Letter #208: Katherine Collins (2012)
Head of Equity Research at Fidelity and Head of Sustainable Investing at Putnam Investments | SAVED BY THE BEE: Vocation, Lost and Found
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Today’s letter is the transcript of a talk given by Katherine Collins titled SAVED BY THE BEE: Vocation, Lost and Found. In this talk, Katherine shares the story behind one of her most treasured possessions and the major effect it had on her, discusses the shift from the Quotron to heatmaps and what it took away from the industry, growing discomfort in her profession, meeting the honeybee (Tom Seeley), understanding how honeybees make decisions, how investors are similar to honeybees, going to Divinity School, finance as a tool, her investment in Lululemon (a 25x!), and three pieces of advice.
Katherine Collins is the Head of Sustainable Investing at Putnam Investments, A Franklin Templeton Company, a Portfolio Manager of Putnam’s Sustainable Future and Sustainable Leaders strategies, and the Chair of the Santa Fe Institute’s Board of Trustees. She also manages the Sustainable Equity Team at Putnam. Prior to joining Putnam, she founded Honeybee Capital, an independent investment research firm focused on sustainable investment issues. Katherine started her career as an equity research analyst at Fidelity and later became a portfolio manager and Head of Equity Research. She also spent two years at the Fidelity Foundations as Program Officer for large philanthropic organizations.
I hope you enjoy this talk as much as I did! For those who did, I would highly recommend reading Letter #89: Ian McKinnon next.
(Transcript and any errors are mine.)
Related Resources
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Transcript
Good morning.
Thank you for coming out early on a Saturday. I have only been here an hour, but I already have a great new resolution. I'm going to start every morning with at least one banjo and at least one dot connection. What a great start.
So thank you for being here today. I am so pleased to be sharing the day with you. And I'd like to start by sharing with you this gift that my father gave to me when I started my first real job.
Some of you might recognize this -- that classic typewriter font, the genuine imitation wood grain. It's an IBM sign from sometime in the mid 60s. My dad worked at IBM for decades, and that meant that for all of those decades, our household was surrounded by this motto. Every single pencil, every coffee mug, every notebook. They all were emblazoned with this simple imperative: Think.
And this sign, I've really treasured. It's come with me everywhere from my very first cubicle that overlooks the scenic ventilation shafts over to corner offices. Boston London, back home again.
But it's only recently that I realized what a real gift this was. The idea that was rooted in my earliest conception of work, that when you go to work, your job is to think.
Turns out, this is not a universally accepted notion.
So I am forever grateful to my father. And really, this is what I have loved about being an investor for the last 20 years. To invest really requires your engagement of your full, creative, focused mind. Things are always changing, and you have to try to figure it out.
But just as things are changing in the world overall, things have changed a lot in the investment field this last 20, 30 years. Some for good, some for less good. And it's really hard to overstate the magnitude of this change.
So I'm going to walk through just one quick example to give a sense of the scope. So many tools, so many products, so many institutions have been created in a really short timeframe. And they've exerted more and more influence on this core profession of investing.
So here's my example. This is a heatmap.
It might be familiar to some of you from flipping through, past CNBC. It's a really handy graphic. It just shows you what's happening in the stock market on any given day. Every stock has a box -- green is good, red is down. You can see a lot of information in this graphic in one fell swoop. And you can get it everywhere now. I've got six apps just on my phone that can show me this -- any market, any minute of the day, what's happening in the world. So it seems pretty handy. This tool is much more amazing when you consider what came before it.
This is the Quotron machine.
And it was just about as user friendly as it looks in this picture. It's gigantic, weighs about 50 pounds, cost an arm and a leg, it required a dedicated phone line, and, if like me, you were a junior analyst in the early 1990s, you had to share. So that meant to see what was happening in the stock market, you had to get up from your desk, walk down the hall, around the filing cabinet, stand in line, and then type in each individual ticker to see what was happening in the world. Obviously, the heat map is a great improvement on the Quotron -- in terms of efficiency, and availability, time effectiveness.
But when we made this switch, something was lost. Something a lot less tangible, a lot less obvious. This Quotron, as horrible as it was -- this was our water cooler. And this is where, if you were the housing analyst like I was, you learned what was happening with semiconductor stocks. If you were the semiconductor analyst, you learned what was happening with retail sales. It's where we connected all of our little pods of data and facts to a greater picture. We knitted them together into something that was more than just information. Sometimes it was knowledge, sometimes it was even wisdom.
