Anthology #3: Tiger Management

50 Lessons from 50 Tigers—including Chase Coleman, John Griffin, Andreas Halvorsen, Philippe Laffont, and Steve Mandel

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Anthology #3: Tiger Management.

If you read this newsletter, you know about my compilations. In fact, you’ve probably even bookmarked a few. But you’ve probably (definitely) never actually read one cover-to-cover.

Unlike my compilations, which range from tens to thousands of pages, or my letters, which are typically a single letter that gives you insight into a single person, Anthologies will be my way of telling a story of some of the people and companies I find interesting through a series of letters, notes, quotes, and/or videos (important: not “the” story, but “a” story).

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Anthology

Introduction

Ask an entrepreneur about their proudest accomplishment and they’ll tell you about the organization they built. When Walter Isaacson asked Steve Jobs about the product he was proudest of, Steve surprised his biographer by not naming a device like the iPhone or Mac, but by choosing Apple the organization.

Making a product is hard, but making a team that can continually make products is even harder. The product I’m most proud of is Apple—and the team I built at Apple.

—Steve Jobs

Ask an investor the same question, and they’ll tell you about their returns. Perhaps this is because of the returns they generated for their shareholders (endowments, pensions, etc.). Or perhaps this is because they focused on investing and neglected to build a firm. Or maybe, they did build a firm, but they built it around themselves.

And for good reason. In investing (as well as sports, acting, or entrepreneurship), people obsess over geniuses. But genius can’t be taught. Charlie Munger likes to tell this Mozart story:

A young man came to him, and he said, “I want to compose symphonies. I want to talk to you about that.” And Mozart said, “How old are you?” And the man said, “Twenty-two.” And Mozart said, “You’re too young to do symphonies.” And the guy says, “But you were writing symphonies when you were ten years old.” He says, “Yes, but I wasn’t running around asking other people how to do it.”

—Charlie Munger

For many, investing is just as unteachable as genius. Famously, Warren Buffett, Seth Klarman, and Li Lu all believe that value investing is like an inoculation—you either get it right away or you never do.

“[Value investing] takes immediately with people or it doesn’t at all. It’s like an inoculation. If it doesn’t grab a person right away, I find that you can talk to him for years and show him records, and it doesn’t make any difference. They just don’t seem to be able to grasp the concept, simple as it is…I’ve never seen anyone who became a gradual convert over a ten-year period to this approach. It doesn’t seem to be a matter of I.Q. or academic training. It’s instant recognition, or it is nothing.”

—Warren Buffett

Now, if you were to ask Julian Robertson the same question, you would get a totally different answer—you would get an answer more similar to that of Steve Jobs than Charlie Munger.

We differ from most hedge fund managers. George Soros, Stan Druckenmiller, Michael Steinhardt and Paul Jones are genius managers. And that's probably true of Lynch, Munger and Buffett. On the other hand, we don't have a genius. What we have is a very good organization. A lot of what I do is cheerlead. It's a lot more fun for me this way. What can happen to genius managers who do so much of it themselves is that they can do it, but the pressure can be pretty tough on them - and they can even burn out. I'm just glad that we have an organization rather than having everything rest on my shoulders.

—Julian Robertson

While Julian didn’t consider himself a genius, he was. His genius lay perhaps not in investing, but in organization building—he was an early adopter of and popularized Alfred Winslow Jones’ hedge fund model, he innovated on the process of value-added research, he realized the advantages of and implemented the pod shop model early on, and he partnered with a psychologist to develop systematic testing procedures to identify talent.

At the end of the day, Tiger Management’s success did not stem just from Julian Robertson, but the organization he built and the Tigers he recruited—and it’s evident in what they’ve gone on to accomplish after.

And as someone who is fascinated by people, the organizations they create, and the networks they form, there are few better subjects, if any, than Tiger Management and the Tiger Cubs.

I’ve been studying Tiger for as long as I’ve been interested in investing, but only recently decided to sit down and write up my thoughts on the organization and its impact. While that essay is focused on Julian and a few select number of the Tiger Cubs (TBD if this will be publicly released), I realized that I had learned something from every person in the Tiger Ecosystem I have met or studied, and decided to put together and share this collection of quotes and lessons from some of my favorites.

