#43 – The Growth Manager

HOW STEVE KNOWS THE GUEST

Steve met Tom at the Library of Mistakes when he was interviewing Anthony Bolton. Steve had invited one of Tom’s colleagues who introduced them. Steve persuaded Tom to agree quickly before he had a chance to watch the Bolton interview, just in case Steve made a mess of it – he didn’t , and Tom stopped by the podcast studio on his next visit to London, (The office and studio are in Paddington, so it’s really quite convenient to hop on the Heathrow Express, walk 5 minutes to the office then walk to the Elizabeth Line and in 5 minutes you get to Mayfair and in 15 to the City).

Chapters

00:02 – Mindset in growth investing
24:28 – Culture’s role in investing
33:10 – Evaluating market opportunities
47:36 – Navigating leadership and change
01:06:60 – Emotional discipline in investing
01:14:10 – Learning from technical founders

Transcript

STEPHEN CLAPHAM: Hi, welcome to the Behind The Balance Sheet podcast where we meet leading investors and commentators and educate ourselves about the world of investing and the world. Our mission is to remove some of the mystique around investing and improve our understanding of what makes a successful investment or indeed an unsuccessful one. Our goal is to inform, educate and entertain. We hope you enjoy this and every episode.

Disclaimer: Podcast guests may own shares or have an economic interest in securities discussed in this podcast, which is aired for your education and entertainment only. Nothing in this podcast should be construed as investment advice or relied upon for investment decisions. Always do your own research.

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STEPHEN CLAPHAM: Tom Slater has been with Baillie Gifford for his entire career, some 25 years, and now runs their US equity team and manages the Scottish Mortgage Investment Trust, the largest such equity vehicle in the UK with a 10 billion sterling market cap.

STEPHEN CLAPHAM: Tom runs a growth strategy, and I was keen to have him in the podcast for two reasons. First, to understand what growth managers do differently from traditional value managers, which is how most of my investor guests have described themselves. And second, to explore what has made Billy Gifford such a successful institution.

STEPHEN CLAPHAM: It runs roughly $300 billion, is based in Edinburgh, and was founded in 1908. It’s one of my clients for both training and research. And I have observed their culture at close quarters, and I find it rather intriguing. Tom didn’t disappoint with his explanation of how he remains ham in the rollercoaster rides of many of his thoughts.

STEPHEN CLAPHAM: NVIDIA, for example, had a 63% drawdown as recently as 2022, on its way to that $3 trillion capitalization. What makes the Billy Gifford culture so special? Why? Tom favors technical founders and how that affords their companies a real advantage in the age of AI.

STEPHEN CLAPHAM: What Elon Musk said to him in 2013, the difference between investing in publicly quoted companies and those in private markets, and why in their process they don’t pitch stocks to the team, which he believes gives them an important behavioral advantage. Comp may run two massive investment strategies and have made… Fortune for his clients in backing the world’s most successful entrepreneurs early on.

STEPHEN CLAPHAM: Bezos in 2004, Musk in 2013, and Jensen in 2016. But Tom is incredibly humble, down-to-earth, and able to laugh at himself. Apologies, we had some technical issues in the studio which caused occasional interference, which even Neil, my wonderful sound editor, might not be able to remove entirely. But it won’t be as bad as the Hoover in episode one. Here, then, is my conversation with Tom Slater.

STEPHEN CLAPHAM: Tom Slater. Welcome to the podcast. I’m excited to talk to you. And I always start with the same question. You studied maths and computer science, but did you always want to be an investor? Or was it just chance?

TOM SLATER: It was chance.

TOM SLATER: I didn’t know what I wanted to do. I’d taken some summer jobs doing computer programming.

TOM SLATER: And then I had a friend from maths, and she worked in the city as an intern. And also was dating a guy from Bailey Gifford. And the combination of those two things put me onto the idea.

STEPHEN CLAPHAM: And what attracted you to investing? What was it?

TOM SLATER: It started with an interest in companies and what makes them work and why some are successful and why others aren’t. And it was more that, I think, than interest in the stock market per se. It was… And I guess this idea that you couldn’t, it was a craft that you couldn’t master, effectively.

TOM SLATER: You know, if you stick with computer coding, you know, the toolkit is really important, and obviously you can continue to increase your skills, but there is a certain extent to which you can become a master computer programmer. But in… Investment is all, you know, just when you think you’ve got it, you will be proven completely wrong.

STEPHEN CLAPHAM: And the computer programming, does that play a big part in the way you approach stocks? I mean, because when you have a conversation with a tech founder, are you able to go a lot deeper than most investors?

TOM SLATER: I struggle with this one because I think a little bit of knowledge can be really quite dangerous. You know, these… These people that are at the cutting edge, you know, thinking you actually understand what you’re doing is, what they’re doing is quite dangerous. So I think that it’s brought it, I think it’s probably brought something of a mindset to investing. You know, there’s a book a few years ago called Thinking in Algorithms.

TOM SLATER: I can’t remember who wrote it, but I guess that, you know, there is something about the mindset of the way one approaches, you know, programming computers, which is. Which has a relevance and then i do think it it there’s an affinity or comfort with tech companies yeah which coming from from that background but you know do i understand better than you do how Google’s algorithm works no definitely not you.

STEPHEN CLAPHAM: Just still program are you completely no no it’s funny because you know i’ve got this online training school and particularly in covert I used to get a lot of computer programmers signing up. It’s, you know, how to learn to invest. And, of course, they all thought they were geniuses. And then they found out they got confused between the genius and the boom workers.

STEPHEN CLAPHAM: So you began managing it under James Anderson, the former senior partner of Billy Gifford, back in 2009. In fact, you worked in Billy Gifford all your career, which is quite interesting. And you became co-manager in 2015. You took over from James in 2022.

STEPHEN CLAPHAM: I just wonder what changed at these points. And I suspect you’re going to say, oh, not much changed. But being in charge is probably different, right? It must be different. It must mean more worry, more sleepless nights. So do you not have sleepless nights?

TOM SLATER: I don’t think, as you suggest in the question, I don’t think there were these big transitions. The trust had had a very difficult year in 2008 with the financial crisis.

TOM SLATER: And it was then that I joined the management with James, I guess, providing some support, which was quite a difficult time. We obviously, in that instance, rebounded pretty quickly in 2009. And then we obviously worked together. And I think what’s relevant here is the way that we worked together, which was we…

TOM SLATER: We basically would back each other’s judgment.

TOM SLATER: Right. And, you know, where we had stocks or investment ideas that we’re enthusiastic about, they would go into the portfolio.

TOM SLATER: And I would tie that partly to the philosophy about this is about finding winners and running them for long periods of time. So it wasn’t that we would, you know, have long debates on stocks and try to come to a view. You know, it may sound odd, you know, when he was obviously at… At that point in 2009, far more experienced investor than me. But it was, you know, it was about putting those ideas in together.