And even more important than that, standing in that line with all of my colleagues -- it connected us to one another. So I've got my heat map in my pocket now, all the time, every day. But my colleagues are still out there. And in fact, they're further away than ever. And all of that wisdom and knowledge that we knit together -- it's further away also.
So you repeat the cycle time and time again. Tool after tool, mechanism after mechanism, product after product. And all of these advances have brought with them pretty good improvements in efficiency and data accessibility, but they've also chipped away, gradually, at the connected nature of investing. And I'll note, I think this is not just true for investing. I talk to my friends who are doctors, and they want to heal people. And instead, they're spending hours on the phone with insurance companies. I talk to my friends who are lawyers, and they really are interested in justice. And they're filling out spreadsheets to account for their time in six minute increments to make sure that the billing system is accurate. So I see the same dynamic and a lot of professions where the tools that we've created, that are helpful in their own ways, have kind of taken over. They've taken on a life of their own.
So as this evolution was occurring within the investment business, it was reflected in my own career. And eventually, we entered a dark period.
I was working in London, and I remember very vividly, one long series of client meetings where I talked to maybe 12 or 13 investors, all in one day. And we got to the end of the day, and I realized, every single client had asked me about tracking error and a lot of statistical measures related to the funds I was managing. But only one person that whole day asked me about an actual investment I had made, and why I thought the company was doing something worthy in the world.
This just felt uneasy to me. And sure enough, soon thereafter, we hit a small bump in the stock market. Nothing at all like we were to see a few years later. But my fund, they just did terribly. They underperformed by 10x more than any of our fancy statistical models said was humanly possible.
So this was a real crisis. Now, the funds recovered, my shareholders were fine. That immediate crisis passed. But I was left with this growing sense of discomfort in my own profession.
And this wasn't a question of not liking my job. This was my profession. This was my vocation. I love investing. And the thought that my vocation and I were growing apart, and at that stage really destined for a split, it was just heartbreaking.
Fortunately, right around this time, I met the honeybee.
Or more precisely, I met Dr. Tom Seeley, who does honeybee research at Cornell. He was presenting at a conference that the Santa Fe Institute hosted, and he was talking about this amazing research he had just completed on how bees make collective decisions within beehives. The scientific story is just incredible, and very well documented. I encourage you to read Dr. Seeley's book.
But what really struck me was the end of his remarks where he talked about the conditions that made this amazing decision making possible. And bees, they don't just make pretty good decisions. They make fantastic decisions. If you give bees a choice of where to locate their new beehive, they pick the single best location almost every single time. It's super cool.
So Dr. Seeley described these conditions that make that great decision making possible. The first condition is: when the bees have a big decision to make, they leave the hive. They go out and explore the environment around them. They don't call an all hands meeting and hide in honeybee conference room and bust out the PowerPoint presentations. They go out and engage with the world. And then they come back together. And they share that information. They share it democratically and openly in front of the whole beehive. And they just share the facts.
There's no bee pundits, there are no bee spin doctors, there's no bee marketing department, there's no bee-NBC. They just share what they've learned. And then, if they find that they conflict and they have different information, they go out, they do it all again until they're sure that they have all of the inputs that they need.
And finally, when it comes time to actually casting their vote to deciding where to relocate, the bees make that decision based on a really clear, common shared value system. They know what they're looking for, and that is the criteria they use for their decision making.
So as Dr. Seeley talked, I felt this huge sense of relief and excitement all at the same time, because what he was describing was so familiar to me. This is the essence of what I loved about investing all those years.
Every great investor I know leaves the office. They go out and see what's happening in the world, and try to engage in it, try to see how they can be helpful in terms of what's happening out there. They don't sit there and look at their screen all day long. I mean, many do, but it's not good. And secondly, they want to share that information. They want to share what they've learned with other people, especially if those people have different points of view or different information. And finally, every great investor I know, whether they explain it this way or not, they all have a really clear value system that is guiding their decisions.
So what I realized, as Dr. Seeley talked, is that the core of my profession, the core of my vocation, was completely intact. What was pulling me off center were all of these tools and mechanics and hangers-on to that process, these mechanisms that had taken on a life of their own.