*Special Request: If you worked at Tiger (or at a Cub/with someone who worked at Tiger) and are willing to share your experience, please reach out! I’d love to chat (more than happy for it to be background or off the record if you prefer).

Additionally, if you know if either this handbook or this guide is real and would be able to share a copy, I’d be forever grateful.

Email: kevin@12mv2.com

What follows is 50 lessons from 50 Tigers—ideas that expand on the value of teamwork, the need for rigorous research, the importance of discipline and risk management, the way culture can make or break a firm, and so much more. These principles aren’t limited to hedge funds though—they speak to leaders, entrepreneurs, and strategists in any field who hope to cultivate high-functioning teams that stand the test of time.

Special thanks to Drew Cohen and Nick Chow for reading early drafts of this.

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Categories

• Compounding/Scale

• Conviction

• Culture

• Edge/Fit

• First Principles

• Process

• Psychology/Personality

• Talent Management

• Timing/Cycles

• Valuation

*Categories listed in alphabetical order
**Quotes in each category listed in alphabetical order of author

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Compounding/Scale

1. Look for and invest in the convergence, early on, of multiple trends, whether that be asset class, industry, geography, or anything else. You’ll get a multiplier on the compounding.

Frankly, if you're in the second inning of a commodity cycle, and China continues to do better, and it has knock on effects to other emerging markets, there's a lot of room for earnings to at least double from kind of the numbers that I'm talking about.

—Bob Bishop

2. Identify the core areas of value creation. Investing is all about the power law—and compounding over time.

It comes down to where the value is being created. Again, my job is to drive returns. How did I go from $5-6mn to $13.6-13.8bn in 25 years? Well, I'll tell you: the majority of that was in the last 15 years. The majority of that was in the last five years.

—David Goel

3. Investing (and life) is all about making decisions. You need to sift through a lot of bad ideas, and some good ideas, to find the great ideas. Choices compound.

As an investor, we need to make choices. We need to sort through a lot of ideas and try to choose the ideas that we think are the most impactful and make the most sense.

—Fuyuki Fujiwara

4. The best way to scale is to have a good product.

The easiest way to get big numbers on the earnings side is to leverage what you already have.

—Arnold Snider

5. Understand the limitations of your strategies. Don’t chase AUM—Renaissance limits the size of the Medallion fund; Buffett’s returns have lagged as Berkshire has gotten larger.

One has to be disciplined. We’ve learned through our history that violating capacity constraints can actually be a material negative.

—Paul Touradji

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Conviction

6. When generational opportunities come, take full advantage of them. When Stan Druckenmiller wanted to short the British Pound with 100% of his fund, George Soros told him to try and put 200% of the fund into the trade.

So there's different ways to do it in different markets and different opportunities, but these come around every 10 years. And if you don't take advantage of them, then it's very difficult to deliver outsized returns over a long period of time, which we think we've done.

—Rob Citrone

7. Do the work. Develop conviction. Have strong opinions—but hold them loosely. When the facts change, change your mind. The journey never ends.

Develop conviction. You want to out-research your competitors. You want to find the smartest people about an industry, and lean on them and talk to them. You want to find out every piece of information possible. And then at the end of that process, which you know is a little bit of a misnomer, because it, in some ways, is never ending, you continue to do your research. When you're a public market investor, you have to believe in your conclusions until you're proven wrong. So you don't want to go down with the ship by any means. And you can change your mind in the public market. But after you've gone through that process, and you've gone as far and as fast as you can go to find the best information, you have to believe what you've learned.

—Glen Kacher

8. Look for asymmetric returns. You don’t have to be—you can’t be—100% sure of anything. See this memo on asymmetry and how to think about risk and reward in investing.

That’s been my mentality: I wouldn’t bet my life on it, I’m not 100.00% sure blockchain assets will go up, but when you multiply the chance it goes up times the order of magnitude or more the industry is potentially going to go up – the result ends up being way better than other assets one could invest in. The expected value of the trade is the most compelling I have seen in almost forty years of doing this.

—Dan Morehead

9. If you have conviction, remain patient. Michael Burry did during the GFC, and he was rewarded handsomely (at least from a returns standpoint).

