During his recent interview with Tobias, Mark Yusko of Morgan Creek Capital Management discusses one of the most important lessons he learned from Julian Robertson – double up, not down! Here’s an excerpt from the interview:
Mark Yusko: I’ve been very lucky. It’s interesting, I’ve been incredibly blessed in my life to have just unbelievable mentors. And it’s not like they spent an hour a week talking to me, but they spent some time helping me. And I also paid attention to what they did. So I watched what they did, and I learned from them, and I had an open mic to them. Again, I didn’t abuse it. So Jack Meyer was a great mentor, Julian Robertson when I got to UNC was a fantastic mentor. I mean there aren’t words to describe how great that was. And again, it’s not a lot of time, it’s just there’s a lot of value in what little time you can get.
Mark Yusko: And so the best advice I always give young people is ask because people want to be mentors. “Oh that person is too busy,” just ask because they can say no, but they might say yes. So that mentorship was really important in helping again hone and develop the value bias. I came to North Carolina, really easy to look good because it was broken. But you also had this guy Julian who I was able to dive deeply into building a relationship, and maybe one of the greatest value investors ever. And that’s not an over exaggeration, look I’m prone to hyperbole, as most people know, but that’s not hyperbolic. I mean the guy is one of the truly great value investors of our age. And the other thing that he I think is … there are no peers of him is in the identification, training, and backing of talent.
Mark Yusko: I mean if you look at the people that have worked for him over the years, and now manage money, most of it with a value biased, not all of it, but most of it. They are some of the greatest managers ever in the business.
Tobias Carlisle: These are the tiger cubs that you’re referring to from Julian’s tiger cubs. Without disclosing any confidences, what did Julian teach you, what did you learn?
Mark Yusko: Yeah, so I mean Julian’s the best. So one of the things that’s really important is don’t fudge the numbers. So he’d come up and he’d ask somebody, “So tell me about this.” And he would immediately tell when the person was bull shitting… and he’s like, “Hey stop, never fudge the numbers. Just say Julian, I don’t have the number, I’ll get it and I’ll come back to you.” So don’t extrapolate, don’t interpolate, only evaluate the real data.
Mark Yusko: And there’s a great line from Seth Klarman about the same thing, he said one day at a meeting to a group of analysts, he said, “So what do we know about this company?” And this one analyst says, “Well I think,” he says, “Stop. I didn’t ask you what you think, I don’t care what you think, don’t ever think. I want to know what we know. What is factual. I don’t want your interpretation, I want facts.” And that’s really important. So don’t fudge the numbers, one of the really important things.
Mark Yusko: Second, never double down, always double up. And here’s the interesting thing, so most people think if you’ve done the work and you buy something and it goes against you, you should buy more. And what Julian would say is no, we’re just wrong. Made a mistake and the market’s right, the market’s … this goes back to the efficient markets. It’s not that the market’s always efficient, but when it’s telling you you’re wrong you should listen to it. And there’s the famous picture of Paul Tudor Jones in his dorm room with the losers average losers sign. And it’s interesting, so I’ve had this gift, and it’s really a gift, that I’ve been able to interview pretty much every person that worked for Julian that formed their own fund.
Mark Yusko: And I have these notebooks, I could probably turn it into a book someday. But I have these notebooks of notes from all these guys saying, “What did you learn working for Julian? What did you learn working at Tiger? What did you learn in separating, and leaving, and starting your own firm?” And without fail they all have different things like, “What made Julian great?” “Well he was super competitive, one of the most competitive person they’ve ever met.” Someone else says, “He’s the most honest person in the world, dishonesty is just not allowed.” And this is a guy who went through customs once with a pair of shoes on that he forgot to declare and he sent a check the next day. Most people lie, forget sending a check.
Mark Yusko: But every single person I ever interviewed said he had an uncanny ability to double up. Now most people would say, “Well wait a minute, that’s not a value investor.” Well think about it, is it or is it not? So what he’s saying is when he had edge, when he had knowledge about an area, an asset, a company and they made an investment and now the market is coming around to your view, rather than do what most human beings do, which is pull their flowers. They’re so happy to have a win they take profits. He’s like, “Well let’s buy more because it’s working.” And there’s the simple statement of let’s do more of what’s working and less of what’s not. Most of us don’t do that, we do more of what’s not working and less of what’s working, which is why the average person underperforms.
Tobias Carlisle: Right.
Mark Yusko: But he had that ability. So I am still not good at it, because I have such a deep value bias in me that when things start to get frothy, I just don’t have the ability to double up. A great example would be in real time AMD, I had great insight because of our move into block chain and crypto a couple of years ago that AMD was one of the companies making GPU’s. It was clearly a deep, deep value when it got down to single digits. And so I bought it, and great so it goes up, and then it gets to 30 bucks this year and I’m like, “Okay it’s just way over valued. The price to book’s crazy and I just can’t take it anymore,” and I sold. Well now it’s to 45.
Mark Yusko: It’s probably a short here, but that’s not the point. The point is that I didn’t have the guts to double up the same way that he would. Now that’s unique, and there are only one or two of him in the world, so that’s probably why they’re really good at it.
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