TOM SLATER: And then I get, over the next six years, you know, I guess it’s learning the investment trust industry, which is, you know, has its own idiosyncrasies. And then James went on sabbatical in 2014, I think. And then post that, we moved to a co-manager structure. And then to your point about, you know, is there a set of stresses that come? Lawrence Burns obviously joined as the deputy manager in 22, maybe earlier.

TOM SLATER: And so he and I now manage the trust together. And I don’t think there’s much distinction, but really from a stock picking standpoint on the deputy co-manager thing, it’s all just titles. But, yeah. I think the stresses of the past couple of years have less to do with that than just a very difficult market, a tough performance period for us in the aftermath of COVID, particularly in 2022, and dealing with those issues.

STEPHEN CLAPHAM: And how do you manage it? I mean, in the US team, I know you have this idea that you don’t pitch stocks, which I think is really, really interesting, because you think that it creates a certain behavioural… Biases. And you think they’re advantageous. Just talk us through why that is. And you do the same with Scottish market.

TOM SLATER: Yes, I mean, it is it’s captured in that same idea that of backing enthusiasm. And I think of it this way. So let’s imagine that you and I were were managing the portfolio and we had to agree when we when we bought a stock. And I have an idea and I With any stock idea, you’re not going to have 100% conviction. You’re going to have some things you’re enthusiastic about and some doubts.

TOM SLATER: But if we come together to discuss this stock, and if the outcome is, you know, if I want to buy the stock, I need to persuade you, then that’s going to naturally lead to some behavioral consequences. I’m going to overstate the positives of the investment case. I’m going to… I… Whether deliberately or not, I’m going to de-emphasize the negatives because I’ve made up my mind what I want to do already.

TOM SLATER: And maybe I convinced you and maybe you buy the stock. Then the next behavioral trait you run into is this pressure to be consistent. As humans, we value people who are consistent, who don’t change their mind a lot. You know, if I’ve gone in all positive on the stock and emphasize the positives and… And we’ve bought it, it’s very hard for me to turn around and say, actually, no, I think we should sell it.

TOM SLATER: So maybe best sort of captured through an example. So let’s take Meta, the owners of Facebook. If I come in and say to you, I think we should buy Meta. It’s got all these fantastic opportunities in AI and XYZ. We really should buy it. It’s really cheap. Let’s do it. And you say, yeah, okay.

TOM SLATER: If I come along, and I know when we start the conversation that if I want to buy it, we’re going to buy it.

TOM SLATER: That’s not up for debate. So what we’re trying to do is have a discussion in the investment case and say, well, what I like about Meta is that, you know, you’ve got these really great under-monetized assets in WhatsApp And Messenger, and I think AI can lead to this really big positive.

TOM SLATER: On the other hand, I’m a bit concerned about the BlueTop app because, you know, It seems to be well behind TikTok in terms of the curation algorithm. And, you know, there could be developments there which would undermine the case.

TOM SLATER: Then we’ve had a frank discussion of the pros and cons. And then, you know, a week, a month, a year later, I can say, look, actually, some of those concerns about the blue top app were right. I think we should sell. And, you know, it’s just much easier for me to have that conversation with you.

TOM SLATER: So I think having that sort of mechanism, that back enthusiasm, it relies on a couple of things. I think it relies on everybody being committed to a clear philosophy. You know, it’s no good me coming up with my high growth idea and you coming up with your deep value idea and saying, how do we put those together? And we’ve got to back each other.

TOM SLATER: So they go and say, you know, you’ve got to have a commitment to a shared philosophy. And then I think you’ve got to have trust in the other people that are doing it. Because, you know, we… Know we’ll get things wrong. And there’s saying, well, actually, over time, on average, I trust this person’s judgment and I may disagree with them, but I’ve got enough evidence to suggest that it’s worth backing them.

STEPHEN CLAPHAM: Do you think that would work in a value fund? Because this works because you’re worrying about your big winners and you’re prepared to tolerate a lot of losers. Would it work in a more conventional fund, do you think?

TOM SLATER: To my mind, it’s not something that. Is, is connected to growth or value. But I, I, you hit on an important point. If you look at the structure of our delivered returns, it’s not about being right more often than we’re wrong. It’s how much we, we make when we’re right and how much we lose when we’re wrong that, that matters to us.

TOM SLATER: But I think if you’re, you know, if you have a different structure of returns, I think some of those, those behavioral characteristics still apply. And if we’re debating a valuation case, again, does it help for me to be trying to sell you on the idea? No. If you trust me as an investor and I know I can make the final call, then actually I’m probably more likely to listen to your concerns about it. Have you considered that?

TOM SLATER: Is there some aspect of the case which actually you weight more heavily than me? Then once we’ve got away from this dynamic of trying to persuade, then actually I’m probably going to be more receptive to your ideas on it.

STEPHEN CLAPHAM: And does the agreement or disagreement, would that color the sizing of the position?

TOM SLATER: For me, there’s two variables. One is how much agreement is there on it? Yeah. And the other would be how strongly does the proponent feel about it?

TOM SLATER: If I feel very strongly about an idea or a transaction that we should do, then even if you disagree, I think you still have to take that into account. Whereas if I’m just over the line on an idea and I get everybody else just over the line, again, it’s always a matter of degrees. It’s not binary. And this philosophy.

STEPHEN CLAPHAM: This approach, this process, it results in fewer ideas, do you think? Because you only bring your higher conviction ideas. You know they’re going in the fund.

TOM SLATER: I think it probably leads to more self-censorship. So, again, go back to that. You know, you’re having a group discussion. You know, I have been doing the work on a stock for the past month. And I quite like it. It’s got its merits. But, you know.

TOM SLATER: And probably the outcome of that is I bring it to the group and say I think it’s a buy and allow myself to be talked out of it. But I want to show everybody I’ve done the work. Whereas if I bring it to that group and I know that if I want to buy it, we will buy it, then I’m probably not going to bring those ideas that I don’t feel as strongly about.

STEPHEN CLAPHAM: So do you end up with a sort of repository of things that you quite like, but they just aren’t the right price?

TOM SLATER: Again, I see this as a positive. But what When you come together to have a stock discussion, you want it to mean something.

TOM SLATER: This is a good idea that somebody’s put some work into, so let’s give it some airtime. I can understand the dynamics that lead to that discussion, but I don’t think it’s a very productive use of time. So I’d rather people kill things higher up in the funnel of their work.

TOM SLATER: I do think it’s things that people feel strongly about where you can have the most valuable. Conversations. Absolutely.

STEPHEN CLAPHAM: And that must be, it must be different if you’re running a growth fund because you’re looking for those big opportunities, those big winners.

TOM SLATER: I slightly struggle to answer the question because I’ve never run a value fund.

STEPHEN CLAPHAM: Oh, sure.

TOM SLATER: But you’ve done.

STEPHEN CLAPHAM: You’ve done like UK equities.