The Japanese banks have been a frustrating investment experience for Tiger. They continue to offer huge profit potential, and I am convinced that patience will eventually win out for us.

—Tim Schilt

10. Innovation creates massive, long-term dislocations in the market. Similarly, Warren Buffett is famous for saying: “Never bet against America.”

I never bet against innovation.

—John Wu

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Culture

11. Look for inspiration outside your field. Be multidisciplinary. It’s why I love Charlie Munger and the Santa Fe Institute. Before Ben Graham applied it to finance, margin of safety was just an engineering concept.

There’s a lot we can learn by looking at how people in other professions handle the same types of problems we run into in our world… We’ve been looking at chefs and how they approach their work. In a lot of ways, their business is like ours: time-bound, a lot of balls in the air at the same time, some element of repeatability, but also significant elements of each practice is different, people who aren’t involved think it’s easy but there’s much more to it.

—Rob Jafek

12. Culture permeates through every level of a company. Don’t just evaluate management, evaluate all of the employees. A company is made of its people. Understand them.

And while the ownership might not appear large relatively speaking, I think it's large enough to be meaningful to them. And I've met several layers of their people. And I'm impressed throughout. It's not just one charismatic person. The other thing I've been impressed with is that their associates truly feel like they're working for the best in the business… And they're proud to be part of it. Also, they lived through the bad times. And the people who are in positions of authority sort of rose to the top during those bad times. They feel like they know what they did wrong. And they know what they've been doing right to get them to where they are today.

—Christine King

13. Credibility matters. And it goes both ways. Steve Jurvetson generally doesn’t use lawyers because: “If [a founder] is going to screw me on terms, I’m going to lose the investment anyway.”

One of the things lacking in the cannabis industry, even today, is credibility. And credibility to close is a big thing… Once we sign a term sheet and we embark on confirmatory due diligence and final documentation, we have never failed to close.

—John Lykouretzos

14. Try to structure win-win relationships. Be an intellectual sparring partner—you will attract those who appreciate you and get a better sense of how people think.

One thing we try to do… is be a resource for [management teams]. So if they think that we know a bunch about emerging competitors, or we know a bunch about somebody they might consider hiring, if they view us sort of as an intellectual peer in effect, that's really, really helpful. And that changes the nature of the dialogue with management considerably.

—Steve Mandel

15. Teams are built together. Shared hardships equalize differences. Experiencing challenges side by side fosters respect and understanding.

Everyone should be in the army. When you do push ups in the mud next to someone, it doesn’t matter where they’re from.

—Thorpe McKenzie

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Edge/Fit

16. You can’t win everything. Stay focused where you have an edge.

And the aspect we get is you need to focus, you need to know what you can say no to and where can you compete because some of the things you talked about, we’re going to have phenomenal innovations on. But the individual small start-up companies generally don’t have the ability to compete there. So seed, seed genetics, everything, that’s owned by a couple different companies. Like, you really can’t invest in the area and believe you have the probability of succeeding. You might but it’s not a good bet.

—Dwight Anderson

17. Have a reason for existing. Ironically, investment firms are always thinking about company differentiation amongst their stocks, but never think about it for their own firms.

Organizations with long-term liabilities are finding it increasingly difficult to close their asset/liability gaps. Next-generation solutions are needed, and we believe a new approach is required to meet those needs.

—Phil Duff

18. Your investment portfolio isn’t your only portfolio—your team is also a portfolio. As you scale, see how different personalities and skillsets fit together—do they clash, or does 1+1=3?

Life is about making the most from resources at hand – and different skill sets or personal attributes may produce optimal outcomes depending upon prevailing circumstances.

—Bill Goodell

19. Understand the law of large numbers. Renaissance bet they would be right 55% of the time and Roger Federer noted he only won 54% of all the points he played. Edge compounds.

Now, we are a little more right than wrong, otherwise we would lose money. And we actually happen to make a little bit of money. So if we make that bet consistently, betting on the management teams that have a similar view of the underlying dynamics as we have, and also look at their record of capital allocation and returns on capital, the likelihood, then that's really the marginal odds were betting on. We're effectively building a business based on the fact that we're a little more right than wrong.

