News & Insights

Weekly update – What our fund managers have been reading in 2023

It’s hard to believe that almost a year has passed since we last provided you with our book recommendations from 2022. Before delving into some of our favourite reads from the last year, I wanted to take a few moments to expand on why we view reading as an essential part of our role as investors.

To identify the most compelling investment opportunities, investors must maintain an open mind and an innate curiosity to learn about a broad range of topics. Whilst, becoming an expert in any given field is not a requirement, possessing a level of fundamental understanding is. By reading (or listening to) books you are benefitting from the learning, lifetime work, and experience of others in a way that concisely imparts their views and knowledge – it is a fantastic way to fast-track your comprehension and development. With that in mind, below are five of the books that have helped shaped our thinking this year (and that we think would make excellent stocking fillers)!

Drive: The Surprising Truth About What Motivates Us by Daniel Pink

Pink’s Drive is an excellent book that examines the evolution of motivation and dispels the myth that “carrot and stick” type rewards are the best/only way to motivate others. An understanding of motivation is extremely important for amplifying the performance of teams and delivering superior outcomes. We spend a significant amount of time assessing company culture and identifying management teams focused on long-term value creation. We typically find the highest quality teams are led by individuals who are focused on purpose (rather than profit) maximisation and who are driven by intrinsic (rather than extrinsic) rewards. Such individuals share goals that are most closely aligned with us as long-term shareholders.

Quit: The Power of Knowing When to Walk Away by Annie Duke

For a small team, managing resources effectively is an extremely important skill. Duke delves into the benefits of quitting in a world where “grit” and perseverance are often viewed more favourably and quitting is viewed as failing or an action reserved for the weak.  The author flips this notion on its head and uses her experience as a professional poker player to demonstrate the importance of knowing when to walk away. The book containes many useful lessons relevant to investors. One example is the idea of introducing “kill criteria”, which are signals that indicate an action is no longer worth pursing. Establishing these ahead of time removes the emotions associated with making a difficult decision in the moment and helps prevent people becoming paralysed by uncertainty. As an investment team, we can use kill criteria to tell us when it is time to move on from an investment and reallocate resource (be that funds or analytical time) to a more productive investment. Duke also did a great talk to employees at X (Google’s moonshot incubator) which I would thoroughly recommend for anyone interested in learning more.

The Spotify Play by Sven Carlsson and Jonas Leijonhufvud

There is no question that Spotify (and the introduction of streaming) changed the dynamics of the music industry forever. It is always interesting to read about disruptive businesses and gain insights from the inspirational visionaries behind them. Although the music streaming industry has become more crowded, what I find most interesting is that Spotify’s product is still undeniably superior to that of its competitors – this is no small feat when you consider who its rivals are. Apple is responsible for designing some of the greatest consumer products of all time yet millions of devoted Apple users (of which I include myself) still make the conscious decision to choose Spotify as their streaming service - despite the fact that Apple Music comes preinstalled on their devices. In essence, Spotify have out designed the company most renowned for product design, and I find that fascinating. The book recounts Spotify’s journey to-date and discusses the numerous trials, tribulations and triumphs encountered along the way.

Better, Simpler Strategy by Felix Oberholzer-Gee

This book introduced us to the Value Stick Framework which we discussed as part of our Q2 Stock in Focus. This has become a useful instrument in our investment toolkit and emphasises the importance of seeking to invest in businesses focused on practices that create value as opposed to those companies that are only concerned with capturing value, which we feel isn’t a sustainable practice longer-term. There are plenty of actions companies can take to drive short-term profitability that will prove detrimental to the performance of the business over the longer-term. Assessing management decisions with the framework in mind should help mitigate the risk of falling into one of these traps.

Jo Malone: My Story by Jo Malone

Jo Malone founded one of the most coveted beauty and fragrance brands in the world. Her story is an inspiring example of how her passion and determination helped her overcome the many obstacles she faced in her early life. Malone and her husband sold their company to Este Lauder in 1999 and this year the Jo Malone brand is set to exceed $1 billion in sales. We read Malone’s autobiography as part of our research into Estee Lauder prior to the recent introduction into our Global Blue Chip strategy. The book shared some interesting insights on what it’s like to do business with (and subsequently work for) the Lauder family and we were reassured by Malone’s depiction of the relationship and their mutual respect for one another. As an entrepreneur, Malone exhibits many of the qualities we look for in the management teams of the businesses we invest into. Whilst she has not been involved with the Jo Malone brand since resigning as creative director in 2006, we feel that the culture she curated and the emphasis on allowing the quality of the product to lead undoubtedly helped propel the brand to the level of desirability it experiences today.

We hope you enjoy these books as much as we did. Thank you to the many people who inspired the selection of books we consumed this year. We are always looking for additional recommendations so if you have any suggestions for our 2024 reading list, please feel free to drop us an email.