#1- Head to Head: John Armitage and Brent Hoberman discuss where quoted investing meets venture.

In this fascinating interview, we learn what Armitage and Hoberman look for in an investment, how they judge management, how they view disruption from their different perspectives and why, in spite of their incredible success, they are both workaholics.


Two investors who went to the same school, then to Oxbridge, and have been awarded the CBE (*). They are both titans in their fields but through very different routes. One has run his hedge fund firm for 27 years, has an astonishingly good track record, yet is so under the radar that few have heard of him. The other has started multiple companies, is a business celebrity and is recognised as one of the most successful people in UK.

( * Commander of the British Empire, one of the most prestigious of the UK’s antiquated and complicated awards system).


Egerton owns Alphabet, Microsoft and Canadian Pacific. First Minute Capital is invested in Wayve , Klang Games and Nabla


This was a wide-ranging discussion and we cannot do it justice here – you really should listen to the podcast, but we have summarised a few of the soundbites below.

John Armitage said “I enjoyed the whole thing” while Brent Hoberman said of John:

“I definitively learnt during the session so it was time well spent for me”.



Brent looks to invest in talent magnets – that his 25 year old former self would want to work for. He looks for obsessive entrepreneurs, almost unhinged with a real passion, one which is infectious, not off-putting.

John looks for executives with focus, integrity and an ability to admit mistakes. He likes to invest in companies with a common culture – whoever you speak to in the organisation, the quality of the answer is consistent and speaks to a common objective. He cites Ryanair as a good example.


Armitage is incredibly humble for a hedge fund titan with $28bn AUM:

“I like working. I never feel successful. I measure success by the recent past.”

Armitage attributes his success to a decent dose of insecurity and being a workaholic. His ingredients for success:

  • Finding something you like

  • Feeling you have more to learn

  • And always worrying

Brent Hoberman who similarly has an astonishing workload and a relentless appetite for new challenges :

“And a word of warning for millennials with a feeling of entitlement. If work-life balance is a primary goal, you won’t be successful”

[because you need hard work and dedication]


John Armitage feels he should have participated more, much of the technological change is from early stage ventures and the more insight the better, but he has open-ended funds, largely with weekly liquidity.

We are in a period of unprecedented change, driven by technology. You can make incredible gains in venture capital, but this has been a peculiar point in time.

Brent Hoberman feels that his First Minute Capital Fund has not taken enough risk, because they have had only 3 failures out of over 50 investments. It’s characteristic that rather than congratulating himself on that success, he should be asking if they haven’t stretched themselves enough.


This was a fascinating discussion with a huge amount of wisdom. I don’t think anyone could come away from this, no matter what their level of experience, without learning something. I know I learned a lot.


John Armitage CBE is the co-founder and CIO of Egerton Capital, an asset management company with $27.8bn AUM at June 30, 2021. John’s track record in the 27 years since inception is simply stellar – the hedge fund has beaten the S&P hands down and it must be one of the longest running (and one of the best) major hedge funds in the world.

Armitage is in his early 60s, and founded Egerton with William Bollinger, formerly of Tiger in 1994, having previously worked for Morgan Grenfell Asset Management, since leaving university. He studied Modern History at Pembroke College Cambridge. A list of the 13-F US holdings at the time of recording the interview below suggests that 30-40% of the fund might be younger companies formerly backed by venture capital.



John Armitage’s hedge fund track record is outstanding, yet he is hardly known outside a small circle of insiders.

In his excellent book, Excess Returns, Fredrik Vanhaverbeke lists the estimated returns of the world’s best investors. Here are some of the longest ones, many of them doing things beyond vanilla equities. Egerton’s returns in a long only like for like comparison would certainly be one of the greats.


John Armitage recommends Security Analysis, the classic work by Graham and Dodd.

Investor Years Return pa
William O’Neill 25 40%
Ed Seykota 30 60%
James Simons 24 34%
George Soros 34 29%
M Steinhardt 28 24.7%
Warren Buffett 54 23%
Anthony Bolton 27 20.3%
Walter Schloss 49 20%
Ed Thorp 29 19.8%
Peter Cundill 33 15.2%
John Templeton 38 15%


Brent Hoberman CBE shot to fame when he brought lastminute.com to the market with co-founder Martha Lane Fox in March, 2000, at the very height of the dot.com boom. It was sold to Sabre Holdings in 2005 and Hoberman left in 2006. He went on to co-found ProFounders Capital, Founders Factory, First Minute Capital and a whole slew of other businesses and not for profits:


Founders Factory studio and accelerator backed by M&S, Holtzbrinck, Guardian Media Group, Aviva, L’Oréal, CSC, easyJet, J&J and Reckitt Benckiser.
Founders Forum – Europe’s pre-eminent community of founders, corporates and tech leaders.
firstminute capital – $250m seed fund backed by 100 unicorn founders.
Founders Intelligence – entrepreneur powered consulting.
Founders Keepers – technology executive search firm.
Founders of the Future – a network that identifies and supports aspiring entrepreneurs.
Founders Pledge community for entrepreneurs committed to finding and funding solutions to global challenges.
accelerateHER – a network taking action to change the underrepresentation of women in technology.
Framework – a new type of business school for a changing world.
Karakuri.com – provider of robotics, AI and automation systems for the restaurant and food services industry.
01 Founders – free-to-access on-campus coding schools with a job guarantee.


Brent Hoberman recommends The New New Thing by Michael Lewis about billionaire Jim Clark who founded Netscape


Brent’s grandmother, South African sculptor, Stella Shawzin, was one of John’s first clients. Both men remember her fondly in the discussion. We don’t know what made Stella invest in John’s fund, perhaps she was a great judge of investors or simply of people. But we do know that she was a talented artist. Her work was on sale at Bonhams Auctions on September 1, including the work in the photo.