—Andreas Halvorsen

20. There’s a million ways to make money. Find what works for you. Investor-Strategy fit is just as important for an investor as Founder-Market fit is for an entrepreneur.

The real issue isn’t what strategies work versus not. The issue is what strategy fits the manager’s skill and personality.

—Jim Murchie

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First Principles

21. Always seek truth. Develop your own metrics if the industry standards don’t reflect reality. See this memo for an example of a proprietary metric: the inventory value capture index.

While net exposure is the most prevalent measure of hedging in the investment community, I believe that another measure, which I refer to as the ‘long/short ratio’, provides much more insight into the degree of hedging. Net exposure indicates what percentage of net assets are long the market, but the long/short ratio describes the balance of longs and shorts. Consequently, this ratio is a more significant determinant than net exposure of a portfolio’s ability to perform in different environments and to produce returns that are not correlated to the market.

—Lee Ainslie

22. You need to understand your customers if you want to figure out the most important thing to them. For products, it’s the customers’ friends’ opinions.

The single most important influencer of product decisions is friends.

—Shelby Bonnie

23. As Stan Druckenmiller preaches, understand the core factors that move a stock. For Philippe, that’s TAM, earnings, growth, and long-term PE.

Public investors… dispose of a large library of good and business models and can quickly zero in on the key metrics that matter. Not all growth is created equal and not every projection is to be accepted. What has worked for me is focusing on TAM (market size), earnings, growth and the corresponding P/E multiple 5-7 years out.

—Philippe Laffont

24. At it’s core, the business of investing is about taking risk, not (just) managing it.

Viking is in the business of taking risk. We put our investor’s capital at risk in pursuit of attractive returns. Shying away from risk-taking goes against our reason to exist, and this is not something I do lightly.

—David Ott

25. If you understand the fundamentals of your tools, you can find creative ways to use them. For example, stress testing is typically retrospective, but can also be used for forecasting and be forward-looking.

Stress testing enables you to look at how all of your different investments may perform in a shock... In addition, you can turn stress testing on its head and turn it into a forecasting tool, looking at times in the past where we’ve seen bouts of inflation and how the different asset classes have performed, and you can actually perform some forward-looking calculations about how your current portfolio may perform.

—David Saunders

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Process

26. Focusing allows you to go deep. Going deep can generate variant perceptions and better understandings of companies and situations.

I always was focused. I really just focused on the financial services sector, and then within that, I tried to really understand the business, whereas most analysts, they're too busy to get down and really understand how, for instance, a checking account is opened, and what the front-line employees go through, and then what the back office a call center goes through. So I would visit places that no other analyst has visited, try to really understand just how the business has been done. I still think I'm the only analyst that ever asked to meet the head of human resources at a bank, but I've done that too, many times.

—Tom Brown

27. Investing isn’t easy. It’s a grind. You need to have grit even if you love it. Legends are made on the practice court, not Center Court.

Make no mistake, this is not a glamorous job. There are some days when I would rather bang my head against the wall because I am so bored with looking at information that I need to get out of the office and go home.

—Tom Facciola

28. Writing is thinking. Writing keeps you accountable. Similarly, Ian McKinnon recommends keeping a gratitude journal.

Observe, don’t predict. It’s really disciplined to keep an investment journal. It becomes an incredibly valuable tool over time. But for some reason, people just don’t like to do it… if you want to get back to inching yourself towards the far-right tail of the normal distribution of outperformance simply by writing down, in a very dispassionate way, in an investment journal, you will practice a discipline that I believe will be rewarded.

—John Griffin

29. Develop your own frameworks for investing that align with your personal worldview. This can generate differentiated viewpoints and can help you keep conviction in difficult times.

So what is Google? Best information to everybody. I know most Google guys don’t know God, but God still uses it. The best information for everybody. Does God love it? Absolutely he does. I’m an investor in Google for five years, and God also cares about fair price, because scripture says God hates wrong scale. My company does a little bit of our part bringing the fair price to Google stock price. Is it important to God? Absolutely. Most Christians would not think that, but please, it absolutely is.

