0:10:27.920 paying your two dollars and you're dreaming of the big jackpot. 0:10:28.559 --> 0:10:31.000 Is there's an element of that in your in your 0:10:31.720 --> 0:10:33.600 you know, pulling the lever. I used to go to 0:10:34.640 --> 0:10:38.040 casinos when I was in college and I would see 0:10:38.080 --> 0:10:40.880 people they were almost They would have these cards and 0:10:40.920 --> 0:10:42.920 it would be the membership card for the casino, and 0:10:42.960 --> 0:10:45.280 it would be attached to their belt and it would 0:10:45.320 --> 0:10:48.280 be plugged into the slot machine and it would look 0:10:48.360 --> 0:10:49.920 like they were one and the same, Right, they were 0:10:50.000 --> 0:10:54.920 connected by connective yeah, right, And they would sit there 0:10:54.920 --> 0:10:59.240 all day zombiefide. That's an addiction, that's absolutely addiction. But 0:10:59.280 --> 0:11:03.760 it's the same mentality of that little buzz you get 0:11:03.800 --> 0:11:06.400 when you win something, or the dreaming of the big payout. Right, 0:11:06.559 --> 0:11:09.400 And I think the lottery is fascinating, because I'm sure 0:11:09.400 --> 0:11:11.880 we'll talk about this, But we did a study recently 0:11:11.880 --> 0:11:18.680 where we took a thousand investors, hypothetical investors, and we said, okay, 0:11:19.200 --> 0:11:23.480 if you've got a fifty year time horizon in terms 0:11:23.520 --> 0:11:27.240 of their investment time horizon, and you're simulating a return 0:11:27.360 --> 0:11:29.959 profile from let's say the S and P five hundred's 0:11:30.000 --> 0:11:32.200 bell curve of returns over the last hundred years. So 0:11:32.480 --> 0:11:34.680 you're sampling your returns each year for these one thousand 0:11:34.679 --> 0:11:38.040 investors over the next fifty years, and you see a 0:11:38.040 --> 0:11:40.920 wealth path for each of those investors, and what you 0:11:40.960 --> 0:11:46.559 get at the end is a very very uneven distribution 0:11:46.640 --> 0:11:49.839 of wealth. That's a function of returns, that's a function 0:11:49.920 --> 0:11:52.960 of the capitalism, it's a function of log normal returns 0:11:52.960 --> 0:11:55.959 that we see in stock markets, and it's exactly the same. 0:11:56.440 --> 0:12:00.400 You see exactly the same nonlinear wealth distribution in real life. 0:12:01.520 --> 0:12:04.560 It's a very uneven outcome, right, very very wealthy people 0:12:04.600 --> 0:12:07.320 and a lot of you know own there was point 0:12:07.360 --> 0:12:10.000 one of the world earn fifty percent of the wealth 0:12:10.080 --> 0:12:12.600 or something, just some crazy number. That is a function 0:12:13.040 --> 0:12:17.120 of capitalism. It's not a it's not a bug. It's 0:12:17.360 --> 0:12:19.880 part of the system. And I think it's an essential 0:12:19.880 --> 0:12:21.800 part of the system in a little bit like the 0:12:21.800 --> 0:12:24.480 way the lottery you see these big, big payouts right 0:12:24.520 --> 0:12:26.800 at the top. You need to see them or you 0:12:26.840 --> 0:12:29.200 won't play. And you need to It needs to be 0:12:29.200 --> 0:12:31.199 the nine hundred million, and you need to see the winner, 0:12:31.240 --> 0:12:32.960 and you need to see them change their life and 0:12:33.000 --> 0:12:35.959 all of the joy and inverted comments they get from that. 0:12:35.960 --> 0:12:38.559 That's why you play, because you see that big payout. 