Steve has known Brent since the days of lastminute.com, when he was one of the few analysts who were positive on the stock. They have stayed in occasional touch and Brent kindly reviewed Steve’s book. Steve has known John Armitage for several years, is an investor in his fund and Egerton Capital is a Behind the Balance Sheet client.


Source: Behind the Balance Sheet from March 31, 2021 Filings
Source: Behind the Balance Sheet from March 31, 2021 Filings


0:06 – Introduction and Background
07:38 – Different Approaches to Investing
15:01 – Lessons Learned from Investment Mistakes
24:02 – Evaluating Valuations and Disruption
31:49 – The Rise of Electric Vehicles
40:27 – Passion for Investing and Inspirations


AI-produced and only lightly edited

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 behind the balance sheet and affiliates and 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: For more details, two investors who went to the same school then to Oxbridge and have been awarded the C B E, they’re both titans in their fields but through very different routes, one has run his fund for 27 years has an astonishingly good track record yet is so under the radar that few have even heard of him.

STEPHEN CLAPHAM: The other has started multiple companies is a business celebrity and is recognized as one of the most successful people in UK tech. Head to head John Armitage and Brent Hoberman discuss where quoted investing meets venture.

STEPHEN CLAPHAM: In this fascinating interview, we learn what Armitage and Hoberman look for in investment, how they judge management, how they view disruption from their different perspectives and why in spite of their incredible success, they are both workaholics.

STEPHEN CLAPHAM: Brent John, welcome to the podcast. Thank you so much. For joining us. You have a number of things in common. I think you even went to the same school. Did you both envisage ending up in investment or was it just accident, John. Do you want to start?

JOHN ARMITAGE: Well, in my case, the earliest stages of my career were like something we used to study when I was at my prep school a long time ago, which was brownian motion. Shine some light into an enclosed area and you’ll see dust particles floating around them because I didn’t know what I wanted to do. I grew up at the end of the 19 seventies missed all my job applications in the milk round at Cambridge.

JOHN ARMITAGE: And got into Morgan Grenfell without knowing anything about the investing business, why it might be interesting or why it was a good business and I was lucky enough to, I was lucky enough to find something I liked after a slow start. And I’d say my career took shape probably three years in to my first job, but I had no financial background whatsoever.

BRENT HOBERMAN: Well, it took me a lot longer to get into investing. And really, I’m at the other end of the spectrum to John, I’m very much early stage seed no financial analysis required. And what I guess there’s two things that got me into it. One was being an entrepreneur myself.

BRENT HOBERMAN: So starting companies and that was partly a sort of family, history and family or my family had done that. So I thought that was a great thing to do. And then my father actually must have had some subliminal impact because he spent his life investing pension fund money into venture capital funds.

BRENT HOBERMAN: And I did do a very early internship when I was probably 19 years old at Sprout Capital A V C firm in New York. And I learned one thing that everybody in venture was smarter than me. And at least in New York, they worked harder than I could work. So I was like, oh, this is quite scary.

BRENT HOBERMAN: But years later, once I was able, once I, I, I was not, not full time starting my own companies. I thought that, you know, meeting entrepreneurs was the, was an amazing thing to do to be able to do all day and then to back the right funds was very exciting. So I’ve set up a couple of couple of seed venture funds since.

STEPHEN CLAPHAM: So you’re both in the, in the investment business, but from really diametrically opposite ends, I don’t know if there are any venture capital funds dabbling in quoted stocks, but quite a lot of quoted equity firms getting involved in, in venture. So we’ve got ob obviously the, the biggest example in the UK is Bailey Gifford.

STEPHEN CLAPHAM: But, you know, in the US, you’ve got everybody from fidelity to, to third point and Dan Lob’s been very vocal about the benefits of doing that. I wondered if, you know, either of you invest in others area if you don’t, should you, or what have you learned if you do John? Have you ever considered doing private or early stage in, in deals and, and, and why not if you’re not, if not, well, not as much as we should have perhaps.

JOHN ARMITAGE: I mean, I’m in two minds about it. You know, the world business, the world, the economies are in a period of unprecedented change driven by technology. Much of that technology is express is much of that technology or some of it’s being generated by early stage companies. And the more insight you one has into it into this change, the better as equated investor.

JOHN ARMITAGE: I think, I mean, I’m, I, I, I’m slight and, and so that’s why I think, you know, if we could do it, we should do it. I guess we’ve been somewhat restrained recently by an inability to access America.

JOHN ARMITAGE: I guess another thing I would say is our funds are essentially open ended funds and the bulk of our money is invested in, in funds where we have to provide, provide weekly liquidity. So I’m not that keen on taking on illiquidity risk having seen major blow ups in the stock market caused by illiquidity.

JOHN ARMITAGE: And you know, I’m also, I also, there are, I also feel that although you can make these incredible gains from equated investments. You know, it is a peculiar point in time when, the equity market is willing to pay very, very, very, very, very high prices, and for, for these things.

JOHN ARMITAGE: And that’s partly because the corporate sector is the engineer of amazing change at the moment. But it’s also because interest rates are very low and, and, and money has been given away and I’m a bit reluctant on being the person to turn up at the end of the party.

STEPHEN CLAPHAM: Brent. Have you ever fancied dabbling in quarter stocks or is it frightening?

BRENT HOBERMAN: It’s frightening for me. It’s funny. It’s just, it, it’s, it’s definitely frightening having I, I’m probably, I’ve been too scared of it, probably because of the last minute dot com bubble experience in 2000. I’ve been too cautious.