So I realized I just needed to return to that core. I needed to be more like a honeybee. So I left the hive, I resigned from the firm that I loved, where I had spent almost 20 happy years. I went out into the world, engaging as a pilgrim and a student and a volunteer. I attended Divinity School to really shore up the clarity and strength of my own inner core of values and beliefs. And I started Honeybee Capital, where we have the simple belief that more integration, more connection, is what leads to optimal decision making. My premise with Honeybee, my mission, is to show that investing is inherently connected with the actual world, and not that world on the screen.
And as I went through this process, I'll say, I realized that my struggle and all of the actions that I had taken, they're really mirrored on a larger level as well. Because what is finance? Finance and investing -- it's just a tool. It's a tool that we created to serve our communities, to serve our society, to serve our planet. And yet that tool, as a whole, it's taken on a life of its own as well. And so I think the call for finance is to do exactly what I'm trying to do in a very small way with Honeybee, to refocus on that connected core that is rooted in the real world.
So that might sound okay, but most people at this point tend to say, Okay, how's it going? I'm happy to say, It's going so well. I'll give you one quick example of an investment I made over the past few years with this increased focus on connection and human elements in investing.
This is not a recommendation about the stock, but the stock is Lululemon. It may be familiar to many of you -- maker of yoga and fitness apparel.
And I first bought it towards the end of 2008. The stock market had collapsed, the economy was a big mess, and on any traditional measure, this looked like a pretty attractive investment. And I figured, Well, I'll wait till things recover, and then I'll probably move on.
But I started talking to a lot of customers. And a funny thing happened.
I would ask person after person about their cute yoga top. And almost every single person would answer -- not by telling me about their cute yoga top, but by telling me about their yoga practice. And they get this dreamy look in their eyes and they would tell me how yoga had changed their life, and how that one hour of the day made all the other hours so much more productive and useful and compelling and happy.
Now, I don't know about you, but I have spent a lot of time on treadmills in my life, and not once have I referred to my treadmill practice with this dreamy look in my eyes and talking about its transformative nature.
So these conversations, they really stood out. But I have to say, if I had had those discussions at any other point in my career, I would have said Okay, great about your yoga practice. Now about your top. Do you have the red one? Do you have the blue one? Did you buy it online? Did you buy it in the store? Did you look at the Nike product too?
And instead, with this focus on listening and engagement, I just tried to be quiet. I tried to listen. And what these women were telling me was: It wasn't about the top. This was a really important, central part of their lives. Something that was valuable and cherished.
Well that's pretty unusual. So I kept the stock a little longer. And a little longer. And a little longer. And this stock is up now 25x. 2,500%. Since the end of 2008. This is like a unicorn. It's like one of those things that old people talk about that used to happen all the time and nobody's seen it in so long they think it doesn't happen anymore. Really extraordinary. And the insight I got from those women and from that listening -- that's insight I never could have found in all my fancy spreadsheets.
So you might be thinking, Okay, but I don't want to quit my job and go to divinity school and buy yoga stocks. And that's okay. I won't take it personally. But I do have some advice, if like me, you're finding yourself out of sync with your own calling, with your own vocation.
And this goes right back to the honeybees.
My first piece of advice is to put down your screen, what ever it might contain, whether it's emails, or a calendar that won't quit, or medical images. Just put it down. Re-engage with the world -- go to dinner with someone you love, go out for a walk, even if it's raining, take even 10 minutes just to look up, to look out, instead of looking down.
The second piece of advice I have is try to communicate your vocation. Try to translate it. If you are working in a field that's really technical, try to explain it just in words. No numbers. Even in poetry or music. See if you can do it. See how it looks from that perspective. See how it feels. Vice versa, if you're in a really qualitative field, try to put some numbers around it. See if someone who just loves math finds your idea as inspiring and amazing as you do.
And the third piece of advice I have is: As you're perched on the edge of the hive, ready to re engage with the world, summoning that inner core of strength and value and belief, is to just take a moment. Deep breath. Rest your wings. And think.
Thank you.
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Wrap-up
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Enjoyed reading this very much! Reminded of Eliot's masterful lines in reading about Katherine Collins' angst on all of the noise that analytic tools throw at us.
"Where is the wisdom we have lost in knowledge?
Where is the knowledge we have lost in information?"