I wrote the following in early February 2020 after my trip to Europe (as part of my Jet Lag Series), which started in Switzerland and concluded in Northern Italy (Venice to be exact).
How do I work? When do I find time to write?
I get asked this question a lot. People wonder when I have time to do research. Do I do research at all? Or do I have someone else do it for me?
I hope this long essay will help other investment and non-investment professionals.
There are so many ways to answer this. I’ll start by saying that I write about two hours every day. This translates into a lot (500-700) of hours a year – more than most people write in their lifetimes. I write probably 800 words per hour, so that is 40 to 60 thousand words a year – about a small book a year. The more you write the better you get (I’ve been writing since 2004), especially if you write daily. Thus I can spew out more words than a person who doesn’t write on a regular basis (however, quantity doesn’t mean quality).
I discussed this before, but it is worth sharing with new readers. I normally get up at 4:30 AM, make coffee, put on my headphones, and write. My wife and kids are asleep, it’s dark outside, and I enter my own world. I get two hours of uninterrupted, focused thinking. And that is what writing is – focused thinking. This is how I access deep, dark corners of my subconscious mind. It’s a necessity, because this is the only way I can string thoughts together. Writing probably overcompensates for my inability to sit still.
Last year I spent hundreds of hours researching Tesla. I wrote a 40-page research report (you can get it here), and we did not buy the stock. This was not an academic exercise so that I could publish a mini-book. In all honesty, I did not know where the research was going to take me. Knowledge is cumulative, and whatever I learned I’ll be able to use in the future. We did not buy Tesla, but one of the conclusions of the research was that traditional car makers are uninvestable to us, so we avoided possible value traps (read about that here). I would not have learned nearly as much if I hadn’t committed two hours a day for a month writing about it.
I love research! The only reason I can write about stocks we own or have analyzed is because I read their annual reports, listen to their earnings calls, build financial models, and debate them with others. The ease with which I write about stocks comes from understanding their businesses, which comes from doing primary research.
I am not the only one doing research at IMA – we have internal and external teams. I have a very large global network of investment friends (though the professional/personal boundaries were washed away years ago) with whom I share our research (including our models), with whom I can debate stocks I am analyzing, and who will share ideas with us. We don’t have the large research department of a mutual fund company but neither do we have the constraints of one.
I am driven by learning, creating, discovering.
Recently we studied Uber, and in our research we had a breakthrough. We discovered a new mental model that helped us understand not just Uber but other companies like it. I cannot tell you how much joy, excitement, and satisfaction that brought me, not just as an investor but as a person who has found something new.
When people ask me at social functions what I do for a living and I don’t want to talk about the stock market (I never market IMA in person), I tell them I’m a writer. But I don’t really think of myself as a writer, just a person who thinks through writing.
In fact, I think of myself as a student of life – a moniker I borrowed from Rabbi Noah Weinberg. We are more than our professions. We are parents, spouses, children, friends; we are our hobbies and our interests. I love investing; I would do it 80 hours a week if my family did not remind me of their existence. But I’d like to be more than just that. Being a student of life is not just a moniker, it is a mentality; it is a slightly different – more open-minded – approach to life. This is why my articles explore topics that venture outside of investing.
My explorations into classical music are an example of that. I cannot play an instrument, but I receive incredible enjoyment from listening to classical music. Without it my life would be far emptier. So I started writing about it, which in turn me helped me to learn more about it.
And then I am also the CEO of IMA – an investment firm with seven employees and a lot of clients. My first and most important professional responsibility is to do research. Clients come to IMA, turn over the bulk of their net worth, and basically say, “Vitaliy, don’t screw it up, please.” How do I make sure that being CEO of IMA doesn’t interfere with research? It took me plenty of trial and error to get to the place where I am today, but here is what I do to stay focused on analyzing and managing stock investments.
First, I outsource and delegate. I hired an assistant. I looked through all tasks I had to do. The ones where I added little value and did not enjoy, I offloaded to my wonderful assistant Barbara. Try to schedule a call with me and you’ll be interacting with her. Not because I am so important – I am not – but because even scheduling a call takes time – five minutes, three emails. If you do four of those a week, that’s 20 minutes. I add very little value doing that task. These things add up.
Which brings me to this: I hire my weaknesses. Which is easy for me, because I have plenty.
I am horrible with emails; I forget to reply or reply weeks later. (If you were on the receiving end of one of those, sorry, and please don’t take it personally). Barbara has zero emails in her inbox; I have an embarrassing number. When we hired an analyst, I looked for someone who would have the same passion for value investing and have the same values but a complementary skill set, strengths that offset my weaknesses.
I went to lunch with a guy who ran a Fortune 500 company, I asked him what he looked for in the people he hired. He said, look for two C’s: competency and character. Hire people that will own a task. This is what I do. Someone gave me another piece of advice that I also took to heart: Hire slowly, but fire fast.
Second, I am protective of my time. Try to reach out to me through IMA’s website – you’ll get an autoresponder that will tell you that if you are a prospect and would like to talk to me, first you need to read our brochure. I won’t talk to a prospect who has not read the brochure. Most of the questions that prospective clients have for me over the phone have already been answered more eloquently in the brochure. Here is an excerpt from the autoresponder that explains why I do this:
We know it’s unusual to require a potential client to read our brochure first, but you may actually end up being the beneficiary of this policy. If you become a client, would you rather see your portfolio manager spend tens of hours a week on the phone with potential clients, or spend the bulk of his time doing research and serving his clients (like you)?
