Traits of Great Investors: Strength of Conviction
I’m often asked what makes a great investor. There are many character traits that great investors share, but I’d like to talk about one in particular today and that is strength of conviction. John Templeton once famously said: “It is impossible to produce superior performance unless you do something different from the majority.” Said another way: If you do what everyone else is doing in the market, you will get the returns that the market gets. By definition, to outperform the market you have to do something different than what the rest of the market is doing …and you have to be right.
To do something different from the market means you have to be a contrarian -you have to be willing to go against the crowd- and you have to be willing to stick to your guns when the rest of the world is telling you that you are wrong. I believe only a small percentage of investors are truly able to do this. Going against the crowd sounds fairly easy, but when you are losing money, clients are calling and threatening to pull their accounts, and your friends and colleagues start to think you’ve lost it, most people just want the pain to end. Great investors tend to all have the ability to withstand this “pain.”
We read widely here at Santangel’s Review and I recently came across an anecdote that perfectly encapsulates the idea of strength of conviction in an unlikely place. The following story comes from ESPN columnist Matt Berry (I told you we read widely….)
Before I came to ESPN I was a reasonably successful screenwriter for film. And before I was a reasonably successful screenwriter for film, I was a consistently working sitcom writer. And before I was a consistently working sitcom writer, I was just a writer with a few credits and a member of the Writers Guild of America. It was through that I got to go see Phil Rosenthal speak.
You may not recognize the name, but you’ve definitely seen his work, as Phil is the creator and executive producer of “Everybody Loves Raymond,” only one of the most successful sitcoms of all time. It was early during “Raymond’s” run that I went to hear him speak — this is many years ago — and he told a story that has stuck with me to this day.
So young Phil gets his script for “Raymond” picked up to pilot (meaning they are going to shoot one sample episode) and if it goes well, it will get on the air. It’s a huge opportunity. Getting a show picked up to air versus just getting a pilot shot can potentially mean many millions of dollars, and it puts your career in a whole different stratosphere. Many very talented writers work for years and never get a pilot picked up.
Just so you understand, the stakes are very, very large here.
So Phil gets a call from the network.
Network Guy: Who are you casting for the wife?
Phil: Honestly, I’m looking now. I’m looking all over the place.
Network Guy: Well, Les Moonves wants this one actress (Phil calls her “So-and-so”). You should cast her.
Phil: Oh, but I think she’s completely wrong.
Network Guy: You didn’t hear me. Les wants her. If you don’t cast her, you don’t have a show.
In case you don’t know who Les Moonves is, just know he is very, very powerful among television executives. He runs CBS and everything that falls under CBS. I’m fairly certain he can legally have people killed. He’s that powerful.
Anyways, Phil calls his agent to complain about So-and-so, a well-known actress.
Phil: She’s totally, completely wrong for the show and will ruin the whole thing. What do I do?
Agent: I would cast her.
They go back and forth, but the agent makes the same point as Network Guy. “If you don’t take her, you don’t have a show.”
Phil is fretting but the agent suggests he at least meet So-and-so. Phil agrees to do that.
So he meets her one morning. Later that same afternoon is an audition for the current three finalists (they haven’t found Patricia Heaton yet) for the role of Raymond’s wife. All the CBS execs, including Les, will be there as each actress comes in, separately, and reads for the part.
And Phil is told that after the three women audition, what was going to happen was this: Les Moonves would stand up and say “What about So-and-so?” And if Phil doesn’t answer “I’m going to cast her,” he’s dead in the water.
From Phil’s book:
“So I meet with So-and-so, and she’s very nice. Lovely, pretty. And during the meeting I kind of talk her into reading. And she reads for me … and she’s 10 times worse than I thought she would be for this part. So now I’m crying because this is the day I lose my show because I cannot do it. I cannot. We go to the CBS offices, I have a bowling ball in my stomach, my three actresses read, they leave and Les Moonves, right on cue, stands up and goes “What about So-and-so?”
Think about this moment. It is a moment anyone in television dreams of. You are there, with the network president, talking about your show. You are surrounded by your agent, all sorts of network executives and studio executives (who are the ones paying you and desperately want this show to go).
You have been told to say “I’m gonna cast her” or your show is dead. End of story. All your months and months of hard work and your future dreams down the tubes. Everyone is staring at you as the most powerful person in the business says directly to you … “What about So-and-so?”
Back to Phil’s book:
“I say ‘I love her. I think she’s great. I’ve loved her in everything she’s done. And I met with her today and she’s beautiful and charming, and I fell in love with her. I wanted to marry her. But then she read for me, and I have to tell you, it’s just not what I wrote. You know? I don’t really buy them as a couple. Could she do it? … Maybe. But I also think, maybe, we could do better.'”
I wasn’t there but I’ll bet anything that there wasn’t a sound in the room, except for maybe a gasp from a low-level studio executive. And as Phil waited there, having made the stand everyone told him not to, all eyes turned to Les Moonves.
Who then just shrugs. “It was just an idea.”
I love that story. Love it. They didn’t go with So-and-so, of course, and about a week later they found Patricia Heaton, who would win two Emmys for her portrayal of Debra Barone, and the show would become a massive critical and financial hit.
Quick addendum to that story: Once the show got picked up there was talk about bringing in a “showrunner,” someone more experienced to help Phil, since he had never “run” a show before (being the main creative force behind every decision). But Les ended up letting Phil do it himself, unheard of in those days, because “He liked how [Phil] handled that thing with So-and-so.”