TOM SLATER: Yes, yep, I have. And for me, actually, that point about big winners is partly, and partly is our style at Bailey Gifford, at Scottish Mortgage, is growth. But… Actually, I think a large part of it is actually about time horizon.

TOM SLATER: Because, you know, we’re all taught that stock market returns are normally distributed and outcome of stocks are normally distributed. But actually, if you extend the time horizon to 10 years, you get this log normal distribution. You get these outliers. And there’s nothing then that says those outliers have to be growth stocks.

TOM SLATER: And indeed, you know, some are, some aren’t. So I don’t see that it is a growth versus value thing. It’s a time horizon thing. And I think if you, you know, if you identify attractive opportunities, underpriced opportunities, then they can pay off many, many, many times over a 10-year time frame.

STEPHEN CLAPHAM: But what sort of… Things that wouldn’t be growth stocks, would it be like serial acquirers or I mean what sort of category would be in that stream? I mean I shouldn’t know the answer to this because I’ve interviewed Chris Mayer who wrote 100 baggers and there was a very wide universe of stocks.

STEPHEN CLAPHAM: Well let me put the question another way, so do you go fishing in other waters other than the growth waters?

TOM SLATER: So I don’t because You know, I think that one of the things that’s really important about a fund or strategy is having identity. Yeah. And, you know, your clients, your investors have a clear reason why they want to own you. They understand what you do. And then they can make the allocation decision for themselves.

TOM SLATER: And, you know, I… In a way, you can think of it as sort of circles of competence, right? There’s a classic Buffettism that his circle of competence is much wider than that of the rest of us.

TOM SLATER: But I think it’s really important that you have an understanding of what you think you can do and you stick to doing that.

TOM SLATER: But I think that if you…

TOM SLATER: One of the… There was an academic piece of work that looked at… Concentration of the US stock market over the past 90 years.

TOM SLATER: And it showed this ridiculously small number of stocks, 90 stocks have contributed to half of the excess return in US equities over 90 years. But the one that sticks out to me from that list would be General Motors. Now, you wouldn’t say that was a growth stock. And indeed, it went bust.

TOM SLATER: But actually, if you looked at, you know, over that 90-year timeframe with the growth it achieved plus the dividend payouts made it one of the 90. So I don’t, you know, I think if you can get an underappreciated long-term compounder, it absolutely can be one of those manifold return companies. Sure.

STEPHEN CLAPHAM: And I was wondering, you know, you mentioned about an investment trust earlier. Is there, I mean, any difference in approach when you’ve got permanent capital versus, say, a retail fund with daily liquidity versus an institutional fund? Is there any difference in the way you manage those?

TOM SLATER: I think that the differences are subtle but important. I mean, the killer one from a returns perspective is the flows.

TOM SLATER: Because we all know that people will tend to allocate and take away capital at the wrong time based on… on historic performance and i think what it does mean is that you’re not forced to sell or reduce stocks yeah and at the wrong point in the cycle and another important part of it is the the relationship that you can have with companies because you do have permanent capital oh really okay just because you know you can you can have a time frame which is more aligned with theirs and that’s important in public markets it’s even more important in in private companies because you know you know the typical structure there is a 10-year limited life fund which means you know three years of deploying capital three years of being a shareholder and three years of trying to sell stuff and and so you know if you say well i’ve got permanent capital i i don’t really care when you list so long as you’re actually making operational progress and i think that’s a different conversation so there’s certainly advantages to it and you know you On the flip side, there were challenges as well with discounts and so forth.

STEPHEN CLAPHAM: So Bailey Giver is an important client for Behind The Balance Sheet. And I always enjoy my trips up to Edinburgh because you’ve got a very different culture. The young people are always encouraged to speak up. There’s always a lot of debate.

STEPHEN CLAPHAM: I always find it very challenging, actually. You know, when I do a training course, it’s always a good fun. But I just wondered, I mean, you’ve been there like 25 years, I think. How has the culture developed over that? And how does the culture give you an investment advantage?

TOM SLATER: First of all, thank you for all that you do in terms of helping our investors get better at their jobs.

TOM SLATER: I think the So start by just, we try to think a lot about culture when we’re investing in companies. And we’ve tried very hard to get better at that. And if I do the sort of extremes of it, I can look back at meeting notes from company meetings from 15 years ago or something. And people were right, good meeting. This was a good meeting. And what…

TOM SLATER: And what… Does that mean? Does that mean you got on well with the management? You know, did you, you had a good chat? But it’s trying to get away from that. And so one of the, you know, one of the simplest frameworks that you might look at a company culture on would be say, right, there’s two, there’s two axes. One is the, is the culture weak or is it strong?

TOM SLATER: You know, and it’s somewhere, sits somewhere on that spectrum. And then on the other axis, you might say, is it, is it aligned or not aligned with what the company’s trying to do? And so, you know, take Salesforce.com as an example. And, you know, you meet the people from Salesforce and they’re extremely hard driving, promotional.

TOM SLATER: You know, they have a certain way of speaking. And I don’t personally feel very comfortable with it. But equally, you’d say it’s really identifiable. It’s a really strong culture and it’s really aligned with what they’re trying to do. And so… So that’s a very simple way into that discussion on culture. But take that back to Bailey Gifford.

TOM SLATER: I think we do have a strong culture. And I think part of that is the focus on, particularly on the investment side of the business and recruiting graduates. Yes, I started 25 years ago as a graduate, but I’m not unusual in a Bailey Gifford context for having done that.

TOM SLATER: In fact, that’s the norm. And so, so what, what I think that leads to a strong culture because, you know, I see it in a lot of other firms because investors move between firms, they take a bit of that culture with them.

TOM SLATER: And so you get a, it, it, it, it tends to have a mean reversion element to it. Whereas, you know, because you’re getting relatively few people later in, in the career, it doesn’t. So, so you, and then, and then the, I think the next ingredient would be that we very deliberately.

TOM SLATER: Try to recruit people with a mix of academic backgrounds.

TOM SLATER: And, and so it’s not, you know, your, your first question was around, did I always want to be an investor?

TOM SLATER: You know, we want to have some of those people who always wanted to be an investor and, and people who’ve, you know, one of, one of the big efforts in our graduate recruitment is actually trying to find people who hadn’t even considered the investment industry as, as a possibility, you know, students from art, arts backgrounds, for, for example. So we put, we put a lot of work into that.

TOM SLATER: So you want to bring in people with a diversity of academic backgrounds and interests, and then you can give them the tools to think about investments. I think that’s another piece of it.

TOM SLATER: So I do think you have a strong culture, and the reason for bringing that breadth in and those different perspectives is trying to align it with our way of investing, which is to be very long-term. You know, you don’t… You don’t want people with a telephone in each hand and 12 screens in front of them yelling into the phone.

TOM SLATER: If you come to the office, it’s a bit more like a library. You’re encouraging people. It’s a perfectly acceptable part of doing your job that you would turn up to your desk and open a book in the morning and read.

