• Why do our managers matter?
    Machines and automated responses may be perfectly suited to remove emotion from decision making, however people and their emotions are still going to be a really big influence on investment outcomes. Programmed trading designed with a logic pattern and a software routine using, "if this, then that," is a good solution if the objective is simply to copy an index. A team of university professors, including two Nobel Prize winning economists designed a system that once nearly brought down the entire capital market system. People who design software are not necessarily great investors.

    Buffett says he is a better investor because he is a business person and a better business person because he is an investor. Our investment managers operate their own investment businesses, and they usually contract their services to a product manufacturer. Each of our managers operate independently from one another, they have their own hopes and dreams, and each have their own sense of professional pride. When they make mistakes, and it does happen, they have no place to hide because everyone gets to know about it rather quickly.

    Our managers are chosen because they are different; they are like the odd ball lemmings that do not follow the others off the cliff. Other managers mitigate agency risk, (career limiting moves), by blending in with the herd. When everyone goes off the cliff together its hard to pinpoint the stupidity on any one of them. By contrast the managers we have selected operate out in the open; they have largely been selected for their willingness to be contrary and we have that much in common with one another.

    Value investing is a lonely business. If the decisions we made were the same as everyone else, we would have lots of company and we could commiserate together on what worked and what didn't work. There are times when some or all of our managers may be out of favor and others may look a whole lot smarter. Our managers are neither right nor wrong because the crowd disagrees with them. They are right when their data and reasoning are right. The process is familiar to each of our managers and with those similarities we are kindred spirits.