Hours we save on selling and regurgitating what is already in the brochure go into research and client service.
We try to make it as easy as possible for those who are interested in our service to learn about what we do without getting on the phone with me. We even included a chapter from my upcoming book, which walks you through our investment philosophy, in our brochure, as well as in an audiobook format.
Third, we don’t do traditional marketing. Clients refer their friends to us or people read my articles and my books, and they reach out to us. Then we figure out whether we are a good fit for each other. That’s it. We are not a traditional investment firm; we don’t do seminars, no cold calls; we don’t do country club social marketing. In fact, I don’t accept members of the local community (e.g. from a synagogue I occasion), friends, or acquaintances as clients; but that’s a topic for a different discussion.
Therefore, I spend no time on marketing. None! This frees up a lot of time.
Fourth, I say no, a lot. Most of the conferences I attend, I am there to learn, not to speak. When I am asked to speak at a conference I usually decline, unless I have an ulterior motive – like a getaway with my wife. In a few cases, when I say yes, once or twice a year, I decline to do a traditional, monological presentation and only do a Q&A. Presentations require a lot of preparation and occupy a lot of mental real estate weeks before a conference. And to be honest, I don’t enjoy doing them, so I stopped doing them.
I also say no to internal projects that are a time suck. Our director of marketing wanted me to do a podcast. I like being an occasional guest on someone else’s podcast – this requires very little time and I really enjoy it. But doing a weekly podcast requires a time commitment and doing something I don’t enjoy. So I found an elegant solution. I have a professional narrator – Elliot from Canada – read my articles, and voila, we have a podcast. It requires absolutely zero time from me. It is produced by the IMA team.
I hope you see a pattern. My personal formula for happiness is: Do more things I enjoy and from which I receive creative satisfaction. Divided by the things that I don’t enjoy (usually very detail-oriented, mundane things that have few creative calories). The goal is to maximize the numerator and minimize the denominator. Because I focus on doing things I love, I can be more focused and have greater stamina.
Fifth, I avoid time-draining hobbies – I don’t play golf or follow sports. There is nothing wrong with either, they are just not my thing. I watch probably two football games a year. Just think how much the average American spends on both. This is not advice for others, but it frees up a lot of time for me to research, write, read, spend time with family.
Sixth, I time block. I am a morning person; thus I am more productive and creative in the first half of the day. I look at research as the most important thing I do. Research consumes energy and requires creativity; thus, I am very protective of my mornings. From 8 AM to 2 PM I focus on research and don’t do non-research phone calls. Talking to clients or prospects takes less energy, and thus I can do it later in the day (from 2–3:30 PM).
I don’t schedule any appointments or phone calls on Wednesday; that’s an open day, when I have no obligations. I can go to the park, go skiing, or go to Starbucks to read.
Seventh, I scale my time through writing to effectively communicate with clients.
We modeled IMA after Starbucks – a company I have tremendous respect for. Starbucks provides premium, consistent, high-quality products and great customer service. That’s a good description of our own North Star.
IMA is not just in the investment business; we are in the service business as well. There is an interesting paradox: Customer service means time – my time. Well, almost – operational issues are elegantly resolved by our very capable team in operations. But as we keep growing and thus have more clients, they will naturally want me to address their concerns about the economy, their portfolios, and so on. Our website and brochure state that our portfolio managers are one phone call away. We promise that we’ll answer clients’ inquiries within one business day. This is not an empty promise. We always do.
We came up with a solution regarding portfolio questions. Every quarter I write an in-depth letter addressing client portfolios. These letters run 20 pages (occasional excerpts from these letters slip into my articles). Through the magic of technology these letters are custom tailored for each client, because all clients’ portfolios don’t look the same.
In the letter we also have a Q&A section where I answer questions sent to us by clients. The goal of these letters is to answer accessibly, honestly, and clearly any possible questions clients may have about their portfolios and the economic world around us. As a result, last year I probably spent twenty hours at the most talking to clients on the phone. Clients can always call me, but they don’t often have the need – I have answered their questions in my letters. My writing is scalable; my time on the phone is not.
One last thing in this department. In October we clear out a week and have our annual client meeting. Our whole team meets with clients one on one before and after the meeting.
As Freddie Mercury said, time waits for no one. I am a bit paranoid about time. I try very hard to spend it only on the things that matter to me the most. I have structured my life to do more things I love and fewer things I don’t like. I identified my edge: thinking through writing and focused research. Time does not scale; writing does. I delegate and outsource. I work with people I love. That’s it!
I am the CEO at IMA, which is anything but your average investment firm. (Why? Get our company brochure here, or simply visit our website).
In a brief moment of senility, Forbes magazine called me “the new Benjamin Graham.”
I’ve written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. (I’m working on a third - you can read a chapter from it, titled “The 6 Commandments of Value Investing” here).
And if you prefer listening, audio versions of my articles are published weekly at investor.fm.