TOM SLATER: You find an area you’re interested and excited about, go off and work on it for the next two or three months. Identify who the important… Players are, who the academics that you could learn from, go spend time with them. And so I think it’s some of those ingredients that lead to something that’s a strong culture that’s aligned with what we’re trying to do.

STEPHEN CLAPHAM: But it hasn’t really changed that much from what you’re saying. Obviously, the technology has changed, but the way you do it, but the philosophy hasn’t changed much.

TOM SLATER: I think that what I…

TOM SLATER: I would say that there are some pillars of that process which are unchanging. But actually, if you look at where the firm has had success, there has been this constant process of change. You mentioned I worked in our UK team earlier in my career. In the 2000s, our UK equity desk was the biggest desk in the firm.

TOM SLATER: And we… Had some nice international businesses. But our investment process evolved. We had success with international strategies for U. S. Clients, emerging markets as it became, and then global strategies.

TOM SLATER: So actually the evolution of the type of strategies we were offering, generally the performance requirements became higher, portfolios became more concentrated, the mix of the client-based transition from U. K. To global. So. I would say that one of the constants has been change and actually adaptability would be one of the pillars.

TOM SLATER: And at the same time, I think the investment process has moved on a lot.

STEPHEN CLAPHAM: And I’m always puzzled. People talk about, oh, you should be long-term, you should have low portfolio turnover. I always think that’s funny because the world changes and you make mistakes and you don’t want to.

STEPHEN CLAPHAM: Be discouraged from taking action in a mistake because you’re worried about your turnover. It seems like it’s a residual to me. Do you have a view on that? And is the growth strategy, does that force you to have a longer term mindset?

TOM SLATER: One of the things that has been important for us in investing for Scottish Mortgage is trying to learn from the brilliant people that run some of the companies that we’ve invested in.

TOM SLATER: And, you know, I think also, you know, I’d link that. So just because people look at their track records, investors, and try to think what they can learn from, you know, other investors. But actually, if I look, for example, at the management of Tencent, you know, Tencent have probably been some of the best investors in the world if you look at the past 10 or 15 years.

TOM SLATER: These people don’t necessarily sit in the classic structures that we might look for great investors in. But, you know, probably more than anyone else, the person that we’ve learned from over the past 20 years has been Jeff Bezos.

TOM SLATER: And I remember sitting in a room with him in Seattle and there was a group of his long term shareholders. And somebody asked him, you know, what, you know, as you look out over the next. 10 years, Jeff, what do you think the biggest changes are going to be?

TOM SLATER: And he said, well, I’Ll come to that. But actually, you’re thinking about it the wrong way around. What you need to think about is what will still be the same in 10 years. And, you know, I know that 10 years from now, people will still love low prices. They will still want convenient delivery.

TOM SLATER: And so I think that framework is important. So I think when you go to your question, low turnover, I think, is because you’re looking at companies that you think there’s something about the culture, there’s something about the way that they approach the task.

TOM SLATER: There’s something about their adaptability and flexibility that means that if you haven’t identified enduring advantages, that they should be able to survive that transition in circumstances. And that should drive low turnover. But I agree with you that low turnover should be the output. And it’s not no turnover. You know, stick with things forever.

TOM SLATER: But also, it should vary because there should be times when, you know, if you have a stock that’s done extremely well, then you need to, you know, one of the ways you’ve been successful is finding those stocks that have done really well and continuing to hang on to them as they’ve done really.

TOM SLATER: Continue to do really well but in order to do that you have to be asking the question what it constantly what is the upside from here yes it’s done well yes i’ve made money but what is the upside from here and when when that question becomes more challenging you know it should it should drive turnover you should be selling and.

STEPHEN CLAPHAM: Do you have sort of fixed risk limits because the problem i mean it’s a nice problem to have with with running your winners is you end up with very concentrated portfolios And how do you overcome that challenge?

TOM SLATER: So in Scottish Mortgage, we have the constraint written into the investment objective is that we will put no more than 8% of the portfolio into a stock at the time of purchase.

TOM SLATER: The tool that the board monitor is the equivalent number of holdings. So it basically says, you know, if you take an 80 stock, the 80 or 90… Actual holdings that we have today, you know, what does that look like as a as an equally weighted portfolio, how many stocks would it have?

TOM SLATER: So you try to adjust for the concentration and the positions. So to put, to explain that in really simple terms, if you had a two-stock portfolio and you had 50% of the portfolio in each, then your effective number of holdings is two.

TOM SLATER: If you had 99.9 in one stock and 0.1 in the other, then your effective number of holdings is one. And so they look at the effective holdings. So they adjust for that skew in the portfolio. And there’s both a hard minimum on that and then a rule of thumb that we manage the portfolio to.

STEPHEN CLAPHAM: Is it uncomfortable trimming those winners?

TOM SLATER: It is. Well, let me ask this two ways. As a fallible human, it’s really not uncomfortable trimming those winners. That’s what you instinctively want to do. You know, this stock’s done well. It’s now. 10% of the portfolio, it’s volatile.

TOM SLATER: You know, if it halves, there’s this strong, intrinsic motivation to trim those winners. But I think the discomfort comes from the fact that we know, let’s say five stocks are responsible for all our returns in the past 10 years.

TOM SLATER: And anything that we’ve done to interrupt the compounding of those 10, those five, sorry, would have meaningfully impacted our returns. And so I’d say it’s not an uncomfortable feeling, but it’s just that knowledge that you need to be pretty careful and pretty sure when you start to interrupt that process.

STEPHEN CLAPHAM: Because you sold on NVIDIA this year.

TOM SLATER: Yes.

TOM SLATER: So NVIDIA we bought in 2016. So it’s been a long-term holding.

TOM SLATER: At the time when we…

TOM SLATER: Bought it what we liked about it was we saw the the potential for this technology and in three different areas one was AI and data centers one was around machine vision the other was around sort of self-driving autonomous vehicles you know it was hard to put the odds on any one of those three succeeding but what we liked about it is that you had these three really big options And we didn’t know when, we didn’t know if, but that’s what’s driven the return since, and certainly very recently.

TOM SLATER: So it’s been a very successful investment for us. It has that common characteristic of most of our successful investments, that it’s been a very uncomfortable ride.

TOM SLATER: So, you know, it’s done well recently. Aren’t we clever? Well, its biggest peak to trough decline in that period of ownership was over 70%. I think it was 73%. As recently as 2022. So it inflicted a great deal of pain on us. But I think it’s back to what we were talking about earlier. You’ve got to be testing the upside. How much do you think you can make now?

TOM SLATER: And for us from where we are today, $3.5 trillion of market cap, that maths gets harder and harder. And so you combine that with thinking about the fundamentals and I don’t think we want to get into… Details of AI at this point, or you can if you want. So we think management have done a great job. We think the company has some formidable competitive advantages, but it’s just having that discipline around upside from here.

