charlie songhurst invest like the best

Lessons From Investing in 483 Companies | Charlie Songhurst on Invest Like the Best

Check out the Invest Like the Best Episode Page & Show Notes

Key Takeaways

  • Effects of Scale:
    • Exponential returns from network effects
    • Declining productivity of individual workers
    • Loss of personal connections between managers and employees
    • Unavoidable conflict
  • There are many talented people, but only a handful of them that will align with your mission
  • Taking a historical lens to understand human nature helps us make sense of the volatility we experience
    • Charlie Songhurst notices a cycle of constant centralization and decentralization throughout history
  • “If you look at what really destroys investing returns it’s geopolitical conflict”Charlie Songhurst
    • “The collapse of European wealth in WW1 and WW2 is just absolutely epic”
    • As a case study, forestry is incredibly stable in its ability to withstand war and revolutions
  • There are actually no cookie-cutter molds of what creates a successful investor
    • “Success is very idiosyncratic” – Charlie Songhurst
  • Socially, the accelerated adoption of tech is a massive and irreversible shift which many do not talk about
    • Quarantines have made us more globalized in employment 
  • The most significant variable in whether or not someone believes cryptocurrency can be viable is age
  • It’s completely possible to globally scale finance but it’s stopped by the rules and regulations of different nation-states
    • “This globalization of finance has the potential for multi-trillion dollar market cap companies over the next decades” – Charlie Songhurst

Intro

  • Charlie Songhurst is the former head of strategy at Microsoft and is currently an active investor
  • Host: Patrick O’Shaughnessy (@patrick_oshag)

Power, Money, or Fame?

  • Charlie finds that this benign interview question can roughly determine a person’s desires and tendencies
  • Power: 
    • “Someone who’s interested in power tends to be better at execution” – Charlie Songhurst
    • Founders who prefer power tend to overspend and aggressively expand
  • Money:
    • “Someone who’s more interested in money tends to think more about capital efficiency” – Charlie Songhurst
    • Many people claim they prefer power when they don’t want to be seen as greedy
    • Founders who prefer money tend to be too cautious
  • Fame:
    • “I tend to avoid people interested in fame, but if you were doing something in showbiz it would presumably be the number one criteria” – Charlie Songhurst

Effects of Scale

  • Exponential returns from network effects
    • Many tech companies can only exist at scale
  • Decline of the productivity curve:
    • Due to psychological and bureaucratic effects, the larger a company gets the less productive each worker becomes
  • There is a loss of personal connections between managers and employees when managing large groups of people
    • That’s like a Fermi paradox, Great Filter; it wipes out an amazing amount of startups” – Charlie Songhurst
  • Companies at scale are forced to become institutions because it is a necessity in order to remain at that size
    • For example, you will need an in-house legal team to handle all the legal issues that are thrown at you

Why Founders are Unique

  • Founding and cultivating a startup is an incredible training program for the mind which takes years to develop
    • We look at visionaries like Jeff Bezos or Steve Jobs at the peak of their success without examining the thousands of hours of work preceding it
  • The journey in creating a transformative business fundamentally changes you as a person

Recruiting

  • Your first few hires are most significant than all the rest 
    • They set the standard for all subsequent hires
  • Taking the extra time to recruit a talented individual who works well with your company will pay dividends down the road
    • There are many talented people, but only a handful of them will align with your mission

History and Investing

  • Taking a historical lens to understand human nature helps us make sense of the volatility we experience
    • Not only that, but you can use history to directly exercise your investing muscles
      • For example, Charlie could ask himself if he would buy Roman real estate right after Caesar was murdered
  • Charlie notices a cycle of constant centralization and decentralization throughout history
  • Forestry is one of the most stable businesses even in times of war and revolution
    • For example, if a government is overthrown and corporations are nationalized, forestry is so boring that it simply flies under the radar and is left alone
    • “What are the digital equivalents of things that have some psychological repellant to them and therefore will actually have great economic capture?”Charlie Songhurst
  • “If you look at what really destroys investing returns it’s geopolitical conflict”Charlie Songhurst
    • “The collapse of European wealth in WW1 and WW2 is just absolutely epic”

Traits of Successful Investors

  • There are actually no cookie-cutter molds of what creates a successful investor
    • “Success is very idiosyncratic” – Charlie Songhurst
  • Charlie has found that successful investors focus on leveraging their unique talents to maximum effect

Impact of COVID-19

  • Socially, the accelerated adoption of tech is a massive and irreversible shift which many do not talk about
    • Even the elderly have started adopting applications like Zoom into their everyday life
  • The success of eCommerce startups has exploded after lockdowns
    • “My guess is the emotional experience of retail will just be less appealing than it was even in a world of reopening, and you have this continued elevation of eCommerce” – Charlie Songhurst
  • Quarantines have made us more globalized in employment 
    • More startups, more jobs, have adopted a work from home model after seeing its benefits
    • “Maybe I’m too optimistic but I think that may just lead to a permanent shift in overall productivity upwards” – Charlie Songhurst

Thoughts on Cryptocurrency

  • Crypto has no analogies or metaphors with which you can accurately compare it 
  • The most significant variable in whether or not someone believes cryptocurrency can be viable is age
    • Also, U.S. investors find crypto less intuitive than non-US investors probably because of the government’s history of banning non-fiat currency
  • Different cryptocurrencies tend to attract certain personality types
    • Proponents of bitcoin tend to be less trusting of people compared to proponents of ethereum
  • It’s completely possible to globally scale finance but it’s stopped by the rules and regulations of different nation-states
    • “This globalization of finance has the potential for multi-trillion dollar market cap companies over the next decades” – Charlie Songhurst
Invest Like the Best : , , , , , , , ,
Notes By TD

More Notes on these topics

Top Insights and Tactics From

31 Best Podcasts of All Time

FREE when you join over 12,000 subscribers to the
Podcast Notes newsletter

No Thanks