Podcast Summary
Long-term investment strategy: Swedish investment company Kinovic prioritizes strategic discussions for expansion and growth opportunities instead of short-term gains, focusing on long-term ownership in companies with large growth potential, novel business models, and the ability to weather challenges.
Kinovic, a Swedish investment company with a long history dating back to 1936, aims to be the best long-term owners in various sectors for their companies. They prioritize strategic discussions in the boardroom, focusing on expansion and growth opportunities, rather than short-term gains. To be perceived as a long-term investor, they look for companies with large growth potential, novel business models, and the ability to weather challenges. Kinovic's ultimate goal is to survive and thrive for generations, recognizing that backing novel business models comes with unique risks but also the potential for extraordinary outcomes.
Long-term focus and unique risks: Successful VCs look beyond present success and focus on a founder's vision for the future, their ability to execute, and their industry-disrupting business model. They value uniqueness and taking calculated risks to back businesses with significant impact and disruptive potential.
Successful venture capitalists look beyond the present and focus on the long-term potential of a founder and their industry-disrupting business model. They aim to identify founders with a clear vision for the future, the ability to execute in the present, and a desire to change entire sectors using technology. They also value being different and taking unique risks, such as business model risk, which sets them apart from other investors. Ultimately, they seek to back founders and businesses with the potential to create significant impact and disrupt their industries. The venture capital industry may be more competitive today, but being unique and taking long-term bets can still lead to success.
Imagination and long-term perspective in investing: Successful investments require a long-term perspective, imagination, and the ability to identify exponential industry changes. Examples include Tesla and Atlas Copco, which both required confidence in the companies' vision and a deep understanding of energy technology progress and market expansion potential.
Successful investments often surpass initial expectations and require a long-term perspective, imagination, and exponential industry change. For instance, in the case of Tesla, an investment in the company in the early stages required a long-term view, confidence in Elon Musk's vision, and academic insights into energy technology progress. Similarly, Atlas Copco's investment in 1986 was based on the company's potential for market expansion and the importance of stable long-term ownership. In both cases, the success of the investments was due to the companies' ability to constantly widen their markets and innovate, rather than relying on small areas of dominance. Overall, successful investments require a combination of imagination, patience, and a deep understanding of industry trends.
CEO tenure, cultural factors: Long-term CEOs who embody their principles and cultural fit are essential for successful companies. Carefully consider the growth potential of a company before selling. Identifying the characteristics of exceptional companies and focusing on long-term growth can lead to significant rewards.
Successful companies are often led by long-term CEOs who embody their principles, and it's worth considering cultural factors before selling. European companies like ASML, which have had consistent leadership for decades, can be particularly intriguing. The decision to sell should be carefully considered, as it's essential to estimate the company's growth potential both economically and culturally. Companies that maintain their ambitious, iconoclastic mindset tend to account for a significant portion of market growth. Investors can approach investing in different ways: owning everything, trying to make companies better, or identifying characteristics of truly great companies. While it's not possible to own everything, especially unquoted companies, the other two approaches can lead to success. Investing is often seen as a competition to outperform others in the short term, but focusing on long-term growth and identifying the characteristics of exceptional companies can lead to more significant rewards. As the speaker suggests, just like Scotland may not excel at soccer, but can excel at darts or snooker, investors can find their niche and succeed.
Ambition gap between US and Europe startups: European startups need to adopt a more ambitious mindset and focus on building great companies for the long term to compete on a global scale
The difference in ambition levels between the US and European startup scenes significantly impacts their success. The US has a higher level of ambition, leading to more focus on innovation and the impossible, while Europe tends to prioritize legislation, boundaries, and regulation. This ambition gap extends beyond founders to investors as well. Sweden, with its history of government-supported technological progress, provides an example of how Europe can foster innovation, but the difference in long-term focus and risk-taking between private and public companies in Europe and the US also plays a role. US companies have the advantage of a larger domestic market and less pressure to expand internationally, while European companies often face more challenges when expanding within the continent. Ultimately, to compete on a global scale, European startups need to embrace a more ambitious mindset and focus on building great companies for the long term, even if that means staying private for longer.