TOM SLATER: And then the final point to make on it is just accepting that there’s a lot that you don’t know. You know, we’re not certain that they’re upside, you know, but there’s a lot of fuzziness around this, but for us, there was enough there to be… For Scottish Mortgage, we sold a billion pounds of stock in 2024.

STEPHEN CLAPHAM: So a pretty substantial call for us.

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STEPHEN CLAPHAM: You’ve also been a longtime backer of Tesla, and you’re still a holder of Tesla and of SpaceX. Musk is in the news every day. He’s now going to have a much wider role with the oddly named DOGE. I wonder, do you have any observations about him that you’re happy to share? It seems to me it must be peak Elon when I read in the FT that the Chinese government is consulting them on what they should do with TikTok.

STEPHEN CLAPHAM: And when he’s making mad comments about our prime minister, any anecdotes, any observations? And how does it affect you when you’re looking at the investments? Because you must worry, there’s only so many hours in the day and he might be an incredible genius, but he’s got a bit too many toys, right?

TOM SLATER: So one of the things that I think is…

TOM SLATER: Important when you’re listening to what people are telling you is trying to assess how credible what they have to say is. And I think with Elon, if I go right back to when I first met him in 2013, the history of it is, I think from memory, I think we started buying the stock towards the end of 2012. And it was, it’s had shares split since then, but it was about, it was about $30.

TOM SLATER: And in the space of the time we were buying it, it went to $100. So we hadn’t bought all the stock that we wanted to do. And we were sitting there thinking, well, what, what do we do next? And so he wasn’t the celebrity then that he is today. It was possible to go out in California and see him. And I was asking him, you’ve had success with the Model S, but the German manufacturer is a…

TOM SLATER: We’re going to do this and they you know they’ve got all this manufacturing expertise and etc etc and so i’m asking these sort of questions for i know five minutes or something and and he stopped me said listen you just don’t get it our ability to succeed will be dependent on our own execution they are institutionally incapable of of competing with us he was saying that out of the experience of building the prototype electric A-class for Mercedes, for example.

TOM SLATER: You know, it wasn’t just taking a side swipe, although it was partly that. And of course, he was spot on. You know, the highs and the lows of Tesla of this intervening period have been entirely driven by its own execution.

TOM SLATER: But you sort of wind the clock forward through all of the ups and downs of the past 10 years with it. You know, what he’s achieved in… In the world of business has been phenomenal. It’s created huge amounts of value for his shareholders.

TOM SLATER: And therefore, you go back to this credibility thing. When you say something, you’ve got to, he has a very high credibility in saying it. And there’s been times when he’s said things to me in the past and I thought, that’s absolutely nuts.

TOM SLATER: But then I remind myself, it would be nuts if, you know, a person off the street said it to me, but actually, right, this remember who it is that said it to you and what they have achieved and and so you know i i think that’s really an important lens to consider when you know when when he’s when he’s speaking i think that the you know the issue you mentioned the issue of bandwidth and you know again that’s that’s been a persistent concern but go right back to that that first meeting so so i i was i was sitting with the cfo of of Tesla it at the time, Deepak Ahuja.

TOM SLATER: And he was saying, we were talking about what it’s like working at Tesla. And he said, well, I’Ll be answering Enon’s emails at midnight and I’Ll go to bed, I’Ll wake up at five and I’ve got six more in my inbox. And he’s incredibly focused on work.

TOM SLATER: Even as he added, because he was doing SpaceX and Tesla at the time, but then there was the… The Boren company, there’s Neuralink, then there’s X. You know, it’s one of these perennial questions, the breadth here. But I think, you know, the question that follows from that is who is around him.

TOM SLATER: You know, he’s always in the spotlight, but then actually, you know, what’s the team like that’s supporting him? And again, I think you can see that in Tesla when, you know, If you go back to production hell in 2018, that team around them was not sufficiently strong.

TOM SLATER: Actually to focus on the bits that he was less good at or focused on. And then subsequent years of execution, with the launch of the Model Y, with the internationalization of the business, the factory in Berlin, the factory in China, all of those ramp-ups have really gone without the same sort of hiccups.

TOM SLATER: He’s in spotlight, but you need to look at the other pieces as well.

STEPHEN CLAPHAM: Oh, yeah. And I believe that they’re recruiting like mad for the new department and recruiting some really amazing people who are excited about the opportunity to serve. So I guess we shouldn’t dismiss his claims. When he made those mad claims about when he was setting his remuneration package, which was suddenly thrown out. And I remember thinking at the time, that’s like bizarre.

STEPHEN CLAPHAM: And of course, you would support that because. The chances of him achieving that are very low. And if he does achieve it, I’m going to be really rich. But I was thinking, God, that’s bizarre. Did you then go and say, oh, correct me if I said this, he’s probably going to do it and we better buy some more stock. What did you think?

TOM SLATER: We voted in favor of that remuneration package. The Tesla board gets a lot of flack, but they had a…

TOM SLATER: They had a process for looking at it they came and consulted us as substantial shareholders before they went ahead with it so quantum was is obviously a hugely controversial topic but you know the lens that we looked at through was you know to achieve this our shareholders you know our clients our shareholders will make an extraordinarily large amount of money and there’s so much controversy around it but you you go back to you know it is creating value for shareholders as the fundamental building block.

TOM SLATER: That’s not to say everything that he’s said has come true, but I do think you can… He’s neatly summarized, and I think a line that he used himself, which is that he’s turned the impossible into the merely late.

STEPHEN CLAPHAM: I love that. Now, Billy Gibbons has a very good magazine which people should read. It’s called trust i think and you wrote an article in it in the last edition about founders managers who can get their hands dirty and you wrote about Zuckerberg can you just explain.

TOM SLATER: The the the rationale that you that you that you outlined so i can’t remember so i did one about founders and then i did one about Technical. Technical CEOs.

STEPHEN CLAPHAM: Technical abilities. So he programmed his doorbell or something.

TOM SLATER: So what I was getting at with that, and so there’s a slight, a nuanced distinction, right? But the point I was making there was that technical CEOs were particularly strongly placed as you think about what’s coming because it seems to me that AI is a hugely impactful technology transition which is going to play out. Over the next 20 years.

TOM SLATER: And if you sit in a big corporate, you’re looking at this thing, I think AI is important. So you’ve probably got a few of the guys from your tech team playing with the technology, some sort of skunkworks, and you probably think it’s a bit more important than that. So you’ve got some consultants in who are charging you some pretty high fees to come out. They’re saying, well, what’s the first use case?

TOM SLATER: And maybe you can… You can put this in your call center. And it’s going to take them 10 years, and it’s going to cost them loads of money to implement. And by the way, all of their competitors and peers are going to be doing the same thing. And so, you know, net-net, probably you have a more efficient business at the end of it, but you haven’t gained any edge.