BRENT HOBERMAN: But I’m also, I like to be a bit more in control and I’m not smart enough to understand where the markets are going to go, the macroeconomic, the power of the fed and all of these things are sort of way beyond my a level economics. So I find that I, I can do a much, it’s much better job of talent spotting early stage seed entrepreneurs. And then right now as John says, you know, you, they are doing really well.

BRENT HOBERMAN: So if, if the see to series a, you know, path now is, is getting faster, I think than ever. And the multiples are getting higher than ever. So, let’s see. The, the key thing in venture now is still is the final, how do you get out? And obviously we’ve just seen that with maid dot com, but even then, not totally because you have six months lockups.

STEPHEN CLAPHAM: It’s an interesting, overlap between what you both do. Management is obviously a critical component and it’s a much greater component in your area. Brent. Do you, do you want to just tell us a few of the secrets in judging whether a founder is going to be able to successfully and relentless pursue that ambition. What do you look for?

BRENT HOBERMAN: Yeah, look, it’s, it’s hard to say different things, but I think probably more than others, I’ll index on very quickly. Would I work for them if I was back to my 25 year old self, would I work for this person? And what I’m really trying to look at is talent magnets. Is this person gonna be able to assemble a world class team?

BRENT HOBERMAN: And then are they going after a big enough market? But the latter isn’t even that relevant because if they’re that good, they’ll work out the bigger market to go after. So it really is what I like is people who are obsessive to the point of being unhinged and that passion is infectious rather than off putting.

BRENT HOBERMAN: And you just know they’re gonna hire the world’s best team and that they’re excited about it. And their energy is infectious and then at seed, you can’t do that much more than that. And the one thing I will say is backing people by Zoom I do think is a lot harder. And so that that’s one of the new risks of this world, John.

STEPHEN CLAPHAM: Do you like backing obsessive, unhinged management or what do you look for?

JOHN ARMITAGE: Well, I wouldn’t say unhinged but I mean, I, I think what Brent described is incredibly to the point. I mean, one thing I look for is people who have the ability to say that they’ve got it wrong and I always resent people who, you know, nothing is ever a mistake.

JOHN ARMITAGE: I, I always resent that because we make mistakes all the time. And how do you realize that you’ve made a mistake apart from? But, you know, you have to realize that and you have to respond and I dislike the arrogance of people who, who, who, who can never admit to mistakes, focus integrity in the created world incentives.

JOHN ARMITAGE: It’s amazing how many companies in the equated world play around with their accounts to justify shareholder, to justify management incentives. And there’s a form of dishonesty about not recognizing costs when you should.

JOHN ARMITAGE: And you know, the thing I always like in a company is when you feel whoever you talk to, they express a culture which has, they express a common culture. You don’t want it to be kind of like at Soviet levels. But there are companies where the quality of the answer, the values, the values they express, you know, they’re gonna be the same.

JOHN ARMITAGE: And I think that’s important. But look an example of someone I, I think of as, as an incredibly powerful, brilliant guy is Michael O’Leary who, you know, he ran an airline whose share price was up last year, which is pretty incredible actually.

JOHN ARMITAGE: And he is, he’s relentless. He’s, he’s fun. He’s, he had a vision. He has, he has fantastic people around him and he’ll admit when he gets things wrong, you know, he’ll have a damascene conversion.

JOHN ARMITAGE: And I think that’s really marvelous.

BRENT HOBERMAN: He’s a real Maverick for a public company. CEO isn’t he though? I mean, I remember I bumped into him on my roadshow back in 2000. I think he, he must have been doing his just before and we bump into and he was like, you thief, you’re nicking it. And we could even believe in last minute dot com.

BRENT HOBERMAN: And then years later, I remember just as I was leaving last, he sent his people. We, we were selling Ryanair flights, we were screen scraping them which was slightly illegal in any way. And he, he then his team then said this was all fine.

BRENT HOBERMAN: And then they actually ran full page ads in the national press saying last minute dot com ripping you off by adding a margin to our flights and all of a sudden full page ads having said it was fine. So anyway, I, I definitely am Maverick but I agree. I respect what he does.

STEPHEN CLAPHAM: It’s funny because he, he meets that, those two criteria of brands because he is obsessive and he is slightly unhinged. I can remember, you know, when I, when I started, I wouldn’t describe him as unhinged.

STEPHEN CLAPHAM: Well, I started, covering it and I went out to the, to the office and, there was, you know, they were telling me stories, the people that worked for him about the memos that went around that you, you know, if you were, went on a trip, you were required to take the pens from the hotel room to save on the stationary bill.

STEPHEN CLAPHAM: And I mean, that has a slight appearance of being unhinged, but of course, it was a fantastic, clever trick because it made everybody really focus on costs and you weren’t, I think there was one point where you weren’t allowed to plug your phone in to the e to the power in the office because it was Ryanair’s electricity bill and you weren’t paying for it.

STEPHEN CLAPHAM: And of course, what that meant was that everybody in the organization was completely obsessed, obsessed with that cost. And that, I mean, it’s worked incredibly effectively and I, I, I think you’re dead right about not admitting to mistakes because he was one of the few managers that, I came across when I wrote a note on him on the stock when I started covering it, he, he wrote back and said, good luck, I’ll prove you wrong.

STEPHEN CLAPHAM: And he was, he was very balanced. And that was always the thing that I, that I looked for other, I mean, other sectors or geographies that you want to invest in. John.

JOHN ARMITAGE: Well, I think as a public market investor, one has to be pragmatic. I also believe quite strongly that in the virtues of diversification, although that’s been a massive mistake in the last two years.

JOHN ARMITAGE: But you know, my stance in the last 10 has been that most sectors of the stock market face disruption driven by technology driven by the impact of technology. And therefore one could only invest in companies with above average unit growth potential and pricing cut.