Investment in R&D vs Short-term Market Rewards: Investing in R&D for future growth can result in short-term market setbacks, but the long-term opportunities in fields like clean tech, data meeting genomics, and AI are significant.
Despite the importance of innovation and R&D for a company's future growth, the markets often do not reward such investments in the short term. This was highlighted by the example of Nvidia's massive setback in 2006, which occurred due to heavy investments in R&D that eventually led to groundbreaking technologies and significant market success. Looking ahead, the areas identified for potential investment and innovation include clean technology, data meeting genomics, and AI. These fields have the potential to revolutionize industries, particularly healthcare, and offer significant long-term opportunities. However, it's important to note that not all areas of AI will yield the same level of success, and there may be margin compressions for thin wrapper technologies with limited business connections. In terms of governance, the main priorities for the chair include ensuring the company's strategic direction, overseeing risk management, and fostering a strong culture of transparency and accountability.
Leader Support: Providing support and encouragement to leaders during challenging times is crucial for long-term success. Maintain a non-conformist mindset and consider all perspectives to make good investments, and learn from failures to move forward.
Providing support and encouragement to leaders during challenging times is crucial for long-term success. This can be done through personal interactions, such as Buffett's public show of support for Bezos, or through the shared history and culture of founding families in businesses. As a CEO, it's important to remember that you're not just carrying the baton for yourself, but for the institution and unique combination of investors and family office mentality. Consensus decisions can be detrimental to making good investments, so it's essential to maintain a non-conformist mindset and consider all perspectives without trying to agree on everything. Lastly, dealing with failures is an inevitable part of the journey, and it's essential to learn from them and move forward.
Learning from Failures: Embrace mistakes as opportunities for growth and avoid creating a culture of fear around them. Risk-taking is inherent in investing, and managing risk is crucial through time and limits on investments.
Acknowledging and learning from failures is an essential part of the growth process for any company, including Kinovic. While it's natural to focus on successes, it's important not to create a culture of fear around making mistakes. Every great company will encounter setbacks, and it's crucial to celebrate these mistakes as opportunities for growth rather than signs of failure. Risk-taking is inherent in investing, and it's impossible to avoid making mistakes entirely. Instead, it's essential to manage risk by deploying capital over time and having limits on the amount invested in any one company. Success is fragile, and even companies that come close to failure can ultimately become some of the best investments. For example, Home Depot, which was on the brink of bankruptcy in the late 1980s, is now one of the 25 best investments one could have made. Ultimately, the focus should be on assessing the caliber of decision-making rather than just the outcome.
Investment humility: Maintain humility and open-mindedness during market resets, as potential winners may not receive funding and great companies can be built with the right investment culture, focusing on objectives and contributions, not conventions.
Investing is not an easy task, and it's crucial to remain humble and open-minded. While it may be tempting to separate winners from losers during market resets, many companies with great potential may not receive the necessary funding and could go bust. As investors, we have the power to help build great companies, and it's essential to have a distinctive investment culture within our organizations. We should focus on our objectives and contributions, regardless of conventions, and rethink the metrics we use to judge companies. Young investors should remember that planning their personal development and career is impossible, and they should remain adaptable and persistent. Inspiration can come from unexpected places, and success may not come as planned.
Personal growth through passions and mistakes: Pursue passions and allow mistakes for personal growth, as they lead to valuable experiences and wisdom, rather than sticking to what is comfortable or prestigious.
Importance of pursuing your passions and allowing yourself to make mistakes for personal growth. The speakers emphasized the value of taking risks and thinking differently, rather than sticking to what is comfortable or considered prestigious, even if it doesn't bring joy or fulfillment. They also highlighted the regret they've seen in individuals who remained in the financial sector out of fear or societal pressure, despite not enjoying it. Therefore, the advice given is to consider leaving the financial industry if one doesn't have a genuine interest or willingness to think differently, and instead, seek out a career that aligns with personal passions. Mistakes are an inevitable part of learning and growing, and they can lead to valuable experiences and wisdom.