It was a typically miserable, rainy, cold Thursday night in the city of London’s financial district. The “suits” had begun to descend on the local pubs in an effort to wipe out the memories of the day. They would soon be engaging in an orgy of lies, chest puffing, pontificating and self-congratulation. Oh, and to ogle the cute office girls and pretend they knew what they were doing with their lives.
Far more importantly, from my selfish perspective, the pub I’d just stepped into was teeming with gorgeous ladies. I had determined that the breast fairy definitely was native to London, and I felt like a ravenous lion amongst gazelles. This was important stuff to any single, self-respecting 20-year old male. Apologies to our female readers, as I’m much more refined nowadays. Just ask my wife.
The gazelles bobbed about smiling and giggling, it was great. I made my way over to some workmates, but before I reached them I bumped into someone who I had seen around the office, but knew anything about. We began chatting, and that evening was to turn out to be one of the most important evenings of my life.
I spent the entire evening talking to this gentleman. A man? You serious Chris? What about the gazelles?
Yep. What this man lacked in looks he made up for in intellect. He was to be one of my first mentors; I’ll call him Richard (for sake of anonymity). He was everything the stereotypical investment bankers I had met were not.
An Australian who had built and sold a broker dealer business from scratch to JPM (for a truly stupid sum of money), he now consulted to them on private equity dealings. He had a complete disdain for the “art” of ladder climbing and brown nosing that so many of the egotistical suits that seemed to gravitate to the large institutions, like a dog to its vomit, where engaged in. We clicked immediately.
While the gazelles bobbed about us, we spoke intently, taking no notice. Tough stuff for a young guy, so you know the conversation was engaging. Closing time saw us move to a coffee shop where we proceeded into the early hours of the morning, finally catching a taxi home to grab a couple of hours sleep before heading back to work.
I was fortunate enough to spend more time with Richard before he left the firm about a month later. Sadly I lost touch with him, but he really was one of my first true mentors and I will remain ever grateful to him. There were many pearls of wisdom that I took out from our conversations, but three in particular stand out in my mind…
1) While Richard and I talked in-depth about investing he said to me, “Mate there are plenty ways to make money investing, but the biggest life-changing gains are in private deals. You get to make the rules and rule the game.” Initially I didn’t know what the hell he was talking about, but as he told me how getting involved in early seed rounds of businesses worked, I knew that one day, somehow, somewhere I would be in that space. I didn’t know how, but I WOULD do it. I would be involved in the art of the private deal.
2) The second lesson followed on from the first, and you cannot have the one without the other. You need to have a sound understanding of the quantitative or fundamental situation in every deal, investment or decision you’re going to make. The facts are almost always there for anyone that cares to look. Most people will never care to actually look however, preferring to rely on others opinions.
Having this quantitative understanding allows you to bet, and to bet BIG. It isn’t risky at all. It’s the complete opposite of risky. Just ask Kyle Bass. “Mate” he said, “All over the world people take massive bets every day. A guy who runs an auto repair shop is betting everything on that one repair shop. Yet if you told an investment manager that you have 40% of your portfolio in one position, let alone one sector, they would tell you that you’re nuts. Ignore them, they just haven’t done the homework.”
3) The third lesson is that of timing. When you have done your homework learn to pull the trigger and don’t screw around. Some of the private equity deals that you will see will only be around for the taking for literally a day or two. We’ve seen deals disapper in hours, especially where the players have solid track records. If you don’t act on them there is no second chance. We’ll dive deeper into this subject later, as it’s very important!
This lesson comes full-circle with the first two lessons. It’s impossible to act with confidence when you don’t know the fundamentals for the sector, country, etc. that you’re investing in.
Trust yourself, do your homework and then pull the trigger, in that order.
Have a fantastic weekend!
“Frankly I don’t see markets; I see risks, rewards and money”. – Larry Hite