JOHN ARMITAGE: But I mean, I think, you know, if you look at say the tobacco sector which and let’s face it, tobacco companies make something which is, which is addictive and has been a habit for whatever it is at least 100 and 50 years since the US tobacco industry started.

JOHN ARMITAGE: I think it probably started in the 18 fifties, 18 sixties in 2015 or 2016, Philip Morris put a value of $35 billion on duel when they bought a when they bought a stake in the company, Philip Morris itself had a value at the time of us of a, I don’t know, probably 100 and $10 billion and yet Jeel had been set up what 345 years before.

JOHN ARMITAGE: And so Philip Morris, these seasoned tobacco executives who run a business which makes addictive products felt this upstart company was worth $35 billion.

JOHN ARMITAGE: And that to me illustrates the extent to which disruption is pervasive in the corporate sector. And I think today the key thing you have to focus on is can this business be disrupted rent?

STEPHEN CLAPHAM: Are you, is there anything you want to invest in anything?

BRENT HOBERMAN: I mean, just to sound soft, it’s anything where sort of gambling sex, those sort of things, you know, cannabis. That, that, that’s really the, the sort of limits of, of what’s off limits for us. But I do like, I mean, it sounds a bit soft but I like, I do like companies where the mission statements are attractive for millennials if you know what I mean?

BRENT HOBERMAN: So I, I think obviously, I think when I talk about talent magnets, I think also companies with great purpose are attracting better talent than ever before. So I think there is that change.

BRENT HOBERMAN: And so that’s what I sort of mean is that, although actually I think legally we can’t invest in some things, I said, I think also you wouldn’t want to because I think for many of those, it’s gonna be harder for them to attract great talent if they’re not doing good things on the planet and I think that’s a really good point.

STEPHEN CLAPHAM: No, absolutely Brent. I mean, is there anything where you’ve invested in something and in a sector and it’s gone wrong and it’s put you off the sector or are you just so used to getting to things blowing up? That is part of the normal course of business and you don’t worry about it.

BRENT HOBERMAN: It was a really good example when, when, when, for first minute fund one, we we’ve actually only lost three out of 56 companies. But I remember my, my colleagues who I did which is Adventure Super Low and it’s almost too low. When, when my colleagues saw the first one or two blowing up, one was because of founder dispute, founders falling out which often have it.

BRENT HOBERMAN: It’s a real risk in our businesses if, if new teams come together and then they don’t quite gel then then that often breaks it apart that becomes un unfund. The other one was a, a AAA company actually, which probably I should have been Savvier about it was doing fuel delivery like Uber for fuel.

BRENT HOBERMAN: And anyway, it didn’t work. But what happened, the team was so stressed about us losing a couple of companies which were like less than 1% of the fund. It was, it was an interesting process. Whereas I was like, as you said, much more pragmatic is like this is venture if we’re not getting some wrong we’re not going to get out size returns anyway.

BRENT HOBERMAN: So I think overall I’m trying to think if there are any sectors we’ve sort of learnt to stay clear of. But no, it’s, it’s, you know, obviously where the winners are. It, it’s fintech. It’s a i it’s, it’s people creating new markets rather than just being iterative. This is this 0 to 1 point that Peter Thiel expressed. Well in his book.

BRENT HOBERMAN: So I, I think the the biggest danger is, and, and where I think we have got it wrong slightly is, is still, is people going after markets that are too small and then particularly in this world where there is so much vision and so many people going from, we saw one today, we passed on it at 2.5 million. It’s to do with N F T S.

BRENT HOBERMAN: It’s stuff I don’t really understand. They’ve just got a valuation today rumored at four billion in 2.5 years. So you think, did we miss it? Yes. Is it necessarily AAA Big Miss? Well, there’s the rumor is there’ll be a $500 million press stack that they’re behind doing N F T s for, for, for, for, for in, in a world that’s still unproven.

STEPHEN CLAPHAM: So it, it’s tough so that it hurts more the not the ones you miss hurt more than the ones that you invest in that go badly.

BRENT HOBERMAN: Yeah, I, I think the antiport fol and I was talking would go nameless, to one of the top three venture funds in the UK, the guy who runs it and he was telling me how they studied their portfolio of deals that got to their investment committee, that the ones they did and the ones they passed, in other words, their anti portfolio.

BRENT HOBERMAN: And he said that the anti portfolio performed marginally just marginally worse than the portfolio. Now that tells you two, a couple of things about venture, it tells you one if you’re as good a brand as one of these top three brands, anything that’s getting to your investment committee is pretty good.

BRENT HOBERMAN: And two at the moment, if you’re buying an index of the top companies in the early stage, and this is, I think this goes back to your question to John is, should more people be doing it or not?

BRENT HOBERMAN: It depends on how long you think that index rate of early stage is gonna work, right? And, and the last few years it’s it’s worked very well. Sort of anyone in investing across a portfolio of early stage companies I think has done pretty well.

STEPHEN CLAPHAM: How about you, John is the anti portfolio? How’s it doing against the Anderson portfolio? Do you get, do you give your team into trouble with the things they miss rather than the things they get wrong?

JOHN ARMITAGE: Well, I mean, it’s the things which go wrong. That can make you lose money. Of course, it’s not the things which miss, you know, we measure ourselves against an index and if we underperform the index, that’s a big black Mark and it gives us a hell of a, and we, I, one experience is a hell of a lot of grief.

JOHN ARMITAGE: And so naturally one’s looking at what one’s missed. I think the sectors, which, I mean, you know, what do I find really difficult? I, I mean, what I find difficult, I suppose the sector we’ve invested in the least besides, besides just trying to ignore companies which face disruption is health care. Because I’ve always felt that the I’ve always felt that clinical trials are very, very hard to predict.