TOM SLATER: But the technical founders, you know, are on top of this technology in a really deep way and then are driving it through their business today. Chat GPT, Daniel Ek from Spotify showed me that months before.

TOM SLATER: And not only did he show me it, but he had understood this is going to completely change our business.

TOM SLATER: And so you don’t have different levels of the organization trying to work out what to do. And the thing about, you could go to technical founders where they can drive. Change through the business, you know, in a very short space of time.

TOM SLATER: And so when you look at, if you take the example of Zuckerberg and Meta, you know, he… He doesn’t need anybody to tell him what the potential of AI is.

TOM SLATER: And actually that played out in a really tangible way. So if you go back to 22, that was the era of headcount. We moved in the post-COVID period. Growth had slowed. The whole tech sector was cutting back on spending. Capital had a cost again. And one of the consequences of… So that was big profit warnings at NVIDIA.

TOM SLATER: You saw all these NVIDIA chips sat in warehouses unused. And it was at that point in that environment that Zuckerberg went out and placed a huge order for NVIDIA GPUs because he could see what was going on in AI and its impact. And so, you know, forget the stock market. You know, 12 or 18 months later, waking him up to the fact that NVIDIA was, you know, was going to see the surge and everybody else scrambling to get chips.

TOM SLATER: Well, he’d got them back in the dark days of 22 because he was a technical founder, because he could see what was coming, because he could connect that to revenue opportunities in the business. And I just think that’s such a valuable input to your… Decision making in the environment we’re in today.

STEPHEN CLAPHAM: Absolutely. And presumably you’re better able than most to connect those dots when you see that happening.

TOM SLATER: Able is an interesting way to describe it because I think we work in the finance industry, there are so many seriously smart, seriously well-paid people. Highly motivated to do this. So I don’t think differentiating yourself on ability is possible.

TOM SLATER: And, you know, going further, you know, I meet investors all the time who are much smarter than I am. So I think instead, it’s how can you set yourself up to see see these things coming. And, and for us, actually I would link it all back to time horizon. You, we’re trying to invest over 10 years.

TOM SLATER: If you’re investing over 10 years, the relationship that you can have with a company is different.

TOM SLATER: You know, it’s, you, you, you don’t want, you know, how many analyst quarterly calls do you sit on where they say, you know, ask a question about the quarter and then they follow it up with a question about the. Three weeks since the quarter end. Can you give me color on what’s happened there? Did you exit the quarter faster than the run rate?

TOM SLATER: You know, but actually sit down and say, right, where, as you think about the next 10 years, and when you have people like Zuckerberg, like Bezos, like Musk running the companies you own, you know, just listen to what they’re telling you. You know, we don’t have to be that smart. And, you know, if you extend it beyond the corporate sphere, you know, so much…

TOM SLATER: Of the information in the investment world comes out of such a small group of people, you know, largely based in London and New York, who set the agenda for investors, who serve up to them on a plate, the facts, the opinions. So actually just getting outside of that bubble can generate insights that others aren’t bothering to look for. Instead of looking at that investment bank piece of research.

TOM SLATER: Go speak to an interesting author on the topic, find some of the leading academics and speak to them. And by the way, these people don’t demand the sort of fees that the brokers will demand. It’s not about being more able. It’s about thinking about what your source of information are and trying to set yourself up to be in a position to get access to the valuable ones.

STEPHEN CLAPHAM: Very good point about the concentration of the output. And the other technical founder, so you’ve got… Zuckerberg, you’ve got Jensen, of course, and I’ve forgotten the gentleman’s name, but the founder of BYD, and you’ve just invested in BYD, and he’s another technical supremo. Is that what made you invest in BYD, or is it just the obvious Chinese electric cars taking over the world?

TOM SLATER: I think that the way that people are looking at China is missing some of the bigger picture. So… There’s a lot of discussion about the weakness of domestic consumption, of stimulation of the property market.

TOM SLATER: I think that’s a guessing game. What’s going to happen with Trump’s tariffs on China? Guessing game. The big picture is that they are moving incredibly quickly up the technology curve.

TOM SLATER: It’s in electric vehicles, it’s in semiconductors, advanced manufacturing, renewable energy. And it’s actually that incredible progress which is giving rise to a lot of the…

TOM SLATER: Geopolitical tension but they stick stick with evs there’s so many you know there’s such different cultures such different places but there are so many parallels between China and the us you know a huge domestic market deep capital markets focus on on innovation and r&d and and great entrepreneurs who operate at real scale so BYD operating in the largest auto market in the world, that auto in the domestic Chinese market, that market is moving much faster than elsewhere in the world.

TOM SLATER: It’s already more than 50% electric vehicles.

TOM SLATER: The pace of innovation is much faster. The prices are much lower and it’s winning. It’s growing top line 40% yet making 20% plus returns on capital.

TOM SLATER: And I think that sets BYD up in a position to be one of the global winners in EV.

TOM SLATER: China will have exported about 5 million passenger vehicles last year. That’s up from one in 2020. And in 2020, it was a net importer.

TOM SLATER: So, you know, businesses are growing incredibly fast, making great returns, and Volkswagen’s profits shrank. 40 plus percent in the third quarter you know the international you know the established players are getting squeezed out and i think that that just grows out from China but there is an issue with China i mean the stock market going up a bit but it’s still pretty cheap but.

STEPHEN CLAPHAM: There is this issue post Russia that these countries are not investable now i know you’ve still got i mean you’ve got metuan and i mean all these unpronounceable stocks But you’re out of BABA, you’re out of Tencent. Just talk us through your sort of geopolitical environment and those stock selections. Why, because, I mean, Alibaba is still pretty cheap, right?

TOM SLATER: Yeah, I mean, I don’t think geopolitical tension goes away. I think the friction only grows from here.

TOM SLATER: I do think in the face of that, you know, that…

TOM SLATER: Maintaining those commercial links, those investment relationships, personal relationships is an important part of what we can all do to stop that escalation.

TOM SLATER: But our approach to investing in China has changed.

TOM SLATER: If we’re going to take China risk, China geopolitical risk, we have to be rewarded for it. We have to see a path to making. Many times our initial investment in those companies.

TOM SLATER: And therefore, we’ve sold out of some longstanding holdings like Alibaba, like Tencent, because they’d be starting from an already large size because we think it’s harder to meet that return threshold that’s required in this geopolitical environment.

TOM SLATER: And the common characteristic of a BYD or a Meituan, which you mentioned, and I’Ll… Pinduoduo, which is an e-commerce platform behind Timu, is that we think they can meet a higher return threshold that compensates us for taking that geopolitical risk.

STEPHEN CLAPHAM: And any observations on ByteDance and TikTok?

TOM SLATER: You link it to the earlier conversation, you’ve got a technical founder, again, also linked to the AI thing, who spotted the potential of AI.

TOM SLATER: It’s in the in the in the online media space years before other people did and and has been very successful at building that that business i think that the the there is this this issue of what happens to bite dance’s business in the us and i i don’t know i mean this is this is you It’s in the field of speculation at this point. It’s unanalyzable.