0:12:38.800 --> 0:12:40.840 And we see Elon Musk and we see Warren Buffett, 0:12:40.840 --> 0:12:42.200 and we see these people at the top of the 0:12:42.280 --> 0:12:45.559 capitalist pyramid, and we think, huh, play the game because 0:12:45.559 --> 0:12:47.679 we can see them. They're very visible. And I think 0:12:47.720 --> 0:12:51.040 capitalism is a big function of capitalism is having those 0:12:51.080 --> 0:12:54.520 big winners and then everyone you know wants to take part. 0:12:54.600 --> 0:12:57.280 And that so correct my bias, because when I look 0:12:57.320 --> 0:13:01.800 at lottery players, your odds are more likely that you'll 0:13:01.840 --> 0:13:05.720 be hit by lightning than winning the lottery, and I 0:13:05.760 --> 0:13:12.600 see that same fat head long tail distribution in capitalism. 0:13:12.640 --> 0:13:15.920 Maybe my bias is just because I've been lucky in 0:13:16.000 --> 0:13:20.160 my career, but it seems like winning in capitalism is 0:13:20.280 --> 0:13:24.160 easier than winning in the lottery. And I don't mean 0:13:24.200 --> 0:13:28.600 being a billionaire run down the list. Must gates are 0:13:28.640 --> 0:13:32.240 not go through all the people LVMH. Bernard, go down 0:13:32.320 --> 0:13:36.080 everybody who's a billionaire. Yeah, that's a little bit of 0:13:36.520 --> 0:13:41.200 marketing for capitalism. But go to school, do well in 0:13:41.240 --> 0:13:45.120 a profession. You can have a fairly comfortable life without 0:13:45.200 --> 0:13:48.240 a whole lot of risk, assuming you have just a 0:13:48.280 --> 0:13:50.839 modicum of skills and diligence. 0:13:50.760 --> 0:13:53.880 One hundred percent. So on the lottery side is pure randomness, 0:13:54.400 --> 0:13:57.320 and there's a negative ev game. Right, every time you 0:13:57.320 --> 0:13:59.880 play you lose a bit of money in probability space 0:14:01.200 --> 0:14:05.000 you are if you're playing cards, you're playing poker. There's 0:14:05.040 --> 0:14:06.720 more skill and if you're very good at it, you 0:14:06.760 --> 0:14:11.920 can eke out when positive EV outcome and grow your 0:14:11.960 --> 0:14:15.920 wealth in a very lumpy fashion. In capitalism it's the same, Right, 0:14:15.960 --> 0:14:18.240 there's a lot of skill, there's a lot of luck, 0:14:18.440 --> 0:14:20.680 and if you work hard and you do everything, you 0:14:20.680 --> 0:14:23.320 can possibly do. You probably climb the ladder and you 0:14:23.320 --> 0:14:25.000 can push yourself a little bit to the right in 0:14:25.080 --> 0:14:26.720 that distribution of wealth over time. 0:14:26.640 --> 0:14:28.960 Second quartile is not unattainable. 0:14:29.200 --> 0:14:33.280 Absolutely not No, that's right. But I mean, and it's 0:14:33.520 --> 0:14:35.200 the pie grows as well. The more people work, the 0:14:35.200 --> 0:14:38.320 more productive they are. There's the other element to it. 0:14:38.480 --> 0:14:43.360 Really quite interesting. So you mentioned the fifty year study. 0:14:43.440 --> 0:14:47.720 I'm kind of intrigued by your thoughts on investor longevity. 0:14:47.920 --> 0:14:51.920 And this quote I pulled of yours is delivering excess 0:14:51.960 --> 0:14:55.880 returns over long periods of time in order to achieve 0:14:56.000 --> 0:15:01.640 extraordinary results as an investor. Is your folk? All right? 0:15:02.000 --> 0:15:05.400 How does one do? That? Sounds easy? Just market over 0:15:05.480 --> 0:15:07.880 decades and you're a winner. 0:15:07.400 --> 0:15:12.120 It sounds incredibly easy. And if you if you write 0:15:12.160 --> 0:15:15.400 it down on paper, you can run the numbers. It's there, 0:15:15.560 --> 0:15:20.280 it exists. It's clear. Three things that matter. Number one longevity. 