JOHN ARMITAGE: And I remember vividly once when we had a holding in Hoffman Roche and they had I think it was a sin which had incredibly good action in certain sorts of cancers and it should have had great action in colorectal cancers. All the experts said so and in fact, it failed.

JOHN ARMITAGE: And I remember then once asking the CFO of maybe it was Novartis, how they think about early, how they think about late stage clinical trials. And they basically said it was an option, you know, they couldn’t predict late stage clinical trial outcomes. And so I felt well, if they can’t, how can I, but the drug sector’s probably moved on from there.

JOHN ARMITAGE: So, so anyway, that’s the sector we do the least in. And I guess today look inevitably once influenced by one’s formative years and in my formative years as an investor, you know, 2030 20 times earnings was a high multiple for a stock and I can bring myself to pay high pe s.

JOHN ARMITAGE: But I find the whole business today that such and such a company is cheap because it’s on 10 15 2030 times revenues. I find that impossible. You know, I like to own companies where there is some valuation, some chance of a conventional valuation support within a few years. And that has meant we’ve missed a lot of big winners in the stock market which trade on big multiples of revenues.

STEPHEN CLAPHAM: Well, you miss them now, but obviously you’ve got to stick to, you’ve got to stick to your process and you’ve gotta stick what to, what you feel.

JOHN ARMITAGE: You’ve got to stick to your process provided it doesn’t lead you to the wrong place, but it’s not, you know, investing is not about religion Brent.

STEPHEN CLAPHAM: I mean, do you think, do you find problems with these valuations or you’re just rubbing your hands because you’re the recipient?

BRENT HOBERMAN: You know, one thing I learned at last month dot com was, you know, when the market was happy to give us a view in, in a good, in a few good minutes of the valuation time, it was happy to view us on. What was the future option value of all the things this management team would be able to create.

BRENT HOBERMAN: So not looking at a traditional sort of income stream, but look saying, look, these guys might reinvent several other different income streams. So, and I, and I think, you know, I’m not, I’m not comparing myself to, to what’s happening with Tesla or something.

BRENT HOBERMAN: But if you, if you look at the Tesla bull case, it is much more like, look, can this guy change? Can he create energy storage? You know, for nothing, you know, all all sorts of other option values.

BRENT HOBERMAN: And when friends of mine were, were shorting Tesla, I was like, I don’t think you can bet against this guy because the people are gonna give him option value to do even if your your logic on the number of cars sold, et cetera, et cetera is right. You’re missing what the extra potential is.

BRENT HOBERMAN: Similarly for the way you look at the, I think it’s about tam total addressable market. It’s similarly to the way people looked at Uber initially were saying, well, look, the valuation is all of the taxi market or whatever.

BRENT HOBERMAN: And then Uber would say no, we’re going for the entire transport market. So but going back to your point do do the do traditional valuations scare me. Sorry, do the valuations today scare me. Yeah, they do a bit because I’ve lived through 2000.

BRENT HOBERMAN: But what it means for me is that I’ll do more where I can in, in the, in the early stage where I still think these companies are, you know, challenging, they’re going to be so many winners like, you know, I mean, one that’s a French health insurance disruptor and you’re like, it’s unbelievable.

BRENT HOBERMAN: It’s got to a valuation of over a billion in, in, in five years. And I think it could go far from here because the option value of them changing health insurance across Europe is, is something I can really get my hands around, head around and understand.

STEPHEN CLAPHAM: No, I I absolutely get it. John, your last letter, you were talking about bubbles or certainly excessive euphoria and a number of areas, alternative energy E V S spats. Brent, you chaired the panel and Clubhouse with some really pretty eminent V CS and founders I think. Was it February Grin Grin who acknowledged there were V C backed companies coming to market earlier than they should.

STEPHEN CLAPHAM: I just wanted to talk about spas because it seems like a very, you know, an area where there, where there is the greatest euphoria and perhaps one of the areas of excess. I don’t know. I mean, John is it, is it just too irrational that you can’t make money by shorting these things because there’s no limit to where they can go. How do you, how do you think about these things?

JOHN ARMITAGE: Well, at the moment, money is free and we are in a bubble or at least there are bubbles. I don’t, I don’t happen to think that there are a lot of companies which are listed in the stock market which are not bubbles, but there is a bubble.

JOHN ARMITAGE: I mean, look, Kay, the latest hot fund manager on Wall Street is a woman called Cathy Wood. They were and she, you know, when you look at the company, she owns a lot of them, to me seem totally ridiculous. And their research piece on Tesla, which gave a share price to a 3 32 100 that would imply 15% of us GDP.

JOHN ARMITAGE: I mean, let’s get real.

JOHN ARMITAGE: There isn’t gonna be a shortage of electric cars. I mean, Elon Musk is a genius so far, Tesla has a $600 billion market cap and it hasn’t made any positive free cash flow from making cars. If you strip, if you add, if you take stock based comp as a cost, which it is. And if you ignore E V credit sales and there isn’t gonna be a car company in the world.

JOHN ARMITAGE: My perspective is there isn’t going to be a car company in the world which can stay in business without making E V s. So there isn’t gonna be a shortage anytime soon. But you know, he’s and do I think there’s a bubble in the spat market? I’m sure there are some good companies coming to market via spas and short circuiting the conventional S E C approach.

JOHN ARMITAGE: But, yeah, there are some ridiculous companies coming to market. Is there a bubble there? Yeah. Look, Gamestop is a company which doesn’t make any money. Has a vast market cap hasn’t made any money and it’s a, and it’s a physical distributor of computer games. Let’s get real. Why does that have a valuation? It has cos, there’s a retail bubble, it doesn’t make any, any money.