—Bill Hwang

30. Don’t dismiss technology—use it. Market cycles are continually compressing. You can’t make informed decisions if you don’t leverage technology to not only catalog, but understand, all of the information the market produces.

So what I noticed while I was in global macro, one is the markets were moving faster than they did before. So when you got information in the market it, it was priced in faster than you might have done, say, 10 years previously, or even five years previously, and that there was a huge amount of information that was coming at you that needed to be organized and understood faster than before. And what that meant was that the use of technology for trading is much more important, in my opinion, than it used to be before, where you have to use it to simplify and understand what's going on, and to be able to catalog and use all this information that comes at you on a daily basis.

—Anu Murgai

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Psychology/Personality

31. If you want to be successful, you have to take risks. And if you take risks, you will have failures. Accepting setbacks is essential for long-term success.

If you are good at what you do, you will take chances. And sometimes, those chances, no matter how “sure” you were of success at the outset, are going to go against you.

—Kevin Becker

32. Successful people are generally obsessed with their jobs. But even if you are, and you love your work, working all the time is not sustainable.

I have loved the work, but it is difficult to turn off.

—Robert Karr

33. Specific, systematic testing across a variety of variables can help organizations identify candidates that are likely to succeed in their firm and in their role.

It’s a two-to-three-hour test examining things like personality, intelligence, and integrity… Over time the data from this exam has helped Tiger to predict what types of individual will be successful investors and fund managers.

—Adam Leitzes

34. Everyone has “negative” traits. How you perceive/engage them can determine if they will destroy you or lift you up. Don’t let them control you—find a way to channel them for good.

Narcissism is a universal human force. Uncontrolled and improperly channeled, it destroys love between human beings and prohibits the joy we all desire for ourselves and others. Effectively controlled and combined with the capacity to care for others—to give of oneself with a genuine purpose—it becomes the spice of life. Whether we control it or it controls us is to me the most crucial choice one can make in a lifetime.

—Aaron Stern

35. Being irreverent and not easily intimidated will help you seek the truth. Don’t take others’ words for gospel. Double and triple check. Have confidence in yourself and your judgement.

I’m not easily intimidated. I do have a strong irreverent sense about me.

—Peter Vig

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Talent Management

36. The best management policy is a good hiring process. If you want to be great, don’t tolerate good. It’s why Netflix offers a generous severance package.

The worst thing that you can do in anybody's career is having to terminate somebody. There's nothing more painful than that… And the problem is, if you have pretty good people, you hire pretty good people. Then you're left with a pretty good firm. You don't want to be left with it. It's really hard to terminate pretty good people.

—Rich Bello

37. Surround yourself with talent. It’s contagious. Streamline operations so your talent can focus on what they’re good at—for Julian’s talent: investing.

Julian has surrounded himself with a bunch of young talents where he is seeding these new funds, who are independent but can use his office space, providing them with back office support, and letting them go. He makes himself available to these guys if they want, and so the drumbeat continues.

—Robert Burch

38. Excellence is expensive. Invest in it in every way you can.

Andover wants to be paramount and excellent in everything it does; we absolutely support those aspirations—teaching excellence, superb facilities, access for the brightest young minds—but that comes with enormous expenses.

—Gil Caffray

39. Physical spaces matter, so cultivate them. They inspire feelings. It’s important to respect and balance both tradition and growth. Embrace evolution while honoring what works.

At the University of Virginia, what it’s done so well, in my opinion, is to stay grounded in it’s history, at the same time, evolving, growing, innovating, creating. As we work to bring in a new building, I think that will only take that to the next level. Instead of lecture space, it’s more flat floor space, it’s more collaborative, creative areas. It’s lab spaces. And I think we’ve got some exciting new ideas about how to put that building together, how to relate it to the rest of the grounds, how to make it an exciting place for students to learn and participate.

—Chris Shumway

40. You grow through responsibility. Two of my favorite funds, Viking and IGSB, are known for giving young portfolio managers real responsibility early on. Stan Druckenmiller was promoted to a bank’s Director of Research at just 25.

Working at Tiger gave each of us at a relatively young age a significant responsibility for parts of the overall portfolio. Julian pushed us to defend our investment theses with fact-based analysis. [Being] a Tiger was helpful in ferreting out information while we were there and remained an important badge after leaving the firm.