0:15:20.680 --> 0:15:22.920 I talk about that study that was a study of 0:15:23.000 --> 0:15:26.280 randomly selecting returns from the S and P. Five hundred 0:15:26.800 --> 0:15:30.040 and that group of one thousand investors gives you that 0:15:30.120 --> 0:15:33.480 very nonlinear outcome in terms of wealth. What that tells 0:15:33.480 --> 0:15:36.000 you is, if you change your inputs a little bit, 0:15:36.040 --> 0:15:37.920 Like you said, around, if you work hard, et cetera, 0:15:37.960 --> 0:15:40.200 et cetera, you can push yourself a little bit to 0:15:40.240 --> 0:15:42.720 the right on that wealth distribution. If you do that, 0:15:42.800 --> 0:15:45.680 because it's non linear, you can get you can get big, 0:15:45.720 --> 0:15:50.240 big improvements in your end wealth, massive improvements. So there 0:15:50.240 --> 0:15:55.800 are really three key inputs to that. One is longevity, right, 0:15:55.880 --> 0:15:59.320 just sticking with it, Warren Buffett, what's the statistic? Ninety 0:15:59.320 --> 0:16:01.840 five percent of wealth has generated after the age of 0:16:02.040 --> 0:16:06.880 sixty five? Impressive, Impressive because he's stuck at it, right, 0:16:06.960 --> 0:16:08.200 and he's pretty smart as well. 0:16:09.000 --> 0:16:14.040 He never tapped into his capital to go get on 0:16:14.040 --> 0:16:17.040 the hit on and treadmill. He's been just let. 0:16:16.960 --> 0:16:19.960 It, just let it compound over time, you know, watches 0:16:20.000 --> 0:16:24.560 his pending and just stays in the game. Another good 0:16:24.760 --> 0:16:28.080 if if the best example of this is endowments here 0:16:28.080 --> 0:16:31.920 in the US phenomenal institutions, and they're set up to 0:16:32.400 --> 0:16:36.760 be perpetually around. They stick around. So if you take 0:16:36.800 --> 0:16:39.040 the Met Museum. I'm sure you've been to the Met 0:16:39.120 --> 0:16:42.000 Museum here in New York. Their endowment I think is 0:16:42.040 --> 0:16:47.160 around five to six billion, phenomenally large number for a 0:16:47.200 --> 0:16:52.200 single institution in Central Park and you know, I'm sure 0:16:52.240 --> 0:16:57.080 they're a very intelligent and diligent investment committee, but the 0:16:57.160 --> 0:16:59.520 Keith at the Keith thing for them has been longevity. 0:17:00.120 --> 0:17:02.920 One hundred and thirty years of compounding has got them 0:17:02.960 --> 0:17:06.280 to where they are today. Stick around is the big is, 0:17:06.320 --> 0:17:07.240 you know, that's the key. 0:17:07.760 --> 0:17:09.960 The rule to be tax exempt in the US is 0:17:10.000 --> 0:17:15.320 you have to disperse five percent of the foundation and 0:17:15.359 --> 0:17:17.880 if you look at long term returns for stocks and bonds, 0:17:18.119 --> 0:17:20.600 that's not a tough target to make. You give out 0:17:20.640 --> 0:17:24.040 five percent. You don't have to pay any tax and 0:17:24.359 --> 0:17:27.600 just let the rest ride exactly that great, that's not bad. 0:17:28.119 --> 0:17:31.679 I think The Guardian also has a foundation that owns 0:17:31.680 --> 0:17:35.800 it that has a few billion dollars and Rolax a 0:17:35.800 --> 0:17:39.240 lot of people don't realize is owned by a private foundation. 0:17:39.840 --> 0:17:43.960 The founder gifted everything to the foundation, and same sort 0:17:44.000 --> 0:17:48.239 of situation. Those have compounded over the centuries and have 0:17:48.480 --> 0:17:51.200 managed to amass a huge amount of capital. 0:17:51.560 --> 0:17:54.280 I mean, there's no it's just simple. It's just math. 0:17:55.119 --> 0:17:56.960 Stick to it of a long period of time, and 0:17:57.040 --> 0:17:59.720 it's much harder in practice because you have to put 0:17:59.760 --> 0:18:03.320 that longevity into your process. The second is excess returns. 