JOHN ARMITAGE: And how are people gonna buy games? They’re gonna go to a shop when they can download them? I mean, let’s just think about that one. So yeah, I do think there’s a bubble in lots of places but you always get bubbles when you have easy money and when you have technology change, you always get bubbles. Look, it happened in the railway boom, it happened in the bicycle boom.

JOHN ARMITAGE: It happened in the 19 twenties and that’s not to say that there are that there are not fantastic companies in existence being invented or listed which are and will change the way we live and work that there are. And Tesla is one of those companies, but it is a $600 billion company which doesn’t make any, any money from making cars at the moment.

JOHN ARMITAGE: And every single car company around the world is gonna make electric cars because if they don’t, they won’t be allowed to exist.

JOHN ARMITAGE: I mean, it’s a pretty amazing thing that suddenly the market cap of the auto sector globally has just gone through the roof. Why is that? Because every single car company is making E V S Brent.

STEPHEN CLAPHAM: Do you, do you drive a Tesla?

BRENT HOBERMAN: No, I would have loved to. Actually my wife went for a we, we went for a hybrid. But I, I, I, I love, I, I love gadgets. So for me, the Tesla is, is, is a, just a great gadget. It’s as simple as that.

STEPHEN CLAPHAM: Are you making any investments in the E V space or in that related space? Anything coming down the pipe that we should be thinking about?

BRENT HOBERMAN: I think for us it’s, it, I do love the picks and shovels of some of these trends. So I guess the picks and shovels of this trend would be one we’re very excited about. It’s out of Cambridge A I labs and it’s called wave W A Y V E. It is autonomous driving. It is a different type of algorithms to do autonomous driving.

BRENT HOBERMAN: So they, I think we’ll hear a lot more about them. And so I think that’s pretty exciting. Otherwise, look, I think it, what other venture capitalists are being smarter at. I think that, you know, I, I’d love it if I could tell you we’re in a battery storage company. I think there’s a couple that have got really hot valuations.

BRENT HOBERMAN: There’s one in Scandinavia, there’s one in the, in the, in the UK recently. I think E V tolls were electric, vertical takeoff and landing. So we’ve got, I was intrigued by, we had two, we had vertical at founders Forum which is Stephen Fitzpatrick, serial entrepreneur. He did ogo energy and now he’s on vertical which to your previous conversation he took public.

BRENT HOBERMAN: It’s going into a $2 billion spack. Again, a good example of something where the European market, we haven’t done much about European versus the US. But European markets wouldn’t really tolerate that, but I can totally understand him doing it.

BRENT HOBERMAN: He’s now raised a lot of money for a big bold bet and it’s probably a bit binary for, for, I mean, I’m sure it’s a bit binary for people like John, but it’s binary for most investors in, in Europe. And so we’ll see how, how that one goes. But otherwise on the E V, the other ones I’ve seen I was on a, I’m on the advisory board of Imperial Innovation Small Fund and they are doing one which is electric grid.

BRENT HOBERMAN: So I think we’ll see a lot, a lot more in charging stations for E V. So that’s another sort of interesting picks and shovels. I think you can get the right players there. That’s, that, that’s very exciting. And then I found this from the other day we had lucid motors up as well and they are, I think going for a $40 billion spa.

BRENT HOBERMAN: So there is, you know, there is quite a lot of excitement.

STEPHEN CLAPHAM: I mean, it’s quite extraordinary that, that valuation, I mean, lucid vehicle looks fantastic and, one of the team presented at a conference a couple of years ago and seems to be entirely ex Tesla people. So people that, and of course, there’s a massive pool of, ex Tesla senior senior managers because nobody can last that that long. Quite, quite interesting. $40 billion. What Volkswagen capitalize that?

JOHN ARMITAGE: It’s not 40 billion. Actually, it’s less, but it’s very high. Look, you know, I, to me that’s an example at the moment, that company is a business plan and every, there are gonna be a hell of a lot of high end cars.

JOHN ARMITAGE: There are gonna be a hell of a lot of high end automakers making E V S and since they can, you know, and they said that the whole thing about they, I mean, one of the things they were very bullish about was the efficiency of their battery technology.

JOHN ARMITAGE: Well, Mercedes has just launched an S class equivalent with battery technology, which is only slightly less efficient than theirs. And, you know, frankly, it’s gonna sell at a cheaper price. So, I don’t know, I mean, they might make a good product but they’re going to face a lot of competition.

STEPHEN CLAPHAM: It’s quite interesting, isn’t it? Because the, the something like Tesla is fantastic to drive and it’s clearly a very different way. Of, of building an automobile. But the car companies, although they’ve been, generally, it’s been difficult to find good investments. They are very well run businesses and their ability to spend an R and D is very, very significant. And I think people have given too little store to the incumbent.

JOHN ARMITAGE: I mean, any time you get a new, any time you get a new technology, you open it up to very disruptive new entrants. But the question is whether the existing players can respond. And my take on the whole E V thing is, look, every single car company is gonna make E V S they just are and why are they gonna do that? Cos they won’t be allowed not to. And so therefore, it’s fine to be a new entrant in the E V space.

JOHN ARMITAGE: But are you valued as if you’re gonna face competition because you are gonna face a lot of competition. This is not like car companies are not natural monopolies. Search is a natural monopoly business, social networking is a natural monopoly business, providing online maps is a natural monopoly business. You know, the provision of digital wallets is a natural monopoly business.

JOHN ARMITAGE: Credit card networks are natural monopolies because once you have, once you have scale, why would you go anywhere else? Ways is a natural monopoly? Well, having said that there are a lot of different maps, but how many maps are they gonna be if they exist? People are gonna use, making luxury cars is not a natural monopoly business.