TOM SLATER: But I think the investment case for ByteDance does not turn on that. The US is a relatively small part of ByteDance’s business. You can more than justify the valuation on its domestic Chinese business.

TOM SLATER: And then there’s what’s going on in the rest of the world as well.

TOM SLATER: But this is a business that on many metrics is a similar size to Meta, but is valued at a fraction of Meta. So… For me, the risks and what happens in TikTok US is more than captured in the price.

STEPHEN CLAPHAM: It’s funny because it’s a private company, so you can’t do anything.

STEPHEN CLAPHAM: Even if you’re worried about it, you can’t sell it. Is that one of the advantages of having a private portfolio?

TOM SLATER: It would be hard to say it’s an outright advantage. I think one of the useful things for us is we’ve tried for years to act like long-term owners in public markets. And one of the positives of investing in a private company is you have no choice but to look through, act as an owner. You know, if the business encounters difficult times, you have to, you know, you have to be an engaged owner.

TOM SLATER: You have to work with the team to try and address the problems. You know, and that’s, you know, that can be painful. You know, as our experience in Northvolt last year showed. You know, the… One thing we found interesting is that it further improves our ability as public market investors to act like owners because you’ve got no choice as a private company investor.

STEPHEN CLAPHAM: Were there any particular lessons from the Northvolt experience?

TOM SLATER: Well, it’s much easier to get lessons from investments than go wrong than from investments that go right. I always think that you need to take your time. Actually working out what those lessons are. The danger of these things is that you rush to a conclusion. But I think there were a combination of challenges for Northwell.

TOM SLATER: It wasn’t any one thing. It was a combination of challenges. But I guess that some of the things that I will think about more carefully when investing in a similar type of business in the future would be if your business model involves deploying a very substantial amount of other people’s capital, then the dynamics are probably different.

TOM SLATER: If you’re investing in, let’s say, a capital-like social media business, the constraints on the founders and others necessarily, a higher representation of those capital providers needs to be different. Yeah. Probably another aspect is, how does a management team deal with an…

TOM SLATER: Almost open-ended opportunity because you know that’s you know you’ve you’ve seen this huge demand for vehicle batteries in the past five years and north volt have had you know opportunities in in europe in several different countries in europe in in north america and i think one of the the challenges that they’ve they’ve had is actually just how to you know focus on a small number of things and get them working really effectively and and it’s difficult when you’re a sort of child in a sweet shop.

STEPHEN CLAPHAM: When you make an investment in a private company, so it’s, I think, you know, Jeff Bezos’One-way doors and two-way doors, you have to spend a lot more time in a one-way door if you can’t reverse it.

STEPHEN CLAPHAM: Is that the way you think about investing in a private company? Once you’re in, you’re in, you can get out. Whereas, you know, if you change your mind in a public stock, you can just get out. So do you spend a lot more time sort of evaluating?

TOM SLATER: I think there are… There are some different aspects there. First of all, the way I think about it with a company is, first and foremost, is it an attractive business? And then you can think about whether it’s private or public. And in a way, let’s just start with, is it an attractive opportunity? And worry about the other pieces later.

TOM SLATER: The second thing would be to say, I don’t think it is a completely binary distinction between… Private and public. You know, you can choose when in a company’s lifestyle, life cycle you want to invest. And, you know, you might invest in a growth funding round in a private company.

TOM SLATER: You might invest in a pre-IPO raise. You might invest in the IPO. You might invest in the secondary market. There’s probably a secondary placing. And actually you can think about where in that piece you want to invest. And with a private company, the additional point is, yes, there’s a funding round today. You can do it, yes or no.

TOM SLATER: But maybe it is that you make a small investment, you learn about do they deliver over the next 12 months because inevitably there’ll be another funding round coming and you can actually build up those positions over time.

TOM SLATER: But I think one of the ways that it is binary is if there is something fraudulent, disreputable, anything like that goes on at that company, your name is associated with it and you can’t undo that. So it’s probably on those issues that it’s a one-way door.

STEPHEN CLAPHAM: You mentioned earlier the 73% drawdown in NVIDIA. And I saw you’d sold Zalando, Zoom, Neo. All stocks have had sort of tremendously volatile rise. I was just wondering, you know, how do you keep calm with this?

STEPHEN CLAPHAM: I mean, just having a long-term perspective can often actually lead you to the wrong conclusion. And I mean, I just imagine it must be really, really difficult when you’re seeing such volatility in share prices and understanding.

STEPHEN CLAPHAM: The question I really want to ask is, what will make you sell? And how do you distinguish between the 73% drawdown in NVIDIA and the 73% drawdown in Zoom?

TOM SLATER: I think that from an investment point of view, we’ve defined our task as delivering long-run capital appreciation and accepting that that would… The consequence of that will be volatility.

TOM SLATER: We’ve over-delivered on the volatility in the past three or five years and given our investors a wilder ride than we would have liked to have. And of course, we’ve made mistakes in that. I would say on the how do you endure volatility, I think it’s about your mindset to the task. I turn up to work as an investor every day. And some of those days, some of those years are bad years.

TOM SLATER: And some of those are good years, either from an absolute market performance or from a relative performance. And it’s trying to, in so much as you can, dissociate yourself from that cycle. Because you still have to come to work no matter which of those things is happening.

TOM SLATER: I remember sitting with Gary Robinson, who’s the manager of Bailey Gifford US Growth Trust and a co-manager with me on American Fund. And I can’t remember when it was, but there’s a rough estimate, let’s say it’s 2017. And we’d had a really good run. We were sitting there one evening, I said, how do you feel? And he said, I’m really uncomfortable. I don’t like this. How do you feel? And I was like, I don’t like this either.

TOM SLATER: And the point was that we knew that things had been going our way and things had been going really well. And the emotion that that elicited was discomfort because you knew that after things had been going really well, they’re going to go really badly. And it does beg the question, of course, as a formality, when do you ever actually feel happy?

TOM SLATER: Because you know you’re definitely not enjoying it when you’re underperforming it and if you’re if you’re not enjoying it when you’re out performing that doesn’t really leave much much else to enjoy but it but it i think it speaks to the fact that you you need you know emotionally you don’t you you can’t tie how you’re feeling too closely to where you are in the performance cycle because it’s just so wearing now it’s inevitable that you to some extent you do but but as a mindset i know i think that’s really important And then to your one about, well, how do you decide when to sell?

TOM SLATER: You know, there’s not a formula. I think process is really important. So it’s not emotion, you know, because in these volatile stocks, that would be really dangerous. But it’s that cold evaluation of upside from here. First of all, do you really understand why you own the stock? Do you have a clear, you know, have you written down why you own the stock?