0:18:03.440 --> 0:18:05.520 If you can just increase your excess returns a little 0:18:05.520 --> 0:18:08.160 bit each year, massive difference. It makes a massive difference 0:18:08.200 --> 0:18:10.879 of a fifty sixty, seventy years, even just a percent. 0:18:12.160 --> 0:18:14.720 So you know, our sister company is South Africa. Africa 0:18:14.760 --> 0:18:18.720 have done eight percent above the benchmark for fifty years. 0:18:19.119 --> 0:18:19.840 That's insane. 0:18:19.920 --> 0:18:22.720 So that's a three hundred to four hundred time time 0:18:22.840 --> 0:18:27.240 sort of out improvement in your end wealth. Phenomenal amount 0:18:27.280 --> 0:18:29.560 of compounding over a long period of time. And the third, 0:18:29.640 --> 0:18:32.920 the one that nobody talks about is risk management risk management, 0:18:33.119 --> 0:18:35.600 and so that's not just we talk about risk management 0:18:35.600 --> 0:18:38.919 in terms of buying at a big discounter intrinsic value and 0:18:38.960 --> 0:18:42.560 then that gives you that capital sort of buffer. You know, 0:18:42.640 --> 0:18:45.560 the last thing you want to do is buy above 0:18:45.640 --> 0:18:47.880 intrinsic value because then you know, that's where you get 0:18:47.920 --> 0:18:51.199 capital impairment. But a big you know, the thing, the 0:18:51.280 --> 0:18:53.760 risk thing that we don't talk about that people should 0:18:53.760 --> 0:18:59.119 talk about is just variance. Volatility. It's people say, oh, volatility, 0:18:59.160 --> 0:19:02.080 you can just it just goes up and down. That's fine, 0:19:02.760 --> 0:19:04.399 but it makes a big, big difference to your long 0:19:04.480 --> 0:19:08.600 term outcomes if you can just avoid those big losses. 0:19:08.480 --> 0:19:10.800 Especially if you have to put money to work on 0:19:10.840 --> 0:19:14.800 a regular basis, especially exactly, then the volatility and the 0:19:14.880 --> 0:19:16.600 valuation makes an enormous differ. 0:19:16.600 --> 0:19:18.960 It makes an enormous difference. And so when you run 0:19:19.000 --> 0:19:21.520 that simulation of and you get that distribution of wealth, 0:19:21.560 --> 0:19:23.159 what you notice about the people at the top end 0:19:23.200 --> 0:19:25.600 is they avoid those big negatives. Is if you lose 0:19:25.640 --> 0:19:28.680 fifty percent, then you've got a double to get back 0:19:28.680 --> 0:19:30.320 to where you were. And if you're comparing at seven 0:19:30.359 --> 0:19:31.960 percent a year, which is what markets have done, it 0:19:31.960 --> 0:19:33.440 takes you about ten years to get back to where 0:19:33.440 --> 0:19:37.040 you were. It's a long time. And so watching your 0:19:37.080 --> 0:19:40.280 downside is very important. So those two things, longevity, a 0:19:40.320 --> 0:19:43.800 little bit of excess return and risk management to be 0:19:43.840 --> 0:19:44.240 the key. 0:19:44.560 --> 0:19:47.160 So let's talk a little bit about Orbis and what 0:19:47.280 --> 0:19:50.920 makes it so special. You joined in two thousand and seven, 0:19:51.359 --> 0:19:53.600 what led you there? So? 0:19:53.640 --> 0:19:55.480 I mean it was interesting because the background I had 0:19:55.520 --> 0:19:58.480 in mathematics, I really had a decision to make do 0:19:58.480 --> 0:20:00.800 you go quantitative root or fundamental route? And it might, 0:20:00.880 --> 0:20:04.240 you know, surprise you to imagine that I thought the 0:20:04.280 --> 0:20:07.399 future was more not on the fundamental side. And I 0:20:07.400 --> 0:20:10.080 came to that conclusion because If you think about what 0:20:10.119 --> 0:20:12.680 the quant side does and what the fundamental side does, 0:20:13.119 --> 0:20:15.119 they're both trying to find the signal in the noise, 0:20:15.400 --> 0:20:17.520 signal in the noise. There's all this noise, all this noise, 0:20:17.560 --> 0:20:20.520 all this noise. What's the signal? What's the core signal? Right, 0:20:20.600 --> 0:20:23.200 that's absolutely what the quant teams are doing around the world. 