—Jonathan Silver

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Timing/Cycles

41. You need to have a variant perception to make money. Going against the crowd can create major opportunities.

I’m praying for a market crash. Find me someone else who’s doing that. You make money betting against the crowd.

—Lawrence Bowman

42. Invest behind long-term inflection points but trade regularly to optimize your portfolio. The global economy doesn’t change often, so neither should your core investments.

We're either looking for an inflection point in a process that will lead to significant change, or we're looking to find our way into a trend very early in its development and participate in that trend, whether it’s rising interest rates or falling interest rates, a commodity bull market, a specific industry which is developing rapidly, where it will be reflected in securities prices. So we're not day traders by any stretch of the imagination… while we transact on a daily basis, that's really to optimize our portfolio. But the global economy doesn't change radically on a day-to-day basis, and our portfolio doesn't either.

—David Gerstenhaber

43. Timing matters. Being early is no different than being wrong.

Tosca was the bank fund that grew and grew and grew – compounding at 20% per annum over the eight years until 2008 went it went too early on the American banks… The first time it went long on American banks it went early on value grounds. We saw it before others saw it – the others couldn’t see it for nine months – but the timing was wrong. But it turned out to be very wrong because there was panic among investors and that damaged our franchise.

—Martin Hughes

44. If you’re investing when everyone is getting interested, you’re too late. If you understand how markets are intertwined, you can identify trends earlier.

We only trade the government debt and currencies of these markets. These are the markets that time forgot, but now that the equity markets are under pressure, the dollar continues to be weak and the euro is getting stronger, people are looking for opportunities here and it is too late.

—Kevin Kenny

45. As John Maynard Keynes noted, “Markets can remain irrational longer than you can remain solvent.” Don’t dismiss the madness of crowds. Even Stan Druckenmiller believes “in the black magic art of technical analysis.”

The market can move against you for much longer than you can be in the business, which turned out to be the case [at Tiger]. I have more appreciation for momentum and sometimes the weakness of fundamental research. I'm not patient enough to sit around and wait for something good to happen.

—Quinn Riordan

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Valuation

46. When you identify a great company, stay with it. Value creation can outpace valuation. See this memo for some thoughts on how great businesses sustainably create long term value.

There is an even longer list of companies we have sold too early – Facebook, Peloton, LinkedIn, Amazon, and Netflix to name a few – only to turn around and repurchase a fraction of the shares we previously owned for far more capital.

—Chase Coleman

47. Rigid investment dogmas can limit opportunities. Be flexible in your approach.

The opportunities are either very small or very thinly traded - so they're not worth digging into. But there's always value. One of the things I've learned from Julian is that you can't go in with a certain school of thought - like never buying a high P/E stock. You've got to be flexible.

—Pat Duff

48. Seek out disconnects—when they close, you make money. As Byrne Hobart has noted, the information that matters for a stock is: the current price, an idea of where the price should be, why there’s a gap, and what would close that gap.

Our process aims to opportunistically exploit what we believe is the disconnect between investors' perception of corporate earnings power and what we think sustainable earnings power really is.

—Kris Kristynik

49. Growth reflects value creation/capture. People forget that the calculation of enterprise value includes growth. See this memo for one way of thinking about growth/value.

You can kind of justify paying a slightly higher multiple because of the great growth.

—Alex Robertson

50. Understand how assets are trading relative to the market. Dislocations will eventually close.

If we look at the end of March – Japan is a March fiscal – Japan is trading, I think, 15x. Consensus S&P using March is about 18x, or maybe slightly below that. I think the Japanese consensus is far too low for its consensus EPS, because the Yen has moved 10% in the last three weeks. So that number is going to come up.

—David Snoddy

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If you got this far, thank you for reading! I hope you enjoyed—and maybe even learned a thing or two. And once again, if you worked at Tiger (or at a Cub/with someone who worked at Tiger) and are willing to share your experience, please reach out! I’d love to chat (more than happy for it to be background or off the record if you prefer).

Additionally, if you know if either this handbook or this guide is real and would be able to share a copy, I’d be forever grateful.

Email: kevin@12mv2.com