TOM SLATER: I mean, forget the, you know, 12-page sophisticated note with lots of tables, but why do you really, what were the small number of things? What did you think was going to happen? So being clear about that in the first place, and then a cold evaluation of, right, this is off track, clearly, because it’s not.

TOM SLATER: Has it destroyed the thesis or the things that you believe, is it still possible that they’re right? Are the people still there that you’ve backed?

TOM SLATER: And so I think it’s sticking to process in those times when things aren’t working for you and having that discipline. And then final one on this, our bias. And again, you will have biases. So just try to… Know yourself in this. Our bias is that we hang on to things too long.

TOM SLATER: Because we’ve seen these drawdowns in our big winners, we’re slow to sell a stock that’s having a drawdown because the amount of value that we would have destroyed if we sold Tesla every time it had one of those drawdowns. You know, we bought Amazon in 2004. It had fallen by a third by 2006. That was when they introduced prime free shipping.

TOM SLATER: And suddenly all the most profitable best customers became their biggest loss makers. The market hated it. Shares sold off by a third. If we had panicked out at that point, it would have had a huge impact. It fell by half from 2008 to 2008. But it fell by half through the great financial crisis.

TOM SLATER: It’s just an intrinsic characteristic. We’ve talked about Meta. That had fallen by half within about two months of the IPO when we bought it. So it’s… Knowing that you can destroy value, we have a bias to hanging on too long with these things, but we just try to stick to the process.

STEPHEN CLAPHAM: I’m conscious of the time. You started a book club. So what are you reading and what would you recommend to people? And tell us about the book club. This is an interesting development.

TOM SLATER: So book club, one of the things that’s been important to…

TOM SLATER: Bailey Gifford’s culture and approach is our geographic location being in Edinburgh i think we’re away from the noise of London and New York it is a facilitator of that slow investment process if you like the the the advantage if the if your advantage is patience you need to be away from the action and my observation in in the Covid period you 2021, is that we were getting sucked into the action because geography was no longer important.

TOM SLATER: You know, if you were a company doing a roadshow, you know, you could, you could have a call with, you know, Fidelity in Boston and then Capital in, in, in Los Angeles and then Bailey Gifford in Edinburgh. And, and so we were getting drawn into the agenda, other people’s agendas. Yeah.

TOM SLATER: And so. Book Club, the idea was everybody in the American team, we’re going to have a book once a month, everybody’s going to read the same book, and then we’re going to sit down and talk about it. And in a way it was symbolic because it was saying, reading books matters, don’t get too drawn into the world that we’re finding ourselves in.

TOM SLATER: And then there was a sort of selfish personal motive as well in that And when I read a book, you know, you asked me a month later what was in it, you know, I struggled to pull out more than a few key points. And so my thing was, well, if I have a group of people to sit down and chat about it with, it’s going to crystallize a lot more of those thoughts in my own head. So there was a sort of slightly selfish motive there.

STEPHEN CLAPHAM: And has that worked?

TOM SLATER: Yes, that’s, I mean, for me, at least. And I think the other people on the team, we’ve read some books which I think have actually been really helpful and understanding. I’Ll pick an example. There’s a book called What’s Our Problem?

TOM SLATER: I forget the name of it now. But if you’re trying to understand what’s been happening from a cultural perspective in the U. S. And the divisive nature of this election, and… This woke backlash that you’re seeing, go read What’s Our Problem, which was written four years ago and I think captures a lot of it really well.

TOM SLATER: You asked what I’m reading at the moment. It’s a book called The Master and His Emissary.

TOM SLATER: And it is written by a physician looking at brain hemispheres. So the master is the right brain. And his mystery is the left brain.

TOM SLATER: And it’s just a really interesting look at how the different brain structures work, how they influence how we behave, and how that shaped the way that we’ve built society.

TOM SLATER: Spoiler alert is that the left brain is getting over-dominant. At this point.

TOM SLATER: I would, you know, it’s, it’s, it’s, it’s not an investment book.

TOM SLATER: But I do think books that help you understand how you, how you think a bit better, you know, sort of examine yourself and, and, and think on a sort of slightly deeper level about what actually, what are the thought processes that are leading to your conclusions is, is, is really helpful. It’s, it’s quite a dense read.

STEPHEN CLAPHAM: Oh dear. I, I, I’ve got such a large pile of books to read. And, you know, those sort of very challenging ones, when I think about what am I going to read next, I always think, oh, God, that looks a bit formidable. So having the book club is a good way of forcing you to read the more challenging things. So that’s something that people should copy.

TOM SLATER: I always listen to the more challenging ones. I find Audible is the solution. Listen to them. Yeah.

TOM SLATER: And that’s a negative as well. Sue, Gary, who I work with, is a… A big fan of D. Huck, the founder of Visa. He wrote some really interesting stuff about chaotic business models. But I just can’t read it because there’s not an audio version.

STEPHEN CLAPHAM: Oh, really? I find this fascinating because when I wrote my book, they said, oh, will you do the narration? And I thought, you know, I couldn’t even look at the final draft. And the final draft, they got the chapter headings wrong. I assumed that somebody else would check it, but no, the publisher was relying on me.

STEPHEN CLAPHAM: So the first print run has got all the chapter ratings wrong and I couldn’t bear the idea of reading it. So the way they do it is they ask you to listen to some editions and the editions were all terrible. And there was one guy that was actually quite cheerful. So I thought.

TOM SLATER: Let’s just have him.

STEPHEN CLAPHAM: The audition was quite cheerful, but the actual rendition was terrible. It was incredibly dull. So I must ask the publisher about whether I’m allowed to record it myself, because I think I could just about bear to do it. Tom, it’s been such a pleasure talking to you. Thank you so much for coming on.

TOM SLATER: Thank you very much for inviting me.

STEPHEN CLAPHAM: As I mentioned, I run training programs at Bailey Gifford for both some of their senior PMs and for the more junior members of the team. I have also done… Forensic accounting research for them. It’s a really interesting and unusual organization, and the culture has without question contributed to their success.

STEPHEN CLAPHAM: Tom’s comment that it was perfectly normal to see someone reading a book at their death sums that up. And if I were to start out again, I think I would love to learn my craft at Bailey Gifford. Tom is incredibly down to earth in spite of mixing with the likes of Bezos and Musk. I love this comment. I meet investors. All the time who are smarter than I am.

STEPHEN CLAPHAM: And when he spoke about feeling uncomfortable when things are going really well, that also resonated with me. But my biggest takeaway was this idea that technical founders have a real advantage in an age of AI. I wasn’t even aware that Zuckerberg had bought NVIDIA chips at scale in the 22 downturn, which was clearly a great clue. I hope you enjoyed this episode half as much as I enjoyed recording it.

STEPHEN CLAPHAM: We have some other really special guests lined up in the next few months, and I’m really excited about the podcast. Great news, Office Sense have agreed to continue to sponsor the show, and we’ve had record numbers of downloads. Please help us spread the word by subscribing to the show and by telling just one friend about it. Thank you for your support.