0:20:23.200 --> 0:20:25.560 What the quant funds are doing is they're analyzing tons 0:20:25.600 --> 0:20:29.160 and tons of data. They're looking for the little signal 0:20:29.160 --> 0:20:32.399 that drives price moves, and hence that's how they generate 0:20:32.400 --> 0:20:35.439 their returns. As I thought about, you know, what is 0:20:35.440 --> 0:20:37.119 going to sustain over the long term? What is the 0:20:37.200 --> 0:20:40.560 ultimate signal in markets? What is the ultimate signal? And 0:20:40.640 --> 0:20:43.520 for me, what is a stock? Is a what is 0:20:43.520 --> 0:20:45.320 an equity? It's a piece of a business. You own 0:20:45.320 --> 0:20:48.720 a piece of a business, right, and so the ultimate 0:20:48.800 --> 0:20:51.480 signal in terms of determining where a price goes over 0:20:51.520 --> 0:20:53.800 the long term is the value of that business. That's 0:20:53.840 --> 0:20:56.520 the signal, right, that's the signal that won't go away 0:20:56.560 --> 0:20:59.480 because it's the base of the whole you know, efficient 0:20:59.480 --> 0:21:02.199 allocation of capital, it's the base of the whole market. 0:21:02.480 --> 0:21:04.199 It's not the little signals that you're trying to pick 0:21:04.280 --> 0:21:05.760 up day to day to figure out where a price 0:21:05.800 --> 0:21:09.440 is going to go. That's the thing that should sustain. 0:21:09.520 --> 0:21:11.880 So that's what drew me to the fundamental side, thinking 0:21:11.880 --> 0:21:14.920 the fundamental side will sustain over a long periods of time. 0:21:15.840 --> 0:21:18.600 Now the fundamental side can adapt, it can bring in 0:21:18.640 --> 0:21:20.679 more and more technology to help it to assess that 0:21:20.840 --> 0:21:23.720 core variable, which is intrinsic value, which is the true 0:21:23.800 --> 0:21:25.479 underlying value of the business. And I think that's what 0:21:25.520 --> 0:21:29.439 will happen. I don't it's interesting as to why the 0:21:29.520 --> 0:21:32.919 quant side doesn't try to figure out what intrinsic value is. 0:21:34.600 --> 0:21:37.639 And I think the problem with it is the prices 0:21:37.760 --> 0:21:40.200 move much much faster than the intrinsic value of the business. 0:21:40.240 --> 0:21:41.880 In order to figure out what the value of the businesses, 0:21:41.880 --> 0:21:43.040 you have to see it evolve. You have to see 0:21:43.080 --> 0:21:45.200 his cash flow come through over years and years and years. 0:21:45.520 --> 0:21:48.159 Is a data on a quarterly basis exactly? And if 0:21:48.160 --> 0:21:50.000 you're in a quand fund and your clients say, you know, 0:21:50.040 --> 0:21:51.960 you've underperform for the last three quarters and I don't 0:21:52.000 --> 0:21:54.159 quite understand the black box, how do you retain how 0:21:54.240 --> 0:21:56.359 you drive that alignment between the client and the business 0:21:56.359 --> 0:21:59.360 and so you need shorter term returns, you need less 0:21:59.440 --> 0:22:01.960 volatility so that you can't sustain. So I think that's 0:22:01.960 --> 0:22:04.600 why the QUIN side doesn't focus on that fundamental side too. 0:22:04.840 --> 0:22:08.080 So that's you know, why did I choose orbis Is 0:22:08.160 --> 0:22:10.520