BRENT HOBERMAN: I agree. And look, look in one sense, look, absolutely. We look for network effects, which is what you’re describing where you can get the normal margins over time. I guess another argument, sorry to bang on about Tesla.

BRENT HOBERMAN: But one argument that they would say is they are a network effect business because they want to replace Uber and have a network of cars that you can use other people’s cars and you know, all that sort of thing.

JOHN ARMITAGE: You’re dead, right? But how far off are we from real autonomous driving?

BRENT HOBERMAN: Well, if you, if you talk to our guys from wa wave, my guys from Wave, tell me, will we be having autonomous groceries delivered in London in Q two next year?

JOHN ARMITAGE: I mean, Google’s spent the most money on this and they would say we’re a long way off and, you know, I mean, maybe people are gonna buy lots of cars worth 60 70 $80,000 and let them be used overnight. I don’t know. I mean, will you let your Tesla rent when you buy it? And you spend $100,000 on a Tesla S class? Are you gonna let some stranger drive in that all night?

BRENT HOBERMAN: Yeah, I am but I’m, I’m, I’m also the guy who backed Stelios with easy car which, which remember was secondhand Air B N B for cars. So I, I, I argued around this a lot.

JOHN ARMITAGE: I mean, I don’t know, I’m a bit skeptical and I’m skeptical, I think there’s a hell of a long way to go between here and there in autonomous driving. I mean, autonomous driving in an American Winter. I mean, Elon Musk consistently talks about autonomous driving and then if you read his filings, he consistently says he’s way off it.

BRENT HOBERMAN: I think that the best defense of autonomous driving was Larry and, and, and Sergey from Google saying we will look back and think it’s crazy. We let people drive cars because they have so many accidents. We will.

JOHN ARMITAGE: But when, but when, I mean, the, the people at Google spend so much money on this and they’ve driven more autonomous miles than anyone else in the world. And they would tell you, you’re a hell of a long way off.

BRENT HOBERMAN: If, if that’s 10 years away and we have full line of sight of that in five years, then their valuation will start to pop then, you know, I mean, it is $600 billion.

STEPHEN CLAPHAM: No, look, I’m not, I’m not saying I’d belong Tesla and of course, the, the good chaps that Billy Gifford have, significantly diminished their holding.

STEPHEN CLAPHAM: I was quite amused to read in one of their marketing documents that they felt that Tesla was going to be making millions of cars and its evaluation was very comfortable at the same time is the, the, the, the filing the holdings were, were declining, but they’ve done an amazing job there. John, you were once quoted. I don’t know if it’s true as saying that your hobby was reading annual reports. Is, is that right?

JOHN ARMITAGE: Well, I’m certainly a workaholic and I certainly don’t like commuting going back to London on Sunday afternoon because it means I can catch up more on Sunday. I mean, I’m a workaholic and there are lots of things I’d rather do. There are lots of things I’d rather work than do lots of different things. And I do work every single day of the year. Yeah.

STEPHEN CLAPHAM: Is that why you’ve been so successful?

JOHN ARMITAGE: Well, I mean, I always hate answering these questions because basically I feel success is a question, you know, I, I never sort of feel particularly successful, and I particularly, you know, you know, and, and, I sort of measure my success by reference to the very recent past, whatever success I’ve had, what I would say to you is that if you start with a healthy dose of insecurity and, and a sort of workaholic driven temperament, that’s a big help to getting ahead with something which you enjoy.

JOHN ARMITAGE: And, you know, I was not in college at, I don’t know whether you were Brent, but being successful is not about being able to write, being able to be, it’s not being able to be a top engineer at Google. It’s finding something you like which you have enthusiasm for and really applying yourself hard to that.

JOHN ARMITAGE: And, always feeling you’ve got more to learn and, and always worrying, I think, but then again, not worrying too much because if you worry too much, you’re frightened of your own shadow and you never do anything. There are some people in the investing world who are just natural geniuses and we’ve all come across them. But I don’t think, but I think to be successful, you don’t have to be a genius, but you do have to work hard.

JOHN ARMITAGE: And I always think of that quote, of dairy players. It’s quite remarkable that the more I practice, the luckier I get investing that doesn’t always work to be successful. You need to work hard, but you also need to catch a zeitgeist at certain times. Yeah, timing is incredibly important and being in the right place, you know, knowing what to work on. Yeah.

BRENT HOBERMAN: But I so agree with you on that effort. And that bit of when one thinks about bringing up one’s kids is how do you get them to a space where it is effort that there is enough insecurity there that they’re so driven. And that they, they realize that it’s, it’s finding a pattern that you love doing.

JOHN ARMITAGE: And I know I know that I know that this is a cliche and all parents say it. But I do remember my father once saying to me and it’s so true. It doesn’t matter how you do provided you do your best.

BRENT HOBERMAN: And I, I, I think that there’s a challenge and now maybe I’m sort of going off piece a bit, but I do feel that there is this millennial entitlement and I don’t know whether you see that with some of your employees, but we’re certainly hearing about, I, I think we’re seeing this more and more where people feel that, you know, work life balance is, is one of their primary goals and that they therefore what they’re doing, what I always say to people is, you know, my work life is balanced because I love my work.

BRENT HOBERMAN: So, you know, but, but there are more and more people coming into the workforce now, I think who are seeing that as, you know, destructive for their mental health, et cetera, et cetera. So we, we’re seeing and, and I think as employers, we’re finding that this is becoming a new channel.

JOHN ARMITAGE: I mean, I think that’s really pathetic because they’re also expecting great working conditions and lots of money. I think it’s just so pathetic and I, I think the millennial anti vaccine movement is pathetic as well, you know. Oh, I agree. Vaccination is right to beat this pandemic. I just don’t think it’s right for me. I mean, it’s pathetic.

