Robert Hagstrom – 'Investing: The Last Liberal Art'

 

Robert Hagstrom, Legg Mason – ‘Investing: The Last Liberal Art’

 

Robert is the author of The Warren Buffett Way and Portfolio Manager for Legg Mason, Inc. (NYSE:LM).

 

• Noted Munger’s 2007 USC commencement speech
  • Attempted to diagram the liberal arts of investing

• Isaac Newton
  • Wrote Principia Mathematica
  • People latched onto physics model for how things work
  • Chesterton wrote …”nearly reasonable, but not quite…” (like EMT)
• Markets more like Biology than Physics
  • Learns and adapts
  • No stable mean
  • Non equilibrium system
  • Recommended book ‘Origin of Wealth’ Eric Beinhocker
• Need paradigm shift in economic thinking
  • Alfred Marshall gave the biology analogy in the 1920’s
  • Thomas Kuhn ‘Structure of Scientific Revolution’ (old model resists the new)
• Ludwig Wittgenstein
  • Not a straight line & changes constantly

• The meaning of a word is its use in the language
• Description of Amazon
  • Barnes & Noble wrong….
  • Wal Mart model wrong….
  • Dell model closer….
    • Amazon is the second largest cloud space provider
    • Potential new BIG business
• “Failure to explain is caused by failure to describe” -Mandelbrot

• ‘How to Read a Book’ Mortimer Adler (cannot read everything, pare down)
  • Inspectional (taste)
  • Systematical (skim)
  • Analytical
  • Synoptical
• Risk tolerance (must get it indirectly because people cannot describe themselves accurately)
  • Gender
  • Age
  • Achievement motivation
  • Personal control orientation
  • How you view the risk environment
    • Complex
    • Trustworthy
    • Fear of Loss
    • Inability to persuade
• Math (beware of averages)
  • Little thought to variables
  • Trend of the system vs. trend in the system
  • Data is non stationary
• ‘Rethinking Undergraduate Business Education’ Aspen Institute
  • Catching up with Munger

 

• Q&A
  • Paradigm Shift?
    • Physics model to Biology model

1. 70’s/80’s Inflation comparison?

• Businesses had better pricing power then vs. now
• More global now

 

Value Investor Conference: Omaha, Nebraska – 

Dustin Hunter, SunRift Capital Partners (www.sunriftcp.com)

(These notes are to the best of my recollection.)