BRENT HOBERMAN: Very selfish.

STEPHEN CLAPHAM: You’re a workaholic as well. Right.

BRENT HOBERMAN: Yeah. And, and, and I guess similar to, to John in that what I would say is you have something you love. I love it. I mean, I, I, I, I’m very lucky I’ve created a thing which my work now is meeting, you know, most of it is when I describe it across all the different things I do.

BRENT HOBERMAN: It’s meeting entrepreneurs hearing their ideas, being inspired by them and trying to give some inspiration back and, and, and help them so I can leverage them. I get satisfaction from helping them and I get satisfaction from hearing and learning about new ideas all the time. So what would you know? And so I always say that doesn’t feel like work, work to me, it doesn’t feel like work, which is why I can do so much of it.

STEPHEN CLAPHAM: That is a brilliant point to. And thank you both.

STEPHEN CLAPHAM: Can I just ask you one sort of closing question and some advice for younger people that might be thinking of coming into investing in, in whether it’s in venture capital, in your case branch or in into asset management, in your case, John, I mean, do you have a favorite book or a practice or a training that you would recommend to a young person coming into the industry? Brent. You want to go first, my favorite book.

BRENT HOBERMAN: Well, I’ll go back to maybe it was a long time ago, but Jim Clark, the new new thing. So he was the founder of Netscape and a couple of billion dollar businesses, I think. You can take away from it, sort of building building loyal teams, you know, going after bold innovative projects, those sorts of things. And, and I remember being very energized after I read it, John.

JOHN ARMITAGE: Well, I would say, look, there are two aspects to investing. One is the technical thing. Companies are worth since merchants first traded a good they bought and sold, they’d only buy it if they thought it was gonna be worth more than they bought it for. Right? And there’s a limited number of ways that you can value companies.

JOHN ARMITAGE: It’s all about the cash flow. So on the one hand, you know, read, I guess the best standard analytic investment textbook is Benjamin is Ben, is Ben Graham’s security analysis. But, you know, in the end, all companies are only worth what their cash flow is going to bring them. And there is only a limited number of ways you can analyze that sort of technically and the concepts aren’t very difficult.

JOHN ARMITAGE: It’s addition attractions, you know, so I would say read one of those and then read the letters of great investors. And there are a number of great investors around the world be and read them for their ideas. And because of the way they think because of the analytical qualities and judgment they bring to bear.

JOHN ARMITAGE: And there are a number of great investors around the world. And you know, I know the folks at Lone Pine, I think they’re sort of utterly brilliant and a bunch of very good people, incredibly, incredibly good people. I think Chris Ho is one of the finest investors of his generation at T C I.

JOHN ARMITAGE: Obviously, there’s a, there’s a friend of mine in New York called Eric Mandel.

JOHN ARMITAGE: You know, reading how great thinkers express themselves is incredibly educational. But if this is the closing thing, can I just end by saying Stella Shaw was a great break for us.

BRENT HOBERMAN: Oh, that’s amazing. Amazing, amazing to hear. We love meeting her.

JOHN ARMITAGE: She was sweet and she gave us money at a very early stage and I really valued that.

BRENT HOBERMAN: Oh, that, that’s amazing. I’m so pleased she did and I’m so pleased you. She she loved the relationship with you and she was truly wonderful. Yeah, she was, she was, she was great.

STEPHEN CLAPHAM: I should explain that this is Brent’s grandmother was one of John’s early investors.

JOHN ARMITAGE: It was a very, very early connection in a very significant way for us at the time.

BRENT HOBERMAN: And she was truly wonderful and she took that decision. I assume John, I never talked to her about it, but I think it’s, it’s how she invested in you was she was backing people, right? I think, I think she was sculptress actress and much more.

JOHN ARMITAGE: She is wonderful and very, very, very bright and also Brent. One of the, in addition to Brent’s professional achievements, of course, one of the things he’s been is you know, one of the greatest honors that could ever befall anyone who was at our school, a fellow of Eden. That’s true.

JOHN ARMITAGE: And I tell you, that’s a hell of a lot more difficult than getting into the House Of Lords or, or, or, or getting any form of honor.

BRENT HOBERMAN: It was, it was, it was a fascinating experience and, and that school has gone on well to do some of the things we talked about actually just very briefly, you know, I think Eaton is important because what it’s done, I think it mirrors the UK in a way it’s gone from a a when John and I were there a school which was about elitism to one that is now much more modern than about excellence and also does a lot in terms of its efforts vis a vis academies, the curriculum.


BRENT HOBERMAN: And, and, and one of the things I did when I was there, John was actually I helped persuade them to do Eat and which was take the brand online. And that is now as you probably know, been given away to all state schools so they can have a bit of Eaton’s education for free.

STEPHEN CLAPHAM: Thank you both. Enormously, I really, really appreciate your time.

STEPHEN CLAPHAM: That was a fascinating session for me. John Armitage is a brilliant investor and he’s deeply thoughtful, intellectually, rigorous and comfortable that he doesn’t get everything right. Brent Hoberman has also had incredible success in a very different field and in a very different style.

STEPHEN CLAPHAM: But it’s the commonalities that I took away. They look for similar things in management, passion and dedication. They’re both workaholics because they love what they do and neither is satisfied with what they’ve achieved and they have a constant thirst for improvement. I hope you enjoyed the episode as much as I did.

STEPHEN CLAPHAM: Thanks for listening. I’m Steve Clapham and that was the behind the balance sheet podcast. If you enjoyed it, please don’t forget to rate the podcast on Spotify, Apple Podcast or whichever platform you use. And don’t forget to sign up on our website behind the balance sheet dot com to get our newsletter and access to our club where we post free training podcast commentary